Page 2 of the handbook, single candle
Dojis
- Signal
- Indecision; dragonfly and gravestone lean to reversal
- Candles
- 1
- Best found
- Anywhere. Wait for the next candle.
What has to be true
- Open and close at or near the same price
- Long legged: long shadows both ways, body mid-range
- Dragonfly: open, high and close together, long lower wick
- Gravestone: open, low and close together, long upper wick
Long legged doji
This candlestick has long upper and lower shadows with the doji in the middle of the candle's trading range, clearly reflecting the indecision of traders.
When you see long legged dojis, it is a sign for you to wait for the next candle as confirmation of the direction!
In this example the two highlighted candles are nearly identical; but the following candle after the first long legged doji gapped down with continuation. After the second long legged doji, price did the opposite and gapped up into a reversal. This perfectly illustrates the indecisive nature of the long legged doji.
Dragonfly doji
The dragonfly doji is a very rare, but powerful reversal type candle. It has a very small or nonexistent body, with a long lower wick. The open, high, and close prices are all at the same level.
This candle suggests that sellers drove the price down during the period, but buyers were strong enough to push it back up to the opening price by the close.
It's often interpreted as a potential bullish reversal signal, especially if it forms at the bottom of a downtrend.
Gravestone doji
Like the dragonfly, the gravestone doji is also a rare, but powerful reversal type candle. It has a very small or nonexistent body, a long upper wick, and the open, low, and close prices are all at or near the same level.
This candle indicates that buyers drove the price up during the period, but sellers ultimately pushed it all the way back down to the opening price by the close.
It's often interpreted as a bearish reversal signal, especially if it forms at the top of an uptrend.