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The ultimate indecision candle - when open and close are virtually equal, signaling a potential turning point in market sentiment.
The Doji is a single-candle pattern characterized by having virtually the same opening and closing price. This creates a candle with little to no real body - just a thin horizontal line with shadows (wicks) extending above and/or below.
The word "Doji" comes from the Japanese term meaning "the same thing" - referring to the rare occurrence when buyers and sellers end up at exactly the same price after a full trading session. It represents perfect equilibrium and signals a potential shift in market sentiment.
The Doji tells a story of stalemate. During the session, both buyers and sellers had their moments of control. Price moved higher, then lower (or vice versa), but by the close, neither side had won. The market ended exactly where it started.
This equilibrium is significant because it represents a *pause* in conviction. If the prior trend was strong, a Doji suggests that momentum is fading. The dominant side is losing steam, and the opposing side is gaining confidence.
Think of it as a tug-of-war where neither team can pull the other across the line. The match isn't over - but the next candle will reveal who's about to gain the upper hand. That's why *confirmation* after a Doji is essential.
For Bullish Reversal: Enter on break above the Doji's high with a bullish confirmation candle. For Bearish Reversal: Enter on break below the Doji's low with a bearish confirmation candle.
Place stop on the opposite side of the Doji. For long entries, stop below the Doji's low. For short entries, stop above the Doji's high.
T1: Previous swing high/low or nearest support/resistance level. T2: Key Fibonacci extension level (1.272 or 1.618). T3: Use trailing stop for trend continuation.
Minimum 1:2 R:R required. Dojis with longer shadows offer better risk-reward ratios.
A Doji's meaning is entirely dependent on context. The same cross-shaped candle can signal a major reversal or be completely meaningless noise - the difference is where it forms and what preceded it.
A doji after a big move is meaningful. A doji in a choppy sideways market is just noise. Context determines everything.
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