A doji is not a pattern, but it is a single candle that mainly means indecision in the market, but may have different interpretations based on its appearance. It is a candle where the opening and closing prices are the same. It may be a significant reversal indicator, but it also can be viewed as a continuation pattern as sometimes markets continue the initial trend before a doji. There are different types of doji’s, like the normal one resembling one cross, or a doji with long uper and lower shadows, (also called rickshaw man), a gravestone doji where the open and closing prices are at the bottom of the candle and the upper shadow is quite long, the dragonfly doji, opposite to the gravestone doji, etc. On the recording that goes with this chapter we are going to identify different types of doji’s and talk about their significance, what do they mean, how to interpret them, what to expect next, and more.
There are many interpretations for this types of candles, as sometimes they are valued for their ability to call market tops and bottoms, whereas sometimes they just signal an exhausted market, a gravestone doji is a bearish pattern, whereas a a dragonfly doji is a bullish pattern, and so on. But depending on its type, this kind of candle is being treasured by traders as being a powerful tool.
With this sub-chapter the chapter dedicated to the candlestick charting techniques is finished and moving on to Chapter 5 where we will take a look at how to calculate price objectives based on the relative strength index (RSI) oscillator.