Pattern Analyis: Doji

[brownsfan019]

James_gsx had a good question on how to interpret a DOJI and I thought we could start a thread discussing different candlestick patterns. We can start a new thread as questions warrant.

The DOJI is visually depicted as when the open and close are the same. While there are a number of different kinds of doji's, there are 3 kinds of doji's in my opinion:

1) An even doji - this doji looks like a perfect plus sign + where the open and close are the same and the high and low are an even distance from the open and close as well.

Example:



2) A bearish doji - this doji, while having an open and close identical, has a large upper shadow, indicating bulls tried to push the price higher and the bears brought it back down.

Example:



3) A bullish doji - this doji, while having an open and close identical, has a large lower shadow, indicating bears tried to push the price lower and the bulls brough it back up.

Example:



Here's a little doji 'cheat sheet' along with some other kinds of bull/bear doji's:




The question then becomes what doji's do you play and how? In other words, do you only play a long on a bullish doji? If so, why? If not, why not? There is no right answer here as it depends on you as a trader and the timeframe being used. As I mentioned previously, the lower the timeframe, the more flexible you need to be in my opinion.

Good trading!

[Soultrader]

Excellent post brownsfan. Dojis are one of my favorite candlestick patterns from a visual and psychological perspective. I also think it is important to understand where the doji occurred. Dojis forming at key S&R levels are far more superior than dojis appearing randomly in a middle of a trend for example. Definiteley, the higher the timeframe the more significant.

[notouch]

The position of the doji relative to earlier candles is all important. In a range bound market a doji means very little but a doji star at the top of an uptrend that gaps higher and then the following day gaps lower and closes lower is ultra bearish. We had a couple of dojis at the top the recent up trend in the US indices but at the same time we had lots of dojis on the way up that didn't lead to any reversal. Daily dojis are better signals in the forex markets I find.

[brownsfan019]

Good points guys.

The key with all candlestick analysis is the context in which the formation appears. Doji's appearing in a flat market are meaningless to me.

[Jakew]

Dragonfly doji and Gravestone doji seem most useful. They are like corresponding hammers but even stronger than the latter.

[brownsfan019]

	Quote:	Jakew
	Dragonfly doji and Gravestone doji seem most useful. They are like corresponding hammers but even stronger than the latter.

Would you mind explaining your statement here jake? I'm curious as to what analysis you have done that shows a dragonfly/gravestone is stronger than a hammer. I personally don't see how either of those technical types of doji's are stronger than a hammer/shooting star. I would actually take the side of the discussion that hammers/shooting stars are stronger, partly due to that I see hammers/shooting stars much more often in my trading (daytrading of the ES) and I have found entries to be easier to gauge on hammers/shooting stars as well. That's not to say that your statement is incorrect or anything, but I'd like to know why you feel those doji's are stronger than hammers/shooting stars.

[Jakew]

	Quote:	brownsfan019
	Would you mind explaining your statement here jake? I'm curious as to what analysis you have done that shows a dragonfly/gravestone is stronger than a hammer. I personally don't see how either of those technical types of doji's are stronger than a hammer/shooting star. I would actually take the side of the discussion that hammers/shooting stars are stronger, partly due to that I see hammers/shooting stars much more often in my trading (daytrading of the ES) and I have found entries to be easier to gauge on hammers/shooting stars as well. That's not to say that your statement is incorrect or anything, but I'd like to know why you feel those doji's are stronger than hammers/shooting stars.

brown, obviously we need to define terms first of all

a/ frequency of occurance of a pattern or signal if you like will not count for its strength (it will definitely count for its usefulness since the more trials with an edge, the better); there are much more hammers than grave/dragon for obvious reasons

b/ strength of signal will mean its reliability

because reliability is purely subjective i.e. dependent on a trader (his stop loss versus his exit placement) and not an objective feature of an entry signal - you will understand that my experience will bring different results than yours, because our setups are different

cheers

[BlowFish]

	Quote:	brownsfan019
	Would you mind explaining your statement here jake? I'm curious as to what analysis you have done that shows a dragonfly/gravestone is stronger than a hammer. I personally don't see how either of those technical types of doji's are stronger than a hammer/shooting star. I would actually take the side of the discussion that hammers/shooting stars are stronger, partly due to that I see hammers/shooting stars much more often in my trading (daytrading of the ES) and I have found entries to be easier to gauge on hammers/shooting stars as well. That's not to say that your statement is incorrect or anything, but I'd like to know why you feel those doji's are stronger than hammers/shooting stars.

I always think of long legged Dojis as a 'special case' of a hamer (i.e. open = close rather than almost the same). Actually I don't think in candlestick terms at all I'm more interested in whats going on 'behind them'. The long tails interest me as that usually indicates a testing and rejection of some level or other.

Cheers.

[Jakew]

	Quote:	BlowFish
	I always think of long legged Dojis as a 'special case' of a hamer (i.e. open = close rather than almost the same). Actually I don't think in candlestick terms at all I'm more interested in whats going on 'behind them'. The long tails interest me as that usually indicates a testing and rejection of some level or other. Cheers.

Yes, same here. I could also alternatively say or - to avoid stirring an unneccessary discussion - think to myself that a hammer is "a case of not fully realized gravestone or dragonfly". By the way "hammer" says relatively little compared to my favorite candle name "gravestone", which says it all and for a reason... I am not a big fan of dragonfly name (http://en.wikipedia.org/wiki/Dragonfly) - what this microscopic creature has to do with the candle's powerful implications (not just look) - for my personal use I call dragonfly "bulltail" or perhaps might imagine a dragon that has just slapped unprepared bears on their heads with its muscular tail

[james_gsx]

How would timing an entry on a gravestone doji differ from say a shooting star?

Thanks for the thread brownsfan, I appreciate all the info.