A Doji candlestick symbol is an important shape that you’ll see a lot in the candlestick charting. Our previous article on candlestick explains how a candlestick is formed. A Doji is one type of candle stick that is formed when the price (opening & closing) didn’t change. Whether you’re using a minute, day or weekly chart, you’ll notice a candlestick doji pattern created when the open price is the same like the closing price. But I like to use day charts ( when 1 candlestick represents 1 trading day) to look for Doji. I just can spot it a lot with a day chart and it most likely represents a trend reverse more accurately.
A Bottom, then Top Doji
Why is Doji important to track?
When a Doji is formed at the bottom or at the top of a trend this is powerful because the pattern speculate that there will be a shift or reverse of prices. I consider it a “pause” in a fight between the bear and the bull that will cause a reverse or shift in power. For instance, if the bull is winning the fight at the moment, but then things is changing followed by a pause (or Doji) and then the bear will take over and the bull will lose the fight at the next moment.
(Note: Bull represent the uptrend market or when traders profit from buying low and selling high. Bear represents the downtrend market or when traders profit from selling high first & then buying low, it’s also called short selling)
Doji at the top
A doji doesn’t has a body, so it only has legs or tails, but it also has some shape variations. For instance there is the popular ” Gravestone Doji” which doesn’t have a tail at the bottom of the body. And as the name suggests it is usually is formed before something bad.
What Doji Gravestone really means is that the bull were winning at the beginning of the session but then they went back to the original position because the bear were pushing hard not to raise price.
So, when a stock is in uptrend or just moving sideways and you see a gravestone doji forming then this candlestick formation suggests that the prices will go down.