Doji candlesticks
Traders often focus on most types of Japanese candlesticks, but they frequently overlook the Doji candle even though it is one of the most important candles that can give early signals of a trend reversal before it happens. Dear reader, this single candle can open up strong profit opportunities if you understand its meaning and how it works. In this article, we will reveal the secrets of the Doji candle and how to use it professionally.
What are the conditions for this pattern to appear?
Where can it form on the chart?
What is the psychological background behind its formation?
And how can a trader use it to enter high-precision trades?
Definition of the Doji Candlestick Pattern:
It is a single candlestick where the closing price is equal to the opening price, and this applies to all types of Doji candles. The Neutral Doji usually appears around support and resistance levels and is known as a “balance candle” because it reflects equality between buyers and sellers. When it appears at a support level, it means sellers are unable to push prices lower because buying pressure matches selling pressure, resulting in the formation of a Doji. The opposite applies at resistance levels.
If a Doji appears with high trading volume at support levels, it indicates a potential upward move afterward. At resistance levels, if it appears with high volume, it suggests a strong احتمال for prices to drop.
It is preferable to wait for a confirmation candle after the Doji—either a bullish candle at support or a bearish candle at resistance.
The Doji candlestick has four main forms, as illustrated, and all of them represent indecision among investors regarding buying or selling in the market, which leads to a state of balance.
How can we trade using this pattern?
When the pattern appears at a support level, a buy trade is entered immediately after the pattern forms and a confirmation candle appears. The stop-loss is placed below the pattern, and the targets are set at three times the stop-loss, as illustrated on the chart.
When the pattern appears at a resistance level, a sell trade is entered immediately after the pattern forms and the confirmation candle appears. The stop-loss is placed above the pattern, and the targets are set at three times the stop-loss, as shown on the chart
