How to trade using the doji candlestick pattern

Popularly called the 'doji candle', the doji candlestick chart pattern is one of the most unique developments on the planet of trading. Find out more about this pattern and learn how you can trade when you recognise it.

What is the doji candlestick chart pattern? 

The doji candlestick chart pattern is a development that happens when a market's open cost and close price are almost exactly the same. There are different variations of the pattern, particularly the common doji, gravestone doji, dragonfly doji and long-legged doji.

The vertical line of the doji pattern is called the wick, while the horizontal line is the body. The wick can vary in length, as the leading represents the greatest price, and the bottom represents the low.

How is a doji candlestick formed?

A doji candlestick is formed when the market opens and bullish traders press rates up while bearish traders reject the higher cost and press it pull back. It might likewise be that bearish traders try to push rates as low as possible, and bulls resist and get the rate back up. Simply put, the marketplace has explored upward and downward alternatives but then 'rests' without devoting to either instructions.

The upward and downward motions that take place in between open and close kind the wick. The body is formed when the rate closes at basically the exact same level as it opened.

What does a doji tell traders?

When took a look at in isolation, a doji tells traders that neither buyers or sellers are getting-- it's an indication of indecision, or neutrality. Some traders believe that the doji indicates an approaching price reversal when seen along with other candlestick patterns, but this may not always hold true. It could be a sign that purchasers or sellers are acquiring momentum for an extension trend.

It's crucial to remember that the doji candlestick does not supply as much info as one would require to decide. Prior to acting on any signals, consisting of the doji candlestick chart pattern, always think about other patterns and signs, and ensure you stay with your trading strategy and danger management strategy.

Doji chart pattern example

Let's presume you're following Microsoft's share rate, which opens the trading day at $104.50. As buyers and sellers go into the market, the share price begins moving, striking a low of $102.00 and a high of $107.00 before closing at $104.20. This creates a long-legged doji, as pictured below.

How to trade when you see the doji candlestick pattern

There are many ways to trade when you see the doji candlestick pattern. Look for signals that complement what the doji pattern is recommending. Most traders utilize momentum indications to validate the possibility of a doji signalling reversal, because these indications can help to identify the strength of a trend.

If you think that a typical doji at the bottom of a sag indicates possible turnaround, you can test the bullish bias utilizing the stochastic oscillator. This indication follows the speed and momentum of the marketplace over a particular timeframe, anticipating rate motions. If the signal is confirmed, you may want to go long (buy).

When you see the doji candlestick pattern and you wish to place a trade, you can do so via derivatives such as CFDs or spread out bets. Derivatives allow you to trade increasing along with decreasing costs. Depending on what you think will take place with the possession's rate when one of the doji patterns appears, you can open a long position or a brief position.

Follow these steps to trade when you see the doji candlestick chart pattern: 

• Log in to your IG trading account

• Browse the possession you wish to sell the 'finder' panel

• Enter your position size

• Select 'buy' or 'sell' in the offer ticket

• Confirm the trade

If you don't have a live trading account, you can open one quickly and easily. If you choose, you can likewise try to find the doji chart pattern and practise trading using a safe demo account.

Doji candlestick pattern summed up

• The doji candlestick chart pattern occurs when a market's open cost and close rate are practically exactly the very same-- it signifies indecision and neutrality

• The four variations of the doji pattern consist of the common doji, gravestone doji, dragonfly doji and long-legged doji

• A doji candlestick forms when the market opens and bullish traders press costs up while bearish traders press it pull back, or vice versa 

• Among the restrictions of the doji candlestick pattern associates with the amount of cost information it provides 

• When you find the doji candlestick chart pattern, you can trade utilizing derivatives such as CFDs or spread out bets

• With derivatives, you can go long or short because you do not own the underlying property