Candlestick signals - The Doji

The doji is candlestick chart pattern consisting of one candle line. The ideal doji occurs when in a trading session the opening and closing prices are the same, but this rule is sometimes relative and you can consider candle line as a doji even when the opening and closing prices are few points or ticks away from each other. For example this is especially true in the forex market due to slightly different data from each platform. In charting software it looks like a cross.



Similarly like spinning top, the doji indicates market in complete balance and indecision between supply and demand. When the doji appears after an uptrend, it can signal market reversal. Probability of this signal is much higher when it's at a level of prior resistance. Altough a doji's appearance in a rally might signal a market top, but in a downtrend it may not signal a bottom, because indecision in an oversold market can be a staid place for a continuing downtrend.

The doji has it's power when it is alone or even greater when it's included in a two or three candle pattern. There are also more types of doji, depending on the position of the open and close price in candle line, but the main interpretation is similar.

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