How to Trade Doji Candle | Single Candlestick Pattern

Learn to use dojis for successful trades →

Hey there 👋🏼

The biggest profits come when you can ride most of a stock’s trend. Although waiting for confirmation before entering a trade is ideal, wouldn’t it be easier if there was a way to predict these trends before they start?

Well, many indicators and candlestick patterns can help you do that. One such candlestick pattern is the doji.

The Doji Candlestick Pattern

A doji is a candlestick pattern whose opening and closing prices are virtually equal or have very little difference. These candlesticks have a small or nearly non-existent body and longer wicks, looking like a crosshair.

A doji candle signals indecision about future prices, potentially a pause in the ongoing trend or a trend reversal.

Although called ‘neutral indicators’, dojis can convey important information about the market’s sentiment.

How to Trade a Doji

Depending on its placement on the chart, you can strategically use a doji for successful trades. Let's see how:

Doji after a Downtrend:

1) The doji should form after a significant downtrend

2) You can enter if the candle after the doji breaches the high of the doji, and is preferably bullish

3) Exit when a bearish candlestick pattern is formed or when a long-term resistance is hit

4) A stop loss can be placed at the low of the doji

Doji formed after a downtrend, triggering a rally.

Doji after an Uptrend:

1) The doji should form after a significant uptrend

2) You can enter if the candle after the doji breaches the low of the doji, and is preferably bearish

3) Exit when a bullish candlestick pattern is formed or when long-term support is hit

4) A stop loss can be placed at the high of the doji

Doji formed after an uptrend, triggering a downtrend.

Dojis can be very useful in an exit strategy as well. When a doji is formed after an uptrend that you participated in, you can exit once the doji’s low is breached. Conversely, when doji is formed after a downtrend, you can exit the short trade once its high is breached.

Note that dojis indicate indecision and shouldn’t be considered a sign of reversal always. It’s prudent to wait for a non-doji candle to confirm a new trend before entering a trade.

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