Trading Pattern Spotlight
Doji
Candlesticks
Doji are one of the most iconic varieties of Japanese candlesticks. They have a distinct look and appear often, so most traders learn about them early. While not a signal onto themselves, they do appear in many candle patterns and can play a pivotal role in price action.
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What Is a Doji Candle Pattern?
A doji is a candlestick with no body. They may have long or short wicks in either direction. In extremely rare cases, they may even have none. Doji are seen as a sign of market indecision, as they show price opening and closing at the same price over a given time period.
Why Doji Candlesticks?
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Indecision Indicator
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What do You Need to KNow ABout Doji Candles?
Price Ranges
Doji candles can help establish important price ranges.
In the example above/to the left, the doji candle set an important price range. It did not provide a directional bias, but its wicks set shorter-term support and resistance levels.
After closing above the range, price returned to the top level, tested it as support, then continued upward.
Trade Idea***: Buy the breakout and set your stop loss at the top of the doji’s upper wick. Or, wait for price to retest the former resistance level and turn it into support before entering the trade.
Reversals
Doji candles can help indicate price reversals.
In the example above/to the left, the large doji appears after a series of large bearish candles. This illustrates a potential change in momentum as the bulls attempt to establish a swing low.
After closing above the doji’s upper wick on the next candle, price proceeded to recoup a substantial percentage of its most recent losses.
Trade Idea: buy after close above doji range (next candle after doji)
Continuation
Doji candles can help set up continuation.
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He’d probably reject both of those titles. But I’ve learned a lot from him in a short time. And I enjoy his take on the news. He has a unique, entertaining type of wisdom.
He has helped me see some important truths.
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Jesse is one of those heroes like Jordan B. Peterson, that has shown me better ways to live out the principles I believe in.
Where Dojis Fit
Experienced traders know:
Nothing is the end-all-be-all when it comes to technical analysis.
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Best Links
- StockCharts – Intro to Candlesticks
- Doji Candlesticks
- How Candlesticks Work
- Indecision Candlesticks
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How To Trade with Candlestick Patterns the Right Way
Candlesticks are the most popular way to chart price for stocks and other tradeable assets.
should understand them as a pass… understand the underlying story
recognize the most basic patterns in the market without indicators… just look at a chart and have a decent idea of what may happen next… not necessarily a prediction but some statistical probabilities… surely have different probababilites across different markets
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