There is one from thing apart from taking a decision on buying or selling which is “doing nothing”. In the markets, not doing anything is also a decision.
The Doji is one of the most important candlestick formations in price action trading and time compression trading. It scans for the “doing nothing” situations.
A Doji is a candlestick pattern whose opening and closing price is almost at the same price level.
- Doji can be found anywhere in the trend. The significance of the Doji varies according to its position in the trend.
- A doji candlestick is formed when the bullish traders push prices up while bearish traders reject the higher price and push it back down in that said timeframe.
- It is one of the most important candlestick signals because a doji represents equality or indecision between bulls and bears.
- A doji is also called a neutral candle because of this.
However, there is flexibility on this rule between the difference of opening price and closing price. That is why it is written “almost”. There is no rule as to how to apply this flexibility. It solely depends on you as a trader.
Doji candlestick can take many forms, each with unique features and interpretation. Let’s have an in-depth discussion on different types of Doji CandleStick Patterns.
This is what a standard Doji Should look like.
This type of Doji is known as “Doji Star” or “Neutral Doji”.
- “Almost” the same opening and closing price.
- Cross Shape.
- Small, “Almost” equal length of upper wick and lower wick.
Clubbing with Support and Resistance:
Now, While We are looking for Doji, We need to check if it is present on top of other Trading Strategy. Like a Doji in the Support and Resistance will have highly significant value. So –
- First, find a scrip that is in either Support or at Resistance.
- Now, look, if the last candle is Doji.
When We are talking about Point 1 here, Note that there is no mention of a timeline. Any stock, commodity, currency, etc, will have different support and resistance on different timelines.
As lower timeframes are erratic, We will look for above the timeframe of 15m to M. (M = monthly)