Did You Know That There are Five Different Types of Doji Candlesticks?

Five Different Types of Doji Candlesticks explained by professional Forex trading experts the “Five Different Types of Doji Candlesticks” FX trading team.

Five Different Types of Doji Candlesticks?

Any doji candle signals market indecision and the potential for a change in direction. (Always bear in mind that the “potential” for a change in direction is not a guaranteed change in direction.)

Doji’s are formed when the price of a currency pair opens and closes at virtually the same level within the timeframe of the chart on which the doji occurs. Even though there might have been quite a bit of price movement between the open and the close of the candle, the fact that the open and the close takes place at almost the exact same price is what indicates that the market has not been able to decide which way to take the pair…to the upside or the downside.
At the point where the doji occurs, we can see that price has retraced a bit after a fairly strong move to the downside. If the doji represents the top of the retracement (which we do not know at the time of its forming) a trader could then interpret the indecision and potential change of direction and short the pair at the open of the next candle after the doji. The stop would be placed just above the upper wick of the doji. In this case, that trade would have worked out nicely.

Keeping in mind that the higher probability trades will be those that are taken in the direction of the longer term trends, when a doji occurs at the top of a retracement in a downtrend or the bottom of a retracement in an uptrend, the higher probability way to trade the doji is in the direction of the trend. In case of an uptrend the stop would go below the lower wick of the doji and in a downtrend the stop would go above the upper wick.

Dojis are popular and widely used in trading as they are one of the easier candles to identify and their wicks provide excellent guidelines regarding where a trader can place their stop.

Five Different Types of Doji Candlesticks Conclusion

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