Doji

A Doji is a single candlestick pattern that occurs when the opening and closing prices are equal. The absence of a real body indicates a state of indecision or a struggle between buyers and sellers, suggesting a potential shift in the balance of power.

The lengths of the upper and lower shadows can differ, resulting in a candlestick that resembles a cross, inverted cross, or plus sign. While a Doji is generally viewed as a neutral pattern on its own, it can be part of more complex candlestick formations.

The Doji is the smallest and simplest of all candlestick types, making it easy to spot. To identify a Doji, look for the following criteria:

• The opening and closing prices of the candlestick must be at (or very close to) the same level, resulting in either no body or a very small body.
• There should be an upper shadow, a lower shadow, or both.
• The horizontal line of the Doji indicates that the opening and closing prices are at the same level.
• The vertical line of the Doji represents the total trading range for that timeframe.

Meaning

The shape of the Doji represents indecision between buyers and sellers. When a Doji candlestick pattern appears, it indicates that the session closed very close to the opening price, which is why the candle lacks a body. This reflects a state of indecision, where neither buyers nor sellers are in control.

A "tug-of-war" is taking place, with neither side holding dominance. Although prices may have fluctuated during the session, they ultimately returned to the original opening price. This moment of indecision often suggests a potential trend reversal.

A Doji holds less significance in a market that is not clearly trending, as sideways or choppy markets are indicative of indecision. If a Doji appears in an uptrend, it is typically seen as significant, indicating that buyers are losing their conviction. Conversely, if a Doji forms in a downtrend, it is also considered significant, as it suggests that sellers are losing their conviction.