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The Doji candlestick pattern is one fascinating and widely recognised candlestick pattern in the world of technical analysis. Using this candlestick pattern you can identify the potential reversal and change in the market sentiment.
What is the Doji candlestick pattern?
The Doji candlestick pattern is a trend reversal pattern with a long shadow and zero body. The appearance of this pattern signals an upcoming trend reversal or a real struggle between buyers and sellers. This pattern appears when both the opening and closing prices are virtually equal resulting in a candlestick that appears as a cross, graveyard ( inverted cross ), or a plus sign.
Significance of the Doji candlestick pattern
The appearance of the Doji candlestick pattern is a signal to a trader that the potential reversal of a significant pause in trend may be imminent. This pattern signals a real struggle between buyers and sellers where both parties are optimistic. You can use this pattern to predict the upcoming reversal, for instance, the Doji candlestick pattern appears after a strong bullish trend with the appearance of the pattern you can expect an upcoming bearish trend.
How many types of Doji candlestick
Classical Doji: This is one of the most basic forms of the Doji pattern characterized by a long upper and lower shadow this pattern indicates a significant amount of indecision.
Inverted cross: The inverted cross has a long upper shadow while the open, low, and close prices are similar.
Dragonfly: This candlestick pattern appears when the open, high & close are the same or about the same with a long lower shadow. This pattern is just opposite to the inverted cross the appearance of the pattern signals that the buyers were able to push the market price up from the lows, potentially signalling a bullish reversal.
How to identify the Doji candlestick pattern
Reversal: The most common use of the Doji candlestick pattern is reversal. when a Doji candlestick pattern appears after a strong bullish trend it potentially signals a rise in optimism of sellers and potentially signals an upcoming bearish trend.
As you can see above I have marked two Doji Candlestick Patterns after both bullish trends and later we can see a bearish trend so, yes we can place a sell trade here.
Similarly, As we can see a Gravestone after a bullish trend and you can use this opportunity to place a sell trade.
