The long legged doji

In addition to the dragonfly and gravestone dojis (covered in Chapter 5), one last doji is significant enough to merit a specific name. This one is cleverly called the long legged doji.

A long legged doji is considered a reversal signal when appearing in an uptrend or downtrend. This doji indicates that there has been much uncertainty in the market after a period of directional certainty. This change of conviction often results in a change in trend.

Identifying long legged dojis

The long legged doji has a fitting name: It features a small stick with very long wicks (or legs) on each end. The small candle on a long legged doji is normally located very close to the center of the candlestick. Check out Figure 6-3 for a classic example of a long legged doji.

In addition to its unique appearance, the long legged doji is singled out due to the unusual price action that causes the formation of this candlestick pattern on a daily chart. Figure 6-4 provides a look at a 30-minute chart that translates into a long legged doji.

Figure 6-4 just looks like a roller coaster ride. Imagine trying to trade during a day like that and ending up where you started. You can really lose (or win) big on such a day.

Figure 6-3:

A long legged doji.

Figure 6-4:

A 30-minute chart that creates a long legged doji on a daily chart.

Figure 6-4:

A 30-minute chart that creates a long legged doji on a daily chart.

l\NG / If you've just started trading or don't feel quite comfortable with your trading abilities yet, it's probably best for you to steer clear of day trading on extremely volatile days. I've been trading for years, and I have taught myself to lay off the day trading when things are particularly hairy.

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