A Doji candlestick is a chart pattern in technical analysis that indicates indecision and uncertainty in the market. It is formed when an asset’s opening and closing prices are virtually identical, resulting in a small or nonexistent body with long upper and lower shadows. A Doji suggests that buyers and sellers are evenly matched, and neither party has a clear advantage in the market. Traders often look for Doji patterns as they can signal potential price reversals or trend continuations, depending on the context in which they appear.
How Exactly was Doji Candlestick Formed?
A Doji candlestick is formed when an asset’s opening and closing prices are almost identical, resulting in a small or nonexistent body. This occurs when the market is experiencing indecision and uncertainty, and buyers and sellers are in equilibrium.
There are several types of Doji candlesticks, but they all share similar characteristics of long upper and lower shadows. The length of the shadows indicates the degree of volatility and price movement during the trading period.
There are several types of Doji candlesticks, which are determined by their shape and the position of their shadows. Here are some of the most common types of Doji candlesticks:
1. Long-Legged Doji
This type of Doji candlestick has long upper and lower shadows, indicating high volatility and a wide price range during the trading period.
2. Dragonfly Doji
This type of Doji candlestick has a long lower shadow and no upper shadow, indicating that buyers took control during the trading period, but were unable to push the price higher.
3. GraveStone Doji
This type of Doji candlestick has a long upper shadow and no lower shadow, indicating that sellers took control during the trading period, but were unable to push the price lower.
Note: There’re more Doji’s Like Four-Price Doji and all, but not considered very important to use in technical analysis by the traders.
Also Read: What Is A Spinning Top Candlestick Pattern?