The Western world was only introduced to the chart during the 1990s by the renowned technical analyst, author and speaker Steve Nison. This candlestick investing pattern is commonly interpreted to suggest that trend directions are approaching a major turning point. Your results may differ materially from those expressed or utilized by Warrior Trading due to a number of factors. We do not track the typical results of our past or current customers. As a provider of educational courses, we do not have access to the personal trading accounts or brokerage statements of our customers.


Analysts use the shape to make decisions and assumptions regarding a particular trend. A dragonfly doji can be an indicator of a reversal in price. When the price of a security has shown a downward trend, it might signal an upcoming price increase.

Technical analysis of a doji candle

Additionally, watching the chart closely for 24 hours makes you emotional, and it is not good for your health. The third dragonfly doji confirms the second doji and bulls’ power. Additionally, the between the second doji and the candle after that and another gap adds to the confirmation.

The chart below shows a long-legged doji candlestick pattern, which could help to signal a short-term top following a brief rally. Since this candle shows a small difference between the open and close price, it is also called a spinning top. After a strong advance, this type of indecision could mean that the bulls are losing control, from a bearish long-legged doji.

Doji candlesticks can look like a cross, inverted cross, or plus sign. Step 1 – Open up the price chart of the crypto asset of choice and scan for doji candlesticks. There are also several other types of doji-like candlestick patterns that don’t qualify as doji, but can often be confused as such. These patterns include the hammer, or hanging man patterns and form with more rarity.


However, the buyers were unable to create a new session high, hence why it is considered weak. The longer the wick, the more significant the action can be. Traders should also note that just because you see a confirmation, that does not necessarily mean that there will be a reversal. Apart from the regular pattern of Doji, we also have the gravestone pattern. Investors usually wait for one day after the pattern to act on this. This pattern can either be pre or post-the price decline or rise.

Step 1. Define the Candlestick Type

Counterattack lines are two-candle reversal patterns that appear on candlestick charts. The example shows the flexibility that candlesticks provide. The price wasn’t dropping aggressively coming into the dragonfly, but the price still dropped and then was pushed back higher, confirming the price was likely to continue higher. Looking at the overall context, the dragonfly pattern and the confirmation candle signaled that the short-term correction was over and the uptrend was resuming. A spinning top is a candlestick pattern with a short real body that’s vertically centered between long upper and lower shadows.

cfds are complex

Please be reminded that the signal is only reliable if there’s confirmation from other technical tools. The Long-Legged Doji can signal both a market correction and a reversal. We can use the Fibonacci tool for our maximum loss and target profit here, too.

The neutral Doji consists of a candlestick with an almost invisible body located in the middle of the candlestick, with the upper and lower wicks of similar lengths. This pattern appears when bullish and bearish sentiments are balanced. A doji is a trading session where a security’s open and close prices are virtually equal. The dragonfly doji is used to identify possible reversals and occurs when the open and closing print of a stock’s day range is nearly identical. The dragonfly doji is not a common occurrence, therefore, it is not a reliable tool for spotting most price reversals.

Is Doji a Reversal Pattern?

They are still applicable, but combining the doji patterns with several other signals is always better. There are many ways to trade when you see the doji candlestick pattern. First, look for signals that complement what the doji pattern is suggesting. Most traders use momentum indicators to confirm the possibility of a doji signalling reversal, because these indicators can help to determine the strength of a trend.

  • Candlestick patterns may consist of one or more candlesticks and provide information to traders about trend continuation, reversals, and other price action.
  • Read our article on the top forex candlestick patterns to look out for.
  • A long-legged doji pattern indicates indecision because neither the bulls nor bears make any real progress, despite strong moves both up and down during the period.
  • The doji signaled to the market there was indecision at an important resistance level, and a powerful reversal followed.
  • Similar to the common type, this candlestick has longer shadows, and the body is still small as the price opened and closed at almost the same level.

Harness past market data to forecast price direction and anticipate market moves. Trade up today – join thousands of traders who choose a mobile-first broker. Please ensure that you fully understand the risks involved. Trading forex on margin carries a high level of risk and may not be suitable for all investors. Our aim is to make our content provide you with a positive ROI from the get-go, without handing over any money for another overpriced course ever again. We are sharing premium-grade trading knowledge to help you unlock your trading potential for free.

As you can see, the interpretations of the doji pattern are so different. If you learn the differences between the doji candlestick pattern types, you will probably find a way to use doji for good. This article explains doji candlestick patterns and provides you with five examples. As seen above, the gravestone doji candlestick pattern looks very similar to the shooting star pattern. As one can observe, the formation of the dragonfly doji candle reversed the downtrend that preceded the doji candle, and led to an upward move indicated by the green arrow. Depending on where it forms, it could indicate a change in the price direction or a continuation in the present direction.

Next, there is a pullback, and the price starts a new downtrend towards the neckline of the double top pattern, where the price meets support. Another long-legged doji appears at level 0.9746, which means market uncertainty and quite strong buying pressure. Inshort-term trading, one should take profit at the nearest support levels.

You can try and practice your knowledge on theLiteFinance free without registration. A Doji is a unique pattern in a candlestick chart, a common chart type for trading. It is characterized by having a small length, which indicates a small trading range.

This book will help you get to know more about candlesticks. Nonetheless, candlesticks are the most important types of charts used in the market today. Our final trade example shows two doji forex patterns that appeared at a 78.6% Fibonacci retracement level, right before a corrective phase ended. Here too, the MACD indicator showed clear momentum divergence before the price reversed higher. After the doji candle closed, a sell order was placed a few pips below the candle with a stop loss a few pips above the same candle. Lastly, we added the MACD indicator in the lower panel of our chart.

If the stock closes lower, the body will have a filled candlestick. One of the most important candlestick formations is called the doji. A bullish trader would only benefit from the appearance of a doji if it formed after a strong downtrend. The doji would signal possible indecision in the market and weakness in sellers that could lead to a reversal to the upside. A bearish trader would only benefit from the appearance of a doji if it formed after a strong uptrend. The doji would signal possible indecision in the market and weakness in buyers that could lead to a reversal to the downside.

Since the closing and open is the same, it also indicates that the buyers were able to absorb the selling and push the price back up again. Typically it is used to find and point reversal patterns in share or asset prices. Dragonfly Doji Candlestick, gravestone doji is a candle stick pattern with open, high, and low close patterns. In most cases, the price of an asset usually turns around when a doji pattern forms. In the description above, we have explained that a doji pattern happens when an asset opens and closes at the same level. Therefore, because of this description, the pattern is often confused with spinning top.