A neutral Doji consists of a candlestick with a nearly invisible body located in the middle of the candlestick, with the upper and lower wicks of similar lengths. This pattern appears when the bullish and bearish sentiments are in balance.

Traders can combine a neutral doji with momentum indicators such as the RSI or the Moving Average Convergence Divergence (MACD) to help identify potential market tops and bottoms.

The daily price of BTC/USD is characterized by a neutral doji candlestick pattern. Source: TradingView
For example, the occurrence of a neutral Doji in an uptrend in conjunction with an overbought RSI (>70) could indicate an imminent market correction. Similarly, the occurrence of a candle in a downtrend when the RSI turns oversold (<30) can precede a market bounce. Long legged doji A long-legged doji has longer wicks, which indicates that buyers and sellers tried to aggressively control price action at some point during the candle's time frame. Regular doji vs. long legged doji. Source: Commodity.com Traders should carefully watch the closing price of the candle when identifying a long-legged Doji pattern. It should be noted that the Doji is a bearish signal if the closing price is below the middle of the candlestick, especially if it is close to the resistance levels. Conversely, if the closing price is above the middle of the candle, it is bullish, as the pattern is similar to a bullish pin bar pattern. Long legged bearish doji chart If the closing price is in the middle, it can be considered a trend continuation pattern. In this case, it is always possible to refer to the previous candles to predict future trends. Dragonfly Doji The Dragonfly doji looks like a T-shaped candle with a long lower wick and almost no upper wick. This means that the opening and closing price and the high price are almost at the same level. Dragonfly doji illustration If the Dragon Doji pattern forms at the end of a downtrend, it can be considered a buy signal, as shown below. Ethereum/USD daily price chart showing the Dragonfly Doji. Source: TradingView Conversely, the occurrence of the candle during an uptrend indicates a possible reversal. Doge's headstone Gravestone Doji is an inverted T-shaped candlestick, the opening and closing coincide with the bottom. The candle indicates that the buyers tried to increase the price but were unable to sustain the bullish momentum. Illustration of the Doge's tomb When the Gravestone Doji appears in an uptrend. It can be considered a reversal pattern. On the other hand, its occurrence in a downtrend indicates the possibility of a bullish retracement. Four doji price The Four Price Doji is a pattern that rarely appears on a candlestick chart except in conditions of low volume or very short periods. Notably, it looks like a minus sign, indicating that all four price indicators (open, close, high, and low) are at the same level over a given period. Four doji price illustration In other words, the market did not move during the period covered by the candle. This type of Doji is not a reliable pattern and can be ignored. It just shows a moment of indecision in the market. How reliable is the doji candlestick pattern? The Doji candlestick pattern may not provide the strongest buy or sell signals in technical analysis, and is likely to be used in conjunction with other metrics. However, it is a useful market signal to consider when gauging the degree of indecision between buyers and sellers. Building a trading strategy based on Doji candlestick patterns is best suited for intermediate or professional traders who can easily identify and accurately interpret given signals.

LEAVE A REPLY