A doji is a type of candlestick pattern that forms when the open and close prices of a stock are roughly equal. Dojis are considered neutral patterns and can indicate indecision or a potential reversal in the stock’s trend.
A doji candlestick is characterized by a small real body (indicating that the open and close prices are roughly equal) and long upper and lower shadows (indicating that the stock’s price moved significantly higher and lower during the trading period).
There are several types of dojis, each with slightly different characteristics and implications for the stock’s trend. These include:
-The dragonfly doji, which has a long lower shadow and a small or absent real body and it forms when the open, low and close prices are the same, indicating strong buying pressure.
-The gravestone doji, which has a long upper shadow and a small or absent real body and it forms when the open, high and close prices are the same, indicating strong selling pressure.
-The long-legged doji, which has long upper and lower shadows, indicating a high level of volatility in the stock’s price during the trading period.
Traders often pay attention to dojis as they can indicate a potential reversal in the stock’s trend, and they should also consider other factors such as the stock’s overall trend and volume of trading before making a decision to buy or sell.