| Candlestick charting is more popular than ever | | | | As previously mentioned, the standard doji consists |
| before, with a legion of new traders and investors | | | | of a candle that closes and opens at the same price |
| being introduced to the concept by some of today's | | | | level. Doji's become more significant when seen after |
| hottest investment gurus. Once mastered, | | | | an extended rally of long bodied candles (bullish or |
| candlesticks can provide unique visual cues that make | | | | bearish) and are confirmed with an engulfing candle. A |
| reading price action easier and also help the trader in | | | | long legged-doji is formed when the stock opens at a |
| identifying turning points in a trend as it occurs, | | | | level, trades in a considerable trading range only to |
| before a new price trend starts. Reversal patterns in | | | | close at the same level as it opened. Long |
| western analysis often take many periods to form | | | | legged-doji's become more powerful when proceeded |
| but the vast majority of candlesticks formations take | | | | by small candles, as a sudden burst of volatility in a |
| only one to three time periods, and give traders | | | | relatively nonvolatile stock; can imply a trend change |
| more of a real time picture of market sentiment. | | | | is coming. Dragonfly Doji's are doji's that opened at |
| Many traders still don't know the major reversal | | | | the high of a session, had a considerable intraday |
| patterns used in candlestick analysis and there is | | | | decline, then find support to rally back to close at the |
| much misunderstanding concerning the practice. This | | | | same level as the open. Dragonfly Doji's are often |
| article series will try to explain the different major | | | | seen after a moderate decline, and are bottom |
| candles, patterns and also when these signals are | | | | reversal indicators when confirmed with a bullish |
| valid. We will start with the major candles and then | | | | engulfing. Gravestone Doji's are the opposite of the |
| graduate to the major reversal patterns. This is the | | | | Dragonfly Doji and are top reversal indicators when |
| first article in this series and we will be discussing the | | | | confirmed with bearish engulfing candle pattern. As |
| doji candle. | | | | the name implies, gravestone doji's look like a |
| The Doji | | | | gravestone, and could signal impending end of a trend |
| Doji's are powerful reversal indicating candlesticks and | | | | for a stock. |
| are formed when the security opens and closes at | | | | While the doji is one of the most powerful candles, |
| the same level, implying indecision in the stock price. | | | | it's best to wait until the next candle for confirmation |
| Depending on the location and length of the shadows | | | | before considering a trade. The doji by itself can |
| (lines above and below the open and close), Doji's | | | | mean a brief resting period or beginning of a price |
| can be categorized into the following formations: doji, | | | | consolidation rather than a full blown trend reversal. |
| long legged-doji, dragonfly doji and gravestone doji. | | | | |