Doji Candlestick Analysis,How to Trade with Doji

  • In forex technical analysis, studying candlestick patterns is an analysis that has a high level of accuracy in determining the direction of the trend

    One form of the candlestick that is often used to identify the direction of the trend is a Doji candlestick

    A candlestick is one of the most obvious trading signals in a candlestick pattern.

    Since hundreds of years ago candlesticks were used to trade rice commodities in Japan until now this formation is still considered a valid trading signal.

    Japanese Doji Candlestick is a candlestick pattern whose open price and close prices are the same or almost the same so this candle can not have a body or a very small body.

    This formation is often seen on the trading chart and does not depend on the time frame. Doji can be formed on weekly, daily or 5-minute charts.


    Doji Candle Meaning

    The doji pattern is a formation of a strong candlestick and indicates doubt between the seller and the buyer. The doji pattern is often found at the top and bottom of a trend and is considered the initial signal of a trend reversal.

    Doji usually forms at least a few bars after the price moves up or down, which indicates uncertainty the market participants will be taken to where the next price movement is.

    Prices may move in accordance with the direction of the previous trend or reverse direction. So the Doji does not always indicate a trend reversal, but it can also indicate a trend forward, depending on the confirmation of the next candlestick bar


    Doji Candlesticks Type

    There are several types of doji that are commonly used as a basis for market analysis, which can be grouped into 7 types of doji in candlesticks for analysis the market trend, and from all groups of types of doji have different meanings, including:

    • Gravestone Doji Star

    The first Doji is a Gravestone Doji Star, this Doji is one of the significant bearish reversal candlestick patterns that mainly occurs at the top of the uptrend.

    This pattern shows that the value of the opening, closing, and the lowest price prices are at the same value.

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    After an uptrend, this Gravestone Doji pattern signals the trader that the uptrend can end and the buy position must be closed.

    The Gravestone Doji Star pattern is formed when the buyer is able to push the price up. and pressure from sellers was able to push prices back to the opening price

    • Gravestone Doji Star At the Top

    Gravestone doji star at the top formation is a bearish pattern formed after the price movement at the highest value.

    The closing of a low price is considered to indicate traders (sellers) who release all their shares and dominate the bearish movement

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    • Gravestone Doji Star At the Bottom

    The gravestone doji star pattern at the bottom formation is a pattern formed after a strong downward price movement or when the price is at its lowest level. And this pattern shows a reversal from the downtrend to the uptrend.

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    • Long Legged Doji at The Top

    Long-legged doji is a doji with a relatively long shadow.

    And the long-legged doji at the top is a legged doji formed at the top of a trend that tends to rise.

    Long-legged doji is a possible early signal of a bearish pattern.

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    • Long Legged Doji at The Bottom

    This long-legged doji is the opposite of long-legged at the top which is a pattern formed below the downtrend. And a bullish signal is likely to start

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    • Dragonfly Doji at The Top

    Dragonfly Doji pattern is a pattern that is formed when the opening and closing prices are near or high.

    This shows the failure of the bears to maintain falling price controls.

    The dragonfly pattern at the top formation is a pattern formed at the top of a trend that tends to bullish, usually formed after the price is at its highest value. And is a possible signal from bearish.

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    • Dragonfly at The Bottom

    The dragonfly at the bottom pattern is the opposite of the dragonfly at the top formation which is a doji pattern formed in the bottom area of a trend that tends move to bearish and is a likely signal  bullish will appear

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    Conclusion

    The doji formation is one way to do a market analysis in a simple way, this is one of the forms of candles that occur in the stock market and the forex market where the candle doji pattern only shows market consolidation.

    There is no definite indication whether the possibility of reversal or forwarding can be identified from the candlestick doji.

    Sometimes, traders are advised to wait until the next candle confirms the doji signal. This could be one reason why pin bars are more popular than doji.

    With almost the same candle, more pin bars can be distinguished into bullish and bearish pin bars to estimate the next price direction.

    Meanwhile, the appearance of the doji tends to not be able to give a definite signal about the possibility of further price movements.

    Apart from these disadvantages, doji can still be used as a reliable price action analysis tool. In fact, this candle pattern can also be used to complement your trading strategy, especially methods that focus on finding reversal opportunities.

    And after all, arranging to trade requires money management and risk management plans in the trading plan, analyzing using a doji pattern is only one market approach, while the market conditions are dynamic, and sometimes the doji signals give false signals