Using the doji pattern in trading – how it looks on the chart, strategies

Методы и инструменты анализа

Japanese Doji candle (doji) and its use in trading, varieties, trading strategies for the doji star, doji candlestick analysis, what the candle says. Understanding
Japanese candlesticks and reading them correctly on trading charts is an important part of success. In order to conduct profitable transactions, you need to know what a doji pattern is in trading. You need to understand that for successful trading and making a profit, you need to additionally know what types of doji are, how they look on the charts.
Using the doji pattern in trading - how it looks on the chart, strategies

What is doji, a general description of the Japanese candlestick

At its core, doji is a trading candle. In most cases, it indicates that there is a so-called market uncertainty. If you look closely at such candles, you can immediately understand that the opening and closing prices either completely coincide or are very close in value to each other. It turns out that doji in 90% of cases is a reversal candle. A similar trading phenomenon occurs at important support and resistance levels. It should be borne in mind that a candle appears when a bullish or bearish trend comes to an end. In order to avoid mistakes in trading, you must first understand how the Japanese candle works in the market. For the first time, Japan became interested in the analysis of doji candlesticks. In it, the opening price is almost equal to the closing price. It also needs to be taken into account that the candle itself is neutral. Also, such patterns can be present in a number of different important candlestick patterns. If we consider this concept in more detail, it should be noted that each candle is formed when the opening and closing prices of each security are almost equal in value. You need to track indicators for a selected period of time.
Using the doji pattern in trading - how it looks on the chart, strategiesThe peculiarity is that, depending on where the opening or closing line passes, Dodge can be called “Tombstone”, there are also other names – “Long-legged rickshaw” or “Dragonfly”. Doji – a candle that symbolizes the indecision that exists or occurs during trading in the market. Another point to be taken into account is that dojis in trading are not too significant in the case when the market is not in a trend at that moment. This is because non-trending markets inherently indicate the presence of obvious indecision. Here it should be taken into account that if a doji candlestick is formed in an uptrend or downtrend, this is considered significant in 90% of cases. A similar signal that buyers are losing their previous conviction, as well as in the case when they form in an uptrend. It is also equally a signal that sellers lose their conviction if they are seen on the charts in a downtrend. https://articles.opexflow.com/analysis-methods-and-tools/yaponskie-svechi-v-trajdinge.htm Each doji candle is formed only if the opening and closing prices of each such candle are the same. This tells interested people that the market is in a state of uncertainty. In this case, buyers, as well as sellers, cannot fully control the situation. An example of how this can be seen visually on the chart:

Using the doji pattern in trading - how it looks on the chart, strategies
Japanese Doji candle

What does a doji pattern look like on a chart?

By itself, the candle in question, called Doji, will not tell anything to a simple person. That is why it is important to consider it in the context of what is happening. It should be borne in mind that they need to be considered taking into account the price movement. As an example, consider the situation when dojis are in an uptrend. All this will in this case mean for the bidders that the market is temporarily in a state of equilibrium. After the market has completely rested, then in 90% of cases the following happens: the price will move higher. This happens because this path is inherently the path of least resistance. 90% of traders, when they see a doji candle in an uptrend on the chart, begin to note that the current trend will change in the very near future. That is why the existing securities can be sold. At the same time, it is easy to make a mistake, since the trend always consists of many candles. They move higher and higher. You also need to calculate how likely it is that it can turn around just under the influence of one such candle. It should also be taken into account that any analysis carried out regarding candles contains doji candles. They are very popular as their opening and closing prices are equal. At the same time, the shadows are relatively short. Variant of how the candle looks on the chart: contains doji candles. They are very popular as their opening and closing prices are equal. At the same time, the shadows are relatively short. Variant of how the candle looks on the chart: contains doji candles. They are very popular as their opening and closing prices are equal. At the same time, the shadows are relatively short. Variant of how the candle looks on the chart:
Using the doji pattern in trading - how it looks on the chart, strategiesFeatures that need to be taken into account indicate that, depending on the presence of a lower or upper shadow, as well as on their length, doji has a number of varieties.

Doji pattern types

Each doji candle in trading is important. This candle has the following varieties:

  • Gravestone.
  • Dragonfly.
  • Long-legged doji.
  • Dodge Rickshaw.

Using the doji pattern in trading - how it looks on the chart, strategiesEach type is recommended to be considered separately. The appearance of a doji candle in the process of trading on the market means that the forces of the “bulls” and “bears” in this case are equal. A special moment – it was during this period of time that the market was in a state of indecision. In the event that a long trend was observed, then the appearance of a doji signals to bidders about its completion and a possible reversal. If the market is active, then the doji will be a strong signal for all its participants. This becomes especially noticeable if it was formed with a gap and has a large tick volume. If the market initially shows low activity, then such an option will be more useless for bidders. Those who have experience with these candlesticks only use them in conjunction with other technical analysis tools. They can be, for example, trend lines or peculiar indicators used in trading. Experienced players point out that the use of dodge with indicators of the following types will be of particular efficiency and profitability: overbought and oversold. The option also shows itself on the positive side when a doji is formed in a similar zone. This is a good signal for a trend reversal to a positive one. Doji can also be part of some candlestick patterns. In this case, the emerging model becomes stronger in the market, and, therefore, significant for all participants in the process.

