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If the closing price is right in the middle, it could be considered a trend continuation pattern. In this case, one can always refer to previous candles to predict future trends. Our two-tiered exit strategy calls for placing a target at a length that is equivalent to the double Doji pattern projected lower from the breakout point. Notice how two candles following the breakout Exit 1 was reached providing us some profits on this trade. However, soon after Exit 1 was reached prices traded slightly lower, and then began to reverse to the upside. We will now draw the support and resistance lines for the double Doji pattern.

Besides, short-term timeframes feature a lot of price noise, confusing traders. Due to their tendency to blend into the background and their similar short stature, doji and hammer candles may appear similar. However, a hammer candle has a long lower shadow that is almost twice the size of a real body. Usually, following a price decline, a hammer candlestick appears, indicating a potential future reversal.

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It signifies a candlestick pattern’s bullish reversal, which typically happens at the bottom of downtrends. The hammer candle is useful for alerting traders to the potential end of a downtrend and for helping traders visualize where support and demand are. The distinction between a Doji and a Shooting Star, which is an inverted hammer and a bearish reversal signal, is the same. Sudden price movements can be a risk when trading with the Doji pattern. In some cases, these sudden price movements can be so large that they can cause significant losses for traders who are not prepared.


This Doji is usually a signal of indecision after a long upward or downward rally. A doji pattern is an important part in day trading because it usually tells traders that a reversal is about to happen. Therefore, if you are unsure about what will happen, the doji can act as a good guide to you.

Psychology behind the formation of doji pattern

A chart depicting a doji suggests that no clear direction has been established for this security – it is a sign of indecision, or uncertainty in future prices. The harami pattern is another signal in the market that is used in conjunction with the doji to identify a bullish or bearish turn away from indecision. This situation causes the candle to be bodiless with only the wicks and a mark at the open/close price level.

The knowledge and experience he has acquired constitute his own approach to analyzing assets, which he is happy to share with the listeners of RoboForex webinars. Take the profit after the quotations reach a strong support level or some signs of a reversal appear. Sell aggressively when the price drops below the low of the Doji. As with buying, it remains unclear if the pattern will work at all but the Stop/Profit ratio you get is better.

Best Practices of Trading with the Doji Pattern

As you see, there is a significant gap down the next day, which bulls can’t close. If the trading volume on the candle is large, it means that a maximum of buyers have intervened. As we mentioned above, Doji means the same thing in Japanese, which refers to the rarity of occurrence of open and closed prices on the market. Please note that foreign exchange and other leveraged trading involves significant risk of loss. Experience our trading platform for 90 days, risk-free. We can use the Fibonacci tool for our maximum loss and target profit here, too.


Both the spinning top and the Doji candle indicate the indecisiveness of the markets. But tech analysts see some differences and read them differently. It indicated a slight weakness in the market trend but not necessarily a breakout in prices. If you spot these two indicators, also refer to the Bollinger band for the higher accuracy of price prediction. According to that, we are able to predict the price movement.

This doji has long upper and lower shadows and roughly the same opening and closing prices. These doji can be a sign that sentiment is changing and that a trend reversal is on the horizon. The dragonfly doji candle has an inverted shape of the gravestone doji pattern, and the meaning of this pattern can be opposite. The dragonfly doji is a bullish trend reversal indicator when occurring in a downtrend. Bears cannot take the price lower, and it’s an opportunity for bulls to propel the price to a new support level and start a long-term uptrend.

bearish reversal

Like any technical analysis tool, the Doji pattern is not foolproof and can produce false signals. It’s essential to use other technical indicators and analysis methods to confirm the pattern and validate the signal before making trading decisions. When a Doji pattern forms near a key support or resistance level, it can indicate that the level is likely to hold. For example, if a Doji pattern forms near a support level, traders might take this as a sign to buy, as the support level is holding. Alternatively, if a Doji pattern forms near a resistance level, traders might take this as a sign to sell, as the resistance level is holding.

Their appearance is more significant at support or resistance in trending markets. The second gravestone doji appears after a harami candlestick pattern. Additionally, the momentum indicator indicates that it is possibly an overbought condition.

A Doji is used to illustrate market indecision and serves as a signal for a reversal in a market that is either upward or downward trending. It forms when the price falls from the open level but recovers again to close near the opening level due to bear activity. Doji has a lot of variations, for example, gravestone, long-legged doji, dragonfly, doji following a long bullish candlestick, etc., which could be confusing. First, you determine the time frame and support/resistance levels.

This doji plus the previous support line and momentum indicator confirmed that the trend has changed. The highest price of that session could not break the previous support line, making it a resistance line. In fact, in the daily or weekly chart, I do not see any perfect 4-price doji, probably in months. Classic Doji has short shadows in both directions and expresses indecision.

How to Trade the Doji Candlestick Pattern – DailyFX

How to Trade the Doji Candlestick Pattern.

Posted: Fri, 07 Jun 2019 07:00:00 GMT [source]

In this case, the managed to slightly dominate the markets. This signifies that the bulls still hold some amount of convictions in holding their trades. Doji at the market high indicates a possible reversal downwards. When this pattern appears after some growing white candlesticks, this might mean the ascending price impulse is nearly over.

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A big bullish candle should be followed by a Doji one with a gap up. The trend reversal is confirmed if the third candle is bearish and opens with a gap down that covers the previous gap up. A Doji indicator is mostly used in patterns, and it is actually a neutral pattern itself.

We have no knowledge of the types of doji of money you are trading with or the level of risk you are taking with each trade. You’ll notice that the EUR/USD is trading in an extended consolidation pattern. After the Doji candlestick forms, the price suddenly moves to the bull.

One key example of doji in context is the doji star pattern, which contains a doji as the second candlestick in a three-stick run. A long lower wick, signalling a bear run that reversed by the session’s end, and nothing on the other side. A gravestone doji on a downtrend can be a reversal signal, whereas it might point to a continuation of bullish price action.


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