Doji Candlestick Pattern: Complete Overview, Types, Example

Look at the chart above, we are at an important level of support, tested 5 times in the past. The highlighted candle could be interpreted as a Doji pattern, as it formed near an important level. The Gravestone Doji pattern has the same closing and opening prices, and the upper wick Is extended while the lower wick doesn’t exist.

However, I will keep things simple and only concentrate on pairs of the same type below. As you will see, these present cleaner interpretations about price action. Along the way, I will show you how to spot this pattern, its different variations, and how to utilize it in your trading strategies. The Candlestick theory is amazing, but unfortunately few traders give it top priority as it deserves.

Heiken Ashi Charts: Identify Trends with Reduced Market Noise

In other words, it resembles two candles with the same opening and closing prices one after the other. Candlestick analysis is at the heart of many price action-based trading strategies. There is a myriad of candlestick patterns that chart traders should be aware of. In this lesson; we’ve covered one of those important candlestick patterns – the Doji pattern.

With these conditions being met, we can now go ahead and plot our support and resistance lines for the Double Doji pattern. Note that within this double Doji structure; the initial Doji pattern creates the high for the entire pattern. The Double Doji pattern is a two-candle configuration composed of two doji patterns which are indecision candlesticks. Therefore, the Double Doji pattern follows the same logic as the Doji pattern.

In the end, I will explain a simple and effective dual doji trading strategy. A dragonfly doji with high volume is generally more reliable than a relatively low volume one. Ideally, the confirmation candle also has a strong price move and strong volume. In technical analysis, a single doji reflects market indecision, as neither the bulls nor bears are in control of the trend at that moment. Because of this indecisiveness, a doji represents a temporary trend pause and a potential precursor to an imminent trend reversal. A doji candle chart occurs when the opening and closing prices for a security are just about identical.

A dragonfly doji suggests that sellers were initially in control of the price before bulls stepped in to drive it higher again. The fact that bulls ended the session in the driving seat means that the dragonfly doji is usually seen as a bullish reversal signal. In contrast to the gravestone doji, which looks like an inverted “T”, the dragonfly doji looks like an upright “T”, with the high, opening, and closing prices all the same.

What is a Doji candle?

In addition to signaling indecision, the long-legged doji can also indicate the beginning of a consolidation period where price action may soon break out to form a new trend. These doji can be a sign that sentiment is changing and that a trend reversal is on the horizon. The GBP/USD chart below shows the Doji star appearing at the bottom of an existing downtrend. The Doji pattern suggests that neither buyers or sellers are in control and that the trend could possibly reverse. At this point it is crucial to note that traders should look for supporting signals that the trend may reverse before executing a trade. The chart below makes use of the stochastic indicator, which shows that the market is currently in overbought territory – adding to the bullish bias.

The strategy mentioned earlier is based on the Daily chart Doji pattern. Usually, it has the most significant impact on daily, weekly, as well as monthly charts when a breakout happens. All information on The Forex Geek website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, expressed or implied, do not represent a guarantee.

Furthermore, it is very unlikely to see the perfect Doji in the forex market. In reality, traders look for candles that resemble the below patterns as closely as possible and more often than not, the candles will have a tiny body. For an in-depth explanation read our guide to the different Types of Doji Candlesticks. You will find Dragonfly Doji tucked away at the bottom of a downtrend.

A doji could be formed by prices moving lower first and then higher second. Beginning traders and students of the market should take some time to practice recognizing this important pattern as it is commonly seen within the price chart. Knowing when and where the Doji pattern occurs can give traders some insights into what is occurring behind the scenes in the market. While the second Doji pattern creates the low for the entire pattern. As such, we will use the first Doji high to plot the resistance level, and the second Doji low to plot the support level.

What happens after a doji candle?

You can observe it on the chart where price rejection is mentioned above the key level. Similarly, the two-time rejection of prices makes the condition of Dragonfly Doji solid and powerful. Generally, it is a pattern where one after another candlesticks are constructed successively. It represents market arrangements and also shows interruptions of prices. The Doji candlestick plays an important role in the forex trading market because it is able to show market conditions when it is not easy to make decisions.

