What are the many forms of Doji Candlesticks and how can I trade them?

The doji candlestick pattern is a cross, plus, a dash, or a T-like candlestick that appears when a market's opening and closing prices terminate at precisely or nearly the same position during that time period. This candlestick pattern indicates that the bulls (buyers) and bears (sellers) are undecided (sellers)

Traders can use the pattern by itself or in conjunction with other candlestick patterns to identify probable trend reversals.

Types Of DOji 

  The design is available in several forms, including the common or Standard doji, tombstone doji, dragonfly doji, 4-price doji, and long-legged doji.

Common Doji 

This is a candlestick pattern in which the bulls dominated the markets until the bears stepped in and brought price down below the opening price to the same level as the bulls, at which point the bulls chose to drive the price back up to very near to or precisely the opening price at that time frame. (or the other way around) The bulls and bears seem indecisive in this candlestick. Traders can figure out what this candlestick indicates by looking at the price activity leading up to it.

Long-legged Doji

In a market with strong activity, a long-legged doji suggests hesitation. The pattern works best when it follows a strong directional move, similar to the classic doji, however it usually just shows the first symptoms of a reversal. The vertical lines above and below the horizontal line are more extended. This means that the price action of the candle moved substantially up and down over the span of the candle, but that it closed at about the same level as it opened. Longer wicks distinguish this design from the regular Doji candlestick. This signifies that both buyers and sellers sought to dominate at some time throughout the pattern construction, but there was no clear winner when the candle ended. Traders in this market concentrate on the closing price in respect to the midpoint (50 percent of the candlestick length)

A trader might interpret the uncertainty and probable change of direction if the Doji indicates the peak of the retracement (which we don't know at the time of its formation). Following that, at the open of the following candle after the Doji, look to short the pair. On the Long-Legged Doji, the stop loss would be put at the top of the upper wick.

Dragonfly Doji 

The bottom wick of a Dragonfly Doji is longer, indicating that the open, close, and highest price were all at the same level. Consider it a candlestick in the shape of a 'T.' It might be regarded a positive indication if it occurs near the bottom of a negative swing. When this happens on a support level, it's a big deal. Traders might consider going long on the breakout of the Doji pattern's peak. The Dragonfly Doji can form at the peak of an uptrend or the bottom of a downtrend, indicating the possibility of a direction shift.

This pattern may be used for both entry and exit. The Doji pattern may be utilized as an entrance point when it occurs at the support level. The Doji pattern can be utilized as an escape point when it occurs at a resistance level.It’s advisable to use a combination of patterns and indicators to determine your trading strategy.


Using the Dragonfly Doji in Trend Trading

Looking for Dojis around levels of support or resistance is a common Doji candlestick trading method. The Dragonfly Doji appears near trendline support in the chart below. Although the Doji does not emerge at the peak of the uptrend in this case, traders can still trade based on the information provided by the candlestick.

The Dragonfly Doji indicates that lower prices have been rejected, and the market has since surged upwards, closing near the starting price. The fact that the candle is near trendline support and that prices have previously bounced off this major trendline adds to this probable bullish bias.

Gravestone Doji:

Gravestone doji have the appearance of an inverted letter "T," which is the polar opposite of the Dragonfly doji. When price action begins and ends at the lower end of the trading range, this pattern occurs. Buyers were able to push the price up when the candle opened, but they were unable to maintain the bullish momentum by the close, and the bears pulled the price down to the starting price.

When trading these patterns, it's critical to evaluate the prior trend as well as volume. During the doji session, the most accurate trade signals are formed following a strong preceding trend with greater than average volume. Other types of technical analysis, such as trend line support or resistance levels, can also be used as confirmation.

4 Price Doji:

The 4 Price Doji is nothing more than a horizontal line with no vertical lines above or below it. Because the candle's high, low, open, and closure (all four prices indicated) are all the same, this Doji pattern represents the utmost in indecision. The 4 Price Doji is a one-of-a-kind pattern that indicates hesitation or a very calm market.

HOW ARE DOJI CANDLESTICK PATTERNS FORMED?

Within the timeframe of the chart on which the Doji appears, the price of a currency pair opens and closes at almost the same level. Despite the fact that prices may have moved between the open and close of the candle, the fact that the open and close are almost the same price shows that the market has been unable to determine which direction to take the pair (to the upside or the downside).

Keep in mind that trades done in the direction of longer-term trends will have a better possibility of success. When a Doji appears at the bottom of an uptrend retracement or the top of a downtrend retracement, the higher likelihood approach to trade the Doji is in the trend's direction. In case of an uptrend, the stop would go below the lower wick of the Doji and in a downtrend the stop would go above the upper wick.

HOW TO TRADE THE DOJI CANDLESTICK

The numerous Doji candlestick patterns may be traded in a variety of ways. However, in order to execute higher-probability trades, traders should constantly search for signs that complement what the Doji candlestick is saying. In order to minimize losses if the transaction does not work out, it is also necessary to use effective risk management while trading the Doji.