Using Doji candles In Technical Analysis
Doji candles are ones that you should be usually glad to recognize when analyzing the chart. The Doji form by itself provides us with useful information regarding the market price action, and may create important chart patterns when combined with other components. Basically, when you see a Doji candlestick you know that the chart pattern is now pretty much neutral. Therefore, it might occur ahead of a potential change in the momentum of an existing forex trend. In one of the previous articles we talked about important formation of Doji candles. Now, I would like to show you 2 other important Doji candles you should be familiar with. If you missed the previous article you can read here: Doji Candle Within An Existing Market Trend.
Long Legged Doji
The long upper and lower shadows Doji candles are candles that are equal or almost equal in the length of their shadows. When you see Long Legged Doji candles you know that the prices were traded well above and below the time-frame open and close rates, and eventually the session was closed practically on the same price. Therefore, it indicates a great indecision in the market. The appearance of the Log Legged Doji candlesticks suggests high volatility and weakening of an existing trend. Therefore, a potential reversal might come next. Don’t base your trading decisions solely on this format. But when confirmed with other indicators it may provide good trading signals. It should be also used as a warning sign that enable you to exit an open position which took advantage of the prevailing trend.
Dragon Fly and Gravestone Doji
Dragon fly Doji candles formation occurs when the open, high, and closing price are the same, however the low price creates a long lower shadow. This low shadow makes it look as the letter “T” while there is no upper shadow at all. When you recognize Dragon Fly Doji candles, you know that during the session the sellers were dominating. However in the end the buyers resurfaced and pushed the prices back up toward the session’s high and opening price. This Doji candlestick usually forms in times of high impact economic releases. It may also occur when the price hit a strong technical resistance level.
The Gravestone Doji candle is very similar. Its form take place when the open, low, and closing price of the relevant time-frame are about equal. In this case we have a long upper shadow that looks like the letter “T” but on the upside down. In these Doji candles There is no lower shadow at all. When you see a Gravestone Doji candle on your forex trading chart, you know that buyers were dominating the session. But then sellers brought the price back down while the closing of the session was equal to the opening price.
When you recognize Dragon Fly Doji, Grave – Stone Doji or other Doji formations, you should remember that the reversal implications depend on previous price action and require a future confirmation. Even though the long shadows of these candlesticks are sign to a high volatility or a failed rally, they provide an evidence of some pressure against the trend and might be a reversal point. So make a smart use of these Doji candles. Don’t use them as the only indication. But once you are able to recognize them and use it wisely in conjunction with some other technical indicators, you’ll have another trading tool which will improve your skills and open for you new trading opportunities.
Soon i will share you some specific trading strategies using Doji candles and other formations. Subscribe to my site on the Home Page and keep up to date. You’ll get inform once any new piece of content is released. If you have any questions or comments about Doji candles or in any other matter please feel free to contact me. See you later!