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Doji Pattern Basics

Big Idea: A Doji candle is simply a candle that closes in the same spot that it opens for that specific timeframe. When this happens, it is often considered an indicator for a reversal, and traders can use doji to help spot a change in direction on any timeframe. Although they are not perfect indicators, they are helpful price action tools. The longer the time frame, the longer the reversal could last, meaning a doji on the 1D chart could change directions which sparks a change in direction that lasts for days/weeks.
Here is an example of a simple doji candle setup that clearly shows how price moves and behaves before and after the doji. Before the doji candle, price is moving in a downtrend, but once the doji is formed, price reverses to the upside. The specific name of this candle is called a long legged doge which is showing rejection from the lows right before a reversal starts.

Key Takeaways


-A doji candle is a candle that opens and closes at the same price

-Dojis help traders spot when a potential reversal could come in a market

-The longer the time frame, the longer the new trend could last

Resources

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