First thing what comes to your head is probably a question, what is the doji thing? You should read Doji signal as one of the most important patterns. Overlooking doji pattern can mess around your current opened trade or you going to miss a possible good position to enter a Forex market.
Doji has several types of its patterns, and they all can have different value in the market. They are: Dragonfly Doji, Gravestone Doji, Long Legged Doji. One thing is the same among those 4 patterns is that their open price and close price is nearly the same. It means that market has opened at a price 1.45270, formed some high and low prices but closed at 1.45290 price level. In such situation candles body is very low and not strong. Visually Doji looks like a cross, or plus sign so it is easy to visible in a market.
Doji candlestick patterns
Doji patterns indicates a possible reversal of current trend. When close and open prices are not exactly the same, we can still take such candle as a doji pattern.
In the upside trend when doji candlestick pattern is formed, there is a possibility that forex market reached high peak and is about to initiate a reversal movement back to lower prices. This action would break upside trend, because bears will overtake bulls. When doji pattern appears, we can say that bulls (buyers) and bears (sellers) fight is even, none of the both sides won the battle.
When downside trend is formed and we can see that doji pattern appeared, there is a situation where market has reached its low peak. This explains that bulls and bears can't decide which side is winning, there is uncertainty in a market.
Long legged doji pattern shows strong misunderstanding between bulls and bears. High and low price range should be large, closing and opening prices are about the same. This pattern is a very reliable reversal pattern.
Doji pattern tells that there is equality between open and close prices, such pattern is called neutral.
Dragonfly doji pattern shows a possible trend reversal, however confirmation is needed to make sure that a trend reversal can be really initiated and not continued further according to previous movements. This pattern is formed when open and close prices are about the same, but the lowest price is very large whereas high price is not that long.
Dragonfly candlestick patterns
Gravestone doji signals a possibility for market to turn around, again it needs further confirmation what is market's next move. This pattern is formed when open and close prices are about the same, high price is very large and low price stays as low movement. Long upper shadow can indicate bullish strength waking up in the uptrend market.
Gravestone candlestick patterns
This is a basic theory to understand doji pattern, it has various interpretations in live trading. We will try to present doji candlestick in real Forex situations, where it occurs and where failures happens. Have good trading!2012-05-08 18:07:22
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