Doji Candlestick Pattern

What is a doji?

A doji is a single candlestick in which the open and close price are virtually the same, producing a very small or nonexistent body. It often looks like a cross, inverted cross, or plus sign. The Japanese word doji means “the same thing,” reflecting the equality of open and close.

What the doji indicates

• Primary signal: market indecision — buyers and sellers are roughly balanced.
• Possible outcomes:
• Trend reversal (more likely when a doji appears after a strong move).
• Continued trend or consolidation (especially if followed by confirming candles).
• Doji is neutral on its own; context and confirmation matter.

Candlestick basics (quick)

Each candlestick reflects four prices: open, high, low, close. The body shows the open-close range; shadows (wicks) show highs and lows. Doji have minimal bodies and varying shadow lengths.

Major doji types

• Dragonfly doji: open, close, and high are at or near the same level, with a long lower shadow. Often read as a bullish sign when occurring after a downtrend.
• Gravestone doji: open, close, and low are near the same level, with a long upper shadow. Often read as a bearish sign when occurring after an uptrend.
• Long-legged doji: long upper and lower shadows with open and close close together. Signals heightened indecision and possible consolidation.

Doji vs. spinning top

• Doji: body is essentially zero (typically body ≤ ~5% of the candle’s total range).
• Spinning top: small but noticeable body; open and close are close but not equal.
  Both indicate neutrality, but spinning tops show slightly more conviction in one side than true doji.

How traders use doji

• Look for confirmation: wait for the next candle to confirm direction before acting.
• Use volume and other indicators (RSI, MACD, Bollinger Bands) to validate signals.
• Place stop-losses relative to the doji’s shadows (e.g., above a gravestone’s upper shadow), but be mindful that shadow size can force wide stops.
• Use doji within broader patterns (e.g., star formations, support/resistance tests) rather than in isolation.

Limitations and risks

• Doji are uncommon and provide limited information alone.
• Reversals signaled by doji are not guaranteed; false signals occur.
• Doji do not provide price targets — additional methods are required for exits and profit objectives.
• Large wicks can result in awkward risk-reward or impractical stop-loss placement.

Use in cryptocurrency and other markets

Doji behave the same across asset classes: they indicate indecision and require contextual confirmation. Volatile markets (including many crypto markets) can produce many false signals; combine doji analysis with volume and other indicators.

Practical checklist for trading a doji

• Confirm trend context (preceding move and support/resistance).
• Wait for a confirmation candle in the anticipated direction.
• Check volume and other technical indicators for agreement.
• Define stop-loss based on shadow extremes and assess risk-reward.
• Plan exits using additional targets or indicators.

Bottom line

A doji marks a session where open and close are virtually equal, signaling market indecision. Types (dragonfly, gravestone, long-legged) suggest different potential outcomes, but a doji alone is not a reliable trading signal. Use it as a contextual clue, require confirmation, and pair it with other tools before making trading decisions.