Delving Into Dojis

A doji is a single-stick pattern in which the open and close for a day are equal (see Chapter 5 for more discussion on dojis). This level of exactness is a rarity, though, and some candlestick chartists are flexible and say that if the open and close are very near each other, it's still considered a doji. I agree, although I do think that they need to be the same in the case of the dragonfly and gravestone — two dojis that are indisputably bullish and bearish, respectively. But there are other varieties of dojis for which the market context is critical, and I cover a few of the significant ones in this section.

Dojis are often associated with the reversal of a trend and can serve as outstanding reversal indicators. If a doji appears in an uptrend, it could very well indicate that the trend may be changing to a downtrend soon, especially if the doji is a gravestone doji. Likewise, if a doji (especially a dragonfly doji) appears during a downtrend, there's a good chance that things will look up soon.

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