The Dojis - Wafadaar Candlestick

The Dojis

The Doji’s are very similar to the spinning tops, except that it does not have a real body at all. This means the open and close prices are equal. Doji’s provide crucial information about the market sentiments and is an important candlestick pattern.

The classic definition of a doji suggests that the open price should be equal to the close price with virtually a non existant real body. The upper and lower wicks can be of any length.

However keeping in mind the 2nd rule i.e ‘be flexible, verify and quantify’ even if there is a wafer thin body, the candle can be considered as a doji.

Obviously the color of the candle does not matter in case of a wafer thin real body. What matters is the fact that the open and close prices were very close to each other.

The Dojis have similar implications as the spinning top. Whatever we learnt for spinning tops applies to Dojis as well. In fact more often than not, the dojis and spinning tops appear in a cluster indicating indecision in the market.

Have a look at the chart below, where the dojis appear in a downtrend indicating indecision in the market before the next big move.

Here is another chart where the doji appears after a healthy up trend after which the market reverses its direction and corrects.

So the next time you see either a Spinning top or a Doji individually or in a cluster, remember there is indecision is the market. The market could swing either ways and you need to build a stance that adapts to the expected movement in the market.