Delving Into Dojis

A doji is a single-stick pattern in which the open and close for a day are equal (see Chapter 5 for more discussion on dojis). This level of exactness is a rarity, though, and some candlestick chartists are flexible and say that if the open and close are very near each other, it’s still considered a doji. I agree, although I do think that they need to be the same in the case of the dragonfly and gravestone — two dojis that are indisputably bullish and bearish, respectively. But there are other varieties of dojis for which the market context is critical, and I cover a few of the significant ones in this section.

Dojis are often associated with the reversal of a trend and can serve as outstanding reversal indicators. If a doji appears in an uptrend, it could very well indicate that the trend may be changing to a downtrend soon, especially if the doji is a gravestone doji. Likewise, if a doji (especially a dragonfly doji) appears during a downtrend, there’s a good chance that things will look up soon.

The long legged doji

In addition to the dragonfly and gravestone dojis (covered in Chapter 5), one last doji is significant enough to merit a specific name. This one is cleverly called the long legged doji.

A long legged doji is considered a reversal signal ...

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