Using the doji pattern in trading - how it looks on the chart, strategies
Gravestone doji [/ caption] Gravestone and Dragonfly are the most popular types of doji. It should be taken into account that the Tombstone has a long upper shadow and at the same time does not have a lower one. The peculiarity is that the opening and closing prices will always be equal in their values. If the species under consideration appears in a long uptrend, this can be taken as a signal that it will reverse as soon as possible. Also, this type can appear in a downtrend, but not a negative market trend. In this case, it indicates a reversal, but the signal itself can only be perceived with subsequent confirmation from other instruments that are directly involved in the analysis. [caption id="attachment_14434" align="alignleft" width="165"]
Using the doji pattern in trading - how it looks on the chart, strategiesDragonfly [/ caption] The next type of candle will be the Dragonfly. At its core, this is an inverted Tombstone. The peculiarity of the view is expressed in the fact that it has a long lower shadow and no upper shadow. Such a dodge signals a change in trend. Here you need to take into account the fact that in the presence of a downtrend (in essence, this is a fall in market indicators), exactly as in the case of an uptrend (in the case of an increase in indicators), it requires subsequent confirmation from other participants in the trading process. The next doji pattern is the long-legged doji. It is also a variation of the classic Dodge. A distinctive feature in this case will be the presence of relatively long shadows. In most cases, it appears after a strong, and sometimes very quickly, unexpectedly and lightning fast up or down trend. Such a candle contains a more volatile movement of the price presented in the auction within it. Accordingly, the signal strength of this dodge will be stronger than the classical one. An example of this kind:
Using the doji pattern in trading - how it looks on the chart, strategiesAnother type is the doji rickshaw. This is an option in which the upper and lower shadows will be equally similar in relation to each other. As a result, the opening and closing prices are located exactly in the center of the price range of the candle in question.

Doji based technical analysis

Any research and analysis in this direction shows that a trend begins to form and further develops when there is a clear difference between supply and demand. This rule applies only to the asset. Here, as an example, consider the case when it comes to an uptrend. It is accompanied by the appearance of the considered candles, which at the same time have a long body.
Using the doji pattern in trading - how it looks on the chart, strategiesIf demand increases, then the value of a particular asset participating in the auction increases. At the same time, you need to monitor all sections of the charts, since in one of them supply and demand must find a balance. It is here that the very candles appear – doji. It should be borne in mind that the short-term balance that has arisen is not yet a full-fledged indicator of the situation in the analysis. The candle indicates that a reversal to demand or supply will occur very soon. It is important to pay attention, first of all, to where such candles appeared in the auction. Thus, the doji candle shows that it is necessary to think about the choice between selling or acquiring an asset, but at the same time it is necessary to analyze the general situation on the market.

How to use, setup, trading strategies

In the case when you have to work with these candles, you need to pay special attention to the areas that precede and follow the pattern. In other words: what the candle is surrounded by. If these are, for example, options with long shadows and a short body, then you should not attach much importance to them in the process of setting up and building a trading strategy. In this case, the market is in the stage of consolidation, in which it will remain for a certain period of time. In the case of the option of being surrounded by candles with a long body, this is a signal for special attention to what is happening. [caption id="attachment_14436" align="aligncenter" width="589"]
Using the doji pattern in trading - how it looks on the chart, strategiesDoji pattern with different shadows

Consider the doji pattern, the Japanese candlestick in its real display on the chart, what the pattern means and what to do: https:/ /youtu.be/vWOxRBI_zAU

When to use doji and vice versa when not to

Since these candles are an element of technical analysis, they are actively used to find the tops (and bottoms) of the selected trading channel. Any trend begins to form and develop, getting an ascent, so you need to use such candles when there is a tendency to turn to demand or there is a balance for a long time. If there is no clear trend, then candles are not recommended.

Pros and cons

The advantages are ease of tracking, ease of analysis, clear visual reflection on the chart, efficiency in work. Disadvantages: different types will be difficult to master for beginners, such candles occur very rarely, they also depend largely on the general situation on the market, without experience it is difficult to understand when to buy a doji on a candle and when to sell it.

Using the doji pattern in trading - how it looks on the chart, strategiesIn order to work with these candles, you will need to know which patterns lined up before and after them. For example, if you look at the screenshot, it will become clear that the price is growing in a certain time period. Then a candle appears directly, indicating market uncertainty.
Using the doji pattern in trading - how it looks on the chart, strategiesAfter that, you need to start monitoring the situation. If there is a rebound from the local maximum at the resistance level, then you can open a deal. The reason is that the price will continue to decline to the support level.

Поделиться ссылкой:

Rate this post
Rate author
Programming, investment and algorithmic trading
Add a comment