Candlesticks Trading Doji
A doji is a candlestick with no real body shaped like a cross. A doji indicates that the difference from the opening to the close was very minimal. In the case of momentum this quite often signals a trend reversal or at least an end to the current momentum.
Example 1 - Upwardtrend
The Doji Candlestick appears at the top of a trend, when indication of overbought is present get ready to sell especially after one or two red candlesticks confirm trend change.
This is the same principle in a downward trend but in reverse.
Example 2
Upwardtrend Dragonfly Doji and Common Doji.
Both occur before trend reversals.
Dragonfly Doji
A Dragonfly Doji has a small body, No upper wick, and a long lower wick.
When a Dragonfly Doji appears in a good upward trend the Bulls (buyers) have momentarily lost control. If one or two more red candlesticks appear it is either time to get out of your long position of perhaps go short.
Long Legged Doji
Long legged Doji candlesticks are a stronger sign of trend change when they appear during a strong uptrend or downtrend
A Long Legged Doji is characterized by much longer shadows. It is an important reversal signal.
Long Legged Doji Example at bottom and top.
Gravestone Doji
A Gravestone Doji is characterized by a Doji with no lower shadow.
The Gravestone Doji is not a great indicator as it suggests the bulls (buyers) may still be in control on an upward trend. Confirmation is usually needed.
Doji Harami
A Doji Harami cross can appear as a reversal sign in a bullish or bearish trend. It is shown on the left with confirmation. i.e the red candlestick after.
You may get out if you were riding the long move up or enter and go short to ride the possible downtrend. You may even flip flop your position.
Trading Psychology
1. Traders saw this as a buy opportunity and this continued for a while creating an upward momentum.
2. At a certain level there was no more buyers indicating the perception that this was no longer an attractive price. Sellers did not enter aggressively showing haste and uncertainty.
3. More aggressive traders may choose this as an entry point. More conservative traders may wait for more confirmation of trend change , such as a couple of candles supporting the direction before entering.
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