Definition
A Doji is drawn when the opening and closing prices are the same. The shadows of the Doji can have different lengths. Therefore, the Doji can have a cross, an inverted cross, or a plus sign shape. A single Doji is a neutral formation.
- Trend: Reversal
- Expected trend: Neutral
- Previous trend: Neutral
- Reliability: Low
- Type: Neutral
- Number: 1
Recognition
- The body of the Doji is small, only a horizontal line.
- The length of the shadows does not need to be similar.
Interpretation
Ideally, the closing and opening prices equal for a Doji. This does not always happen. If the opening and closing prices are the same, the Doji has a greater importance. Dojis always reflect the market participants’ uncertainty. They show that the share price was both above and below the opening price and closed near it. Neither the sellers nor the buyers could dominate the market that day.
Important factors
Dojis are easy to identify. Their body is small, sometimes only a horizontal line. The previous trend must be assessed to interpret a Doji. If the Doji appears after an ascending trend or a long white candle, it reflects the weakening of the demand side of the market. If the Doji appears after an inclining trend or a long black candle, it reflects the weakening of the supply side of the market. To conclude, Dojis always reflect uncertainty on the market and signal the weakening of one side on the market. It may also signal a trend reversal. However, a single Doji is not enough to forecast a reversal. The reliability of a Doji’s signal depends on the current market situation. The signal should be only taken seriously on markets with no frequent Doji candlesticks.
