Doji candle
Family VI · Charts & indicators
Not to be confused with hammer candlestick, engulfing candlestick pattern, candlestick pattern.
Doji candle is a candlestick pattern that forms when the open and close of a period are the same or almost the same, leaving a horizontal line rather than a tall body. The pattern signals that buying and selling pressure reached equilibrium during that period. It is interpreted in context, not as a standalone buy or sell signal.
Structure and formation
A candlestick plots four prices for a chosen interval: open, high, low and close. In a doji, the open and close are equal or differ by only a few ticks, so the real body collapses to a thin horizontal line. The high and low extend above and below that line as shadows, also called wicks. The longer the shadows relative to the body, the more pronounced the indecision the candle represents.
Doji can appear on any timeframe, from one-minute to monthly charts. Their meaning depends on where they occur: after a sustained advance or decline they may indicate that the prevailing move is losing momentum, while inside a range they carry little information.
Worked example
A daily chart shows a stock that has risen for several sessions. On the day in question, the price opens at 50.00, trades as high as 51.20, falls as low as 48.90, and closes back at 50.00.
The zero-length body confirms the doji. The next session's close above 51.20 or below 48.90 is often watched as confirmation of direction, though confirmation rules vary by trader and method.
Variants and interpretation
Several named variants exist, including the standard doji, long-legged doji, gravestone doji (long upper shadow, little or no lower shadow) and dragonfly doji (long lower shadow, little or no upper shadow). These names describe shape, not predictive power.
Interpretation is subjective. A doji after a strong trend is commonly read as a possible reversal warning, but it can also mark a pause before continuation. Analysts typically require additional evidence, such as a confirming candle, volume behaviour or support and resistance levels, before acting on the pattern.
Often confused with
- hammer candlestick
- A hammer candlestick is a single-bar chart pattern with a small real body near the top of the range and a long lower shadow at least twice the body's height, indicating that sellers pushed price down but buyers recovered it before the close.
- engulfing candlestick pattern
- An engulfing candlestick pattern is a two-candle formation in which the second candle's real body completely covers the first candle's real body, indicating a potential reversal in price direction.
- candlestick pattern
- A candlestick pattern is a recurring arrangement of one or more candlesticks on a price chart, each candlestick showing the open, high, low and close for a single period, used to describe price behaviour and potential shifts in supply and demand.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci