Doji

From Wikipedia, the free encyclopedia
Jump to: navigation, search
Main article: Candlestick pattern

The doji is a commonly found pattern in a candlestick chart of financially traded assets (stocks, bonds, futures, etc.) in technical analysis. It is characterized by being small in length—meaning a small trading range—with an opening and closing price that are virtually equal.[1]

The doji represents indecision in the market. A doji is not as significant if the market is not clearly trending, as non-trending markets are inherently indicative of indecision. If the doji forms in an uptrend or downtrend, this is normally seen as significant, as it is a signal that the buyers are losing conviction when formed in an uptrend and a signal that sellers are losing conviction if seen in a downtrend.

Types of Doji[edit]

Neutral:[2] Dojis form when the opening and closing prices are virtually equal. Alone, dojis are neutral patterns. 
Long-Legged:[3] This doji reflects a great amount of indecision about the future direction of the underlying asset. 
Gravestone:[4] The long upper shadow suggests that the direction of the trend may be nearing a major turning point. 
Dragonfly:[5] The long lower shadow suggests that the direction of the trend may be nearing a major turning point. 

A doji is a key trend reversal indicator. This is particularly true when there is a high trading volume following an extended move in either direction.[6] When a market has been in an uptrend and trades to a higher high than the previous three trading days, fails to hold that high, and closes in the lower 10% of that day's trading range, there is a high probability of a downtrend in the ensuing days. Likewise, when the market has been in a downtrend and trades to a new low that's lower than the three previous trading days, fails to hold that low, and closes in the upper 10% of that day's trading range, there is a high probability of an uptrend in the ensuing days.

See also[edit]

References[edit]

External links[edit]