Candlesticks: Doji

Doji is a candlestick with closing and opening prices equal or very close. Length of both shadows can vary.

When doji emerges on a chart it usually means that bulls and bears have similar strength and there is indecision, no clear direction for further movement. The longer shadows, the more indecision.

If doji appears in uptrend or after white marubozu, it can signal end of the movement in this direction. In a similar way, if doji appears after downtrend or after black marubozu, it signals possibility of changing the trend soon.

Although doji is very strong indicator, it is good habit to wait one or two stock exchange sessions and look for confirmation

There are two very specific types of doji, which are worth short presentation:

Gravestone Doji

Gravestone Doji has no lower shadow and long upper shadow. If gravestone doji is preceded by uptrend or white marubozu, it usually signals change in direction, because bulls tried to reach higher price levels, but were pulled down by bears to the opening price.

Dragon Fly Doji

Dragon Fly Doji is reversal to the gravestone doji. It has no upper and long lower shadow. After downtrend or black marubozu, it signals that bears’ domination was neutralized by growing bulls strength.

In both cases, it is good to wait one or two days for a confirmation of direction change.