What Is Doji Candle and How to Work?  

Introduction to Doji Candles  

When the candle starts, the buyer wants to buy, the stock and the price move up, seller starts selling on the stocks due to this reason stock unable to move up, and the situation for the seller. When the seller wants to sell and the buyer starts buying and price is unable to move downside. In this way, the stock is trading at the same level and unable to move upside and downside. Finally, a candle forming doji candle with upper and lower shadow no body candle. The upper and lower shadows will be almost the same as a small body candle.  

What Exactly Is a Doji Candle?  

A Doji candle is a type of candlestick pattern that forms when a security's opening and closing prices are virtually the same. Here's what you need to know:  

1. The word "Doji" comes from Japanese and means "blunder" or "mistake".  

2. It looks like a cross, inverted cross, or plus sign.  

3. The length of the upper and lower shadows can vary as per market condition.  

   Fact: Doji candles are like the market's way of saying, "I'm not sure which way to go upside or downside".  

How many types of Doji Candles?  

There are actually a 4 different types of Doji candles. Let's see all types of doji candles.  

1. Neutral Doji candle  

This is a standard Doji candle with equal upper and lower shadows. It's like the market is taking a quick breather.  

2. Long-Legged Doji candle  

This one has long upper and lower shadows. It tells us that there was a lot of indecision in the market that day. The market may be go upside or downside.  

3. Dragonfly Doji candle  

Dragonfly doji candle like a "T" with a long lower shadow looks like a hammer candle, It often signals that buyers stepped in to push prices back up and break out the upperside.  

4. Gravestone Doji candle  

The opposite of a Dragonfly, it looks like an upside-down "T". This one might hint that the seller took control and went down the lower side.  

How to spot a Doji Candle?  

Spotting a Doji is pretty straightforward:  

1. Look for a candle where the opening and closing prices are the same or very close.  

2. Check if it forms a cross or plus sign shape.  

3. Pay attention to the length of the shadows, upper and lower shadows will be the same.  

What does a Doji candle tell us?  

1. Neither buyers nor sellers are in control, the market may go any side.  

2. The current trend might be losing steam.  

3. A potential reversal could be on the horizon.  

How to trade with Doji Candles in your Trading?  

1. Look for confirmation: Wait for the next candle to confirm the potential reversal.  

2. Consider the trend: A Doji after a long uptrend or downtrend is more significant.  

3. Use with other indicators: Combine Doji signals with other technical analysis volume and RSI indicator tools.  

4. Practice and more practice: The more you work with Doji candle patterns, the better you'll get at interpreting them.  

Common Mistakes to Avoid  

1. Don't rely solely on Doji candles for your trading decisions.  

2. Be careful not to over-interpret Doji patterns in ranging markets.  

3. Remember that not all Doji candles are created equal - context matters.  

"Unlock Your Investment Potential – Open a Demat Account with Upstox Referral Link Today!"