Doji

What Is a Doji?

A doji is a candlestick pattern in which the open and close prices are equal or very nearly equal, resulting in a candle with little to no body. The visual appearance resembles a cross, plus sign, or inverted cross depending on the wick lengths. The pattern represents a session where buyers and sellers fought to a standstill, with neither side establishing control by the close.

Doji candles appear on all timeframes and in all markets. Their significance varies dramatically based on context. A doji after a long trending move is noteworthy; a doji in the middle of a choppy range is unremarkable.

Types of Doji Patterns

The standard doji has a thin or nonexistent body with upper and lower wicks of roughly similar length. It is the most neutral form of the pattern.

The long-legged doji has exceptionally long wicks on both sides, indicating that price traveled far in both directions during the session before closing near the open. This pattern shows high volatility combined with ultimate indecision and often appears before significant turning points.

The dragonfly doji has a long lower wick, no upper wick, and closes at or near its high. When it appears at the bottom of a downtrend, it acts similarly to a hammer, suggesting that sellers drove price lower but buyers reclaimed all the lost ground. This is a potentially bullish signal.

The gravestone doji is the opposite: a long upper wick, no lower wick, and a close at or near its low. At the top of an uptrend, it resembles a shooting star and warns that buyers attempted to push higher but sellers dominated by the close.

Trading with Doji Patterns

The doji is best understood as a warning signal rather than a trade signal. It tells you that the prevailing trend has encountered resistance, but it does not tell you what happens next. The candle after the doji provides the confirmation.

A common strategy is to note when a doji forms at a key support or resistance level and then enter a trade in the direction of the confirming candle that follows. Stop losses are typically placed beyond the doji's extreme wick. This approach uses the doji as a setup candle and the follow-through as the trigger.