Doji

Each doji variant tells a different story about market psychology:

Standard doji (neutral): Open and close are nearly identical with roughly equal upper and lower wicks. This signals pure indecision — neither buyers nor sellers could gain control. After a strong trend, it warns that momentum may be stalling.

Dragonfly doji (bullish): Open and close are at or near the session high, with a long lower wick and no upper wick. During the session, sellers pushed price sharply lower, but buyers fought back and drove it all the way to the open. This aggressive rejection of lower prices is a strong bullish signal, especially after a downtrend.

Gravestone doji (bearish): Open and close are at or near the session low, with a long upper wick and no lower wick. Buyers pushed price higher during the session, but sellers overwhelmed them and drove it back to the open. This failure to hold higher prices is bearish, especially after an uptrend.

Long-legged doji: Very long upper and lower wicks with the open/close in the middle. This signals extreme indecision and volatility — both buyers and sellers were active but neither could dominate. Often appears before major breakouts or trend changes.

Four-price doji: A rare pattern where the open, high, low, and close are all the same (a horizontal line). This occurs in very low-volume, illiquid stocks and signals zero participation rather than indecision.

Context is everything: A doji in the middle of a sideways range means nothing — the market is already indecisive. A doji after five consecutive bullish candles at a resistance level is significant because it signals the trend may be exhausting.

Wait for confirmation: Never trade on a doji alone. Wait for the next candle to confirm the reversal. If a gravestone doji forms at resistance and the next candle is bearish (closing below the doji's low), the reversal is confirmed. Without confirmation, the doji is just a pause.

Combine with support and resistance: Dojis at key levels (moving averages, prior highs/lows, Fibonacci retracements, VWAP) are far more meaningful than dojis at random price levels. The key level provides a structural reason for indecision.

Volume matters: A doji on high volume indicates a genuine battle between buyers and sellers. A doji on low volume may just reflect a lack of participation (lunch hour, pre-holiday) and carries less predictive value.

Entry and stop placement: For a bearish doji at resistance, enter short if the next candle closes below the doji's low. Stop goes above the doji's high. For a bullish dragonfly doji at support, enter long if the next candle closes above the doji's high. Stop goes below the doji's low.

Dojis frequently appear as part of larger multi-candle patterns:

Morning star (bullish): A large red candle, followed by a doji that gaps down, followed by a large green candle that closes into the first candle's body. The doji represents the moment of maximum selling exhaustion before buyers take control.

Evening star (bearish): A large green candle, followed by a doji that gaps up, followed by a large red candle. The doji marks the peak of buying enthusiasm before sellers step in.

Doji sandwich: Two candles of the same color with a doji between them. The doji represents a brief pause, and the trend typically continues in the direction of the surrounding candles.

Three-candle doji reversal: Multiple consecutive dojis at a key level represent building pressure. When the breakout finally comes (a large directional candle after 2-3 dojis), the move tends to be powerful because the compression releases stored energy.