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Thread: DOJI CANDLESTICK: UNDERSTAND TRADE FORMATION AND STRATEGY

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    Default DOJI CANDLESTICK: UNDERSTAND TRADE FORMATION AND STRATEGY

    DOJI CANDLESTICK: UNDERSTAND TRADE FORMATION AND STRATEGY

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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    Buying and selling decisions in the
    trade can be made quickly on the basis of gut feeling. However, this does not lead to long-term success. In the long run, trading on the stock exchange will only be successful if there is also a strategy behind its own investment decisions. For this, well-founded analyzes and their interpretations are necessary.

    Traders can use a variety of tools, including chart technology. One type of chart technique is candlestick charts. One of the candles is called Doji . But what is behind it? The meaning, definition, and how to interpret Doji Candlestick will be clear below.

    See the theory examples of Doji Candlesticks here:
    Attachment 338853


    TRADING STRATEGY WITH THE DOJI FORMATION
    Candlestick charts in general can be a helpful analytical tool in trading. However, special attention should be paid to Doji candlesticks. Signs of indecision and thus a stalemate between buyers and sellers are an exciting indicator of analysis in trade. If you do not recognize a Doji in a candlestick chart, you can make the wrong analyzes and thus also the wrong investment decision. Thus, a Doji always arises when the prices are almost the same between the open and the close.

    This is usually the case in trend markets. There it can come more often to a Doji since trends are changing now time and time again.

    In the picture below you can see an example of a dog and a diagram analysis. We will take a closer look at the example:
    Attachment 338855


    In the image above you can see the candlestick chart with a resistance zone drawn in. This is a price rejected by market participants. The price is too expensive there and many traders want to sell there. In the past, the price has tested this place several times.

    Now you can see a Doji formation on a mound. A double top is formed. With the combination of the resistance zone and the input signal Doji, we could have made a profitable short trade here. A trading strategy should never consist of a Doji alone. The trader must include the current price, chart analysis, and even basic data.

    Likewise, we realize that the downward trend is stopped by a Doji with a small light body. Doji can also be used as a closing signal for existing positions.


    HOW DO YOU RECOGNIZE THE DOJI CANDLESTICK?
    To recognize the Doji in a candlestick chart, it is first important to understand the candlestick chart as a whole. In general, it is possible to map price trends with a chart and thus graphically extract indicators for further price trends. The diagrams thus serve to analyze and interpret the price development for an investment or a market.

    Traders usually have the choice of what type of chart they would like to choose. The bar chart or line chart is especially popular for beginners, as the chart types are easy to read and understand. Candlestick charts, however, offer much more information for analysis , which is why professional investors prefer to use this chart. To understand Doji, therefore, the candlestick chart will be explained first below.


    Candlestick Chart: A brief overview
    With a candlestick, it is possible to show the price development of derivatives, securities, and a currency. Not only the rise and fall of prices are shown in the individual lights, but also other information can be read from them. These are:
    • Opening and closing course
    • Highest price
    • Low Price

    Rising candlestick (long):
    Attachment 338858

    GROSS Candlestick (short):


    Over and over again, you will hear the terms bulls and bears in candlestick chart technique. Bulls denote hausse candles and carry GROSS candles. Bulls stand for buyers in trade, while bears stand for sellers. These types of lights indicate whether the spread between the opening price and the closing price is quite close or far away.

    But what happens if such a spread does not exist? This is always the case when the light is closed at a price equal to or equal to the opening price. This is also known as a Doji.

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    Four Doji candlestick types differ:
    A Doji thus indicates that the price level between the opening and closing price is almost identical or even the same. This type of price movement conveys indecision.

    And how do you recognize a Doji? While normal candlesticks always consist of a candlestick body and a candlestick wick, the candlestick body is almost minimal or almost unrecognizable . This can be seen well in the following diagram.

    However, a dog is not always a Doji. The doji light therefore also has variations between which are distinguished. What variation it is, is clear from the shape and position of the Doji. What are the differences between the formations will be clear below.

    Attachment 338860


    Tombstone Doji (Tombstone)
    A Gravestone-Doji is an important signal for traders. Whenever a Gravestone-Doji is displayed, it means that the current uptrend for the asset class is over. Signals like this, therefore, are important to pay attention to when trading. A trend reversal could take place.

    Dragonfly Doji (Dragonfly)
    The opposite of the Tombstone Doji is the Dragonfly Doji. This indicates that a downward trend is over. Instead, a break occurs and rising price developments can be expected. Here it is therefore worthwhile to come in as a buyer.

    Long-legged Doji (Long-legged)
    While Gravestone and Dragonfly-Doji indicate clear price breaks, Long-Legged-Doji is an indication of strong price development . Therefore, Long-Legged-Doji shows as formations that there is currently no clear direction in the price. Price variations occur in the market. Thus, entering the market at this time would be associated with increased risk for traders.

    Standard or Star Doji (Star)
    Finally, we have the star Doji. This is always seen when you open with a price gap. Thus, Doji is separated from pre-light. Again, a distinction must be made between the low and high variants of the candlesticks. A bullish Doji Star is placed below the pre-light in the candlestick chart, while the Doji in the BAISSE variant is placed above the pre-light.

    The star Doji is often a sign of a trend reversal. Both an uptrend and a downward trend in prices can be the result. However, it is usually a sign of falling prices.

    In general, a Doji can be described as a deadlock between bulls and bears. In order to analyze the star Doji even better, a distinction is made between three types:

    • Evening-Doji-Star: Forecasts an increase in market prices.
    • Morning-Doji-Star: Forecasts a fall in market prices
    • Shooting-Star formations: Upward trend, due to falling prices



    Doji indicates price reversal
    What a Doji light is, is now clear. As one of the candles in a candlestick chart, a Doji allows an even better analysis of the current price situation and often indicates a trend change. When the closing price and the opening price are close to each other, it is therefore important to take a closer look at the current market in order to anticipate a trend.
    Attachment 338861


    Is a Doji Considered a Trading Signal?
    A Doji is a valid signal in the trade, which should influence investment decisions. However, a distinction must be made between the markets. While a Doji is a good indication of changes in a trending market , the importance of the indicator is usually not so great in all markets. In emerging markets, they are not always reliable and can thus lead to a distortion of supply and demand.

    Thus, when trading stocks, Doji is a very good indicator in volatile markets. The probability of a Doji indicating a trend change is extremely high in these markets.


    Doji Conclusion: Helpful charting for records and outputs
    Who often trades in the stock market, should at least understand what it is about a Doji Candlestick, as it contains important information and thus forecasts and shows you profits through proper analysis of each price. A Doji can be displayed in candlestick charts of different asset classes and always represents a similar development of the opening and closing prices. Through that type of Doji traders can recognize if there is a positive or negative trend reversal or if prices fluctuate strongly.

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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