I’m proud to have the opportunity to present to you such a successful strategy, and to help you reach your financial goals. As you might noticed, my first profit target was identical to the Stop Loss, while the second profit target should double the Stop Loss. For a Sell (Short) trade, place the Stop Loss 1 pip above the Doji’s upper border. One in case the market breaks the upper border of the Dojis (1 pip above it is enough) and one in case the market breaks the lower border (1 pip below).

What Is Double Doji Candlestick

My name is Vladimir and I’ve been following this strategy and implementing it successfully for the past 4 years. I believe it’s about time I’ll share its simplicity and power with the Forex traders’ community. I’m sure a lot of people out there are eager to arrive to the place I’m in now. Moreover, instead of losing money rapidly, you will be able to minimize risks for your trades.

• Moreover, instead of losing money rapidly, you will be able to minimize risks for your trades.
• While the price ended up closing unchanged, the increase in selling pressure during the period is a warning sign.
• Therefore, all you need to do is find two consecutive candles with long wicks and small/non-existent bodies.
• When the rejection occurs two times, the probability of trend reversal increases.
• In reality, traders look for candles that resemble the below patterns as closely as possible and more often than not, the candles will have a tiny body.

Start your research with reviews of these regulated brokers available in , many have free demo accounts so you can preview their technical analysis features. At the opening bell, bears took a hold of GE, but by mid-morning, bulls entered into GE’s stock, pushing GE into positive territory for the day. Unfortunately for the bulls, double doji pattern by noon bears took over and pushed GE lower. The first doji outlined on Chart 1 in the previous section was a high-low doji, where prices made the highs for the day first, and the lows for the day second. This time will be referring to the price chart for the US Dollar to Canadian Dollar Forex pair as seen on the daily timeframe.

Double Doji pattern and traders

In the above example this bearish candlestick has closed with no shadow below the closing price. The Doji pattern is one of the most incredible patterns among the Japanese candlesticks . Because we were able to reach Exit 1, however, we gave back those profits when our stop loss was hit. Now we will go ahead and place our OCO order, one cancels the other, one PIP above the high as represented by the upper black dashed line. Tone PIP below the low as represented by the lower black dashed line. Once we’ve done that we would go ahead and wait until the price either breaks above the resistance level or below the support level to enter into the position.

The Doji pattern must be accompanied by a strong and significant signal in order to establish what the Doji pattern has been forecasting properly. Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more.

In isolation, a doji candlestick is a neutral indicator that provides little information. For example, suppose a significant volume exists on one side of the market (either buy or sell). In that case, it may suggest that buyers or sellers are trying to push through their desired direction, which would invalidate any potential double doji pattern forming. This pattern forms when a market is very illiquid or the data source did not have any prices other than the close. Doji candle offers traders an early warning that there may be a change in market momentum or a possible change in direction if current conditions don’t change. So, the first thing you should remember after reading this article is to use Doji candle in combination with other technical indicators or price action, never on its own.

signallab License Activation

When two Doji candlesticks form, it increases the chance of winning in an analysis. For instance, a Dragonfly Doji or a Gravestone Doji indicates a trend reversal. However, when two indistinguishable types of candlestick form back-to-back, then the probability of the result will increase. If the double doji appears in an upward trend alongside other bearish indicators, then this could signal potential bearish reversal.

Significance of doji candlestick patterns is significantly increases by occurrence of these patterns at crucial support and resistance levels along with fib retracement levels. When two doji candlesticks form, it increases the probability of winning in an analysis. For example, a gravestone doji or dragonfly doji indicates a trend reversal. But when two identical types of candlestick form consecutively, then the probability of the result will increase. The first step to identifying a potential double doji pattern is to look for two consecutive long-legged (or “gravestone”) doji with bodies at or near the same price level.