Dragonfly Doji

Even though the bears are starting to lose control of the decline, further strength is required to confirm any reversal.

We know that a support area can become resistance once it is broken so this is a nice candidate for a short setup. This blended candlestick captures the essence of the pattern and can be formed using the following: 

But, you can significantly improve your success rate trading a doji candlestick pattern by hunting for those hidden reversal patterns in the lower time frames. The close near the day's open suggests that demand is again starting to outweigh supply moving forward.

BREAKING DOWN 'Dragonfly Doji' 

Doji Candlestick. A Doji represents the equilibrium between supply and demand in the markets. This signal is distinct in that prices open and close at or near the same level, indicating indecision of investors.

The key is to look for doji that follow an uptrend or downtrend. The initial uptrend ends with a long bullish candle. After a gap up, we see a doji, and then the market gaps down to a long bearish candle.

In this case, the pattern successfully predicted a downtrend. Although there are short up and down movements within the larger downtrend, the price does decrease in the long term. In this example, we see a doji candlestick pattern taking part in an Evening Star candlestick pattern.

The bulls are in control and push the price up during the first section, forming an uptrend. In addition, because there is a gap between the doji and the subsequent candle, the odds of a reversal increase. As expected, the price decreases after the appearance of the Evening Star. First, you can identify the pseudo-Dragonfly by its long lower tail. Due to its short upper wick, it is not a true Dragonfly.

However, like a Dragonfly, it predicts a bullish reversal, which ends up being slow but steady. Next, the pseudo-Gravestone lacks authenticity due its short lower wick. However, like a Gravestone, it successfully forecasts a bearish reversal, which occurs shortly thereafter. Therefore, technical analysts use tools to help sift through the noise to find the highest probability trades.

One tool that was developed by a Japanese rice trader named Homma from the town of Sakata in the 17th century, and it was made popular by Charles Dow in the s: Doji Formation Every candlestick pattern has four sets of data that help to define its shape. Based on this shape, analysts are able to make assumptions about price behavior. Each candlestick is based on an open, high, low and close.

The time period or tick interval used does not matter. The filled or hollow bar created by the candlestick pattern is called the body.

The lines that extend out of the body are called shadows. A stock that closes higher than its opening will have a hollow candlestick. If the stock closes lower, the body will have a filled candlestick. One of the most important candlestick formations is called the doji.


Doji Candlestick 

A doji is a name for a session in which the candlestick for a security has an open and close that are virtually equal and are often components in patterns.

Doji Candlestick. A Doji represents the equilibrium between supply and demand in the markets. This signal is distinct in that prices open and close at or near the same level, indicating indecision of investors. The Doji is an transitional Candlestick formation, signifying equality and/or indecision between bulls and bears. A Doji is quite often found at the bottom and top of trends and thus is considered as a sign of possible reversal of price direction, but the Doji can be viewed as a continuation pattern as well. 

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After a long white candlestick and doji, traders should be on the alert for a potential evening doji star. After a decline or long black candlestick, a doji indicates that selling pressure may be diminishing and the downtrend could be nearing an end. The doji is a commonly found pattern in a candlestick chart of financially traded assets (stocks, bonds, futures, etc.) in technical analysis. It is characterized by being small in length—meaning a small trading range—with an opening .

Mar 11,  · Doji candlesticks tell a story and are part of many patterns. This article discuses what a doji candlestick is and what story it tells.5/5(5). A doji occurs when the opening and closing price is the same (or close to it). Many traders think that this candlestick pattern is one of the best ones to trade. Heck, Steve Nison devotes a whole chapter to it! The reality is that this pattern doesn't tell you a whole lot. At best, it only tells you.

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