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Figure 1. Doji (basic candle).
Japanese name: doji
Forecast: lack of determination
Trend prior to the pattern: n/a
Opposite pattern: none
Construction:
- a doji candle
- appears on as a long or short line
- candle does not meet requirements to be considered as any of the following doji type:
Candles, in which there is no body, because the opening price is equal to the closing price are called doji candles (jap. fool, clumsy, slip of the tongue).
There are the following types of doji basic candles (do not mix them up with candlestick patterns per se):
If we deal with a doji candle, but a candle cannot be considered as any of the above doji types, we say that we have a Classic Doji candle. Usually, we skip "classic" word however and say just Doji. Pay attention to the fact that when we are talking about doji candle, meaning the type, we write it in lowercase, i.e. doji. When, however, we indicate a particular basic candle name, (classic) Doji, we start with an uppercase.
Please read the following articles to find out more about doji candles:
- The problem with doji candles (Part 1)
- The problem with doji candles (Part 2)
- Candlestick charts: CandleScanner color theme
Figure 2. The figure presents three occurrences of doji candles.
The first doji candle is a classic one, appearing alone (i.e. not being part of any pattern).
The second doji occurs within the Bearish Harami Cross pattern and is considered as a classic Doji (i.e. cannot be assigned to any other more specific doji type).
The third doji is considered as a Dragonfly Doji. But it is important to notice that this is the case only when we are slightly flexible and allow small body for doji candles. Here we have a body height being 1.45% of the whole candle height (opening price: $89.95, closing price: $89.97). If this assumption would not be valid, the basic candle would be considered as a White Spinning Top. Moreover, as we are dealing here with an uptrend, we could even recognize this candle as a valid Hanging Man pattern. However, in that case, this would be a pattern of weak significance rather due to a low trading volume on the day when it was formed.
Figure 3. The chart presents three occurrences of doji candles (red candles).
The first and the third occurrence is not a part of any pattern. Because these doji candles do not meet the requirements of any particular doji, we consider them as classic Doji candles.
The second doji being a Long-Legged-Doji basic candle occurs within a Bullish Doji Star pattern. It is important, however, to emphasize that we can consider this candle as a doji, only because we allow small doji body (up to 3% of the overall candle height). Candle's opening price is $55.51, closing price $55.50 and body size is 0.61% of the full candle height. Otherwise, we would have to consider that candle as a High Wave basic candle that is a type of a spinning top candle. As a result, we would not have a Bullish Doji Star occurrence, and the only thing we could say about market would be that the market does not know in which direction to go. This example shows however that being a bit flexible can improve the trading decisions. Here Bullish Doji Star was formed at a very high trading volume that makes this signal significant. Moreover, in fact, we can see that in the subsequent days market experienced rapid increases.
It is worth also to mention that we see some other candles that resemble doji candles, but, in fact, are not considered as such. In these cases, the body of the candle was bigger than 3% of the overall body size and could not be seen as a valid doji candle.
