What it means
A doji is a candle whose open and close are almost equal, so the body is tiny compared with the range. A common rule is a body of 10% of the candle's range or less.
Types: standard (wicks both sides), long-legged (long wicks both sides), dragonfly (long lower wick, close near the high) and gravestone (long upper wick, close near the low).
Why traders use it
A doji shows that neither side won the period. After a strong move, that pause can signal the move is losing momentum. On its own it says nothing about direction.
Chart examples
Four types of doji
Doji after a rally, then confirmation
How to identify it objectively
- 1Body ≤ 10% of the high-low range.
- 2Classify by where the body sits: middle (standard / long-legged), top (dragonfly), bottom (gravestone).
- 3Note the context: after a rally, after a decline, or inside a range.
- 4Wait for the next candle to close before acting.
Bullish use
- 1A dragonfly or long-legged doji after a decline, at support.
- 2The next candle closes above the doji's high.
- 3Stop below the doji's low.
Bearish use
- 1A gravestone or long-legged doji after a rally, at resistance.
- 2The next candle closes below the doji's low.
- 3Stop above the doji's high.
What confirms it
- A close beyond the doji in the expected direction.
- Location at a level, not in the middle of a range.
What invalidates it
- The next candle closes beyond the doji in the trend direction.
- Doji in the middle of a quiet range.
How a hypothetical setup is built
Entry
On the close of the confirmation candle.
Stop
Beyond the doji's opposite extreme.
Target
The previous swing.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Candlestick PatternsHammer and Hanging Man
- Candlestick PatternsShooting Star and Inverted Hammer
- Candlestick PatternsMorning Star and Evening Star
- Full guide on The TradeskillCandlestick Patterns Overview
Historical testing
Not tested on The Tradeskill. In liquid 24-hour markets dojis are very common; any test should record location and confirmation separately.
Limitations: when it fails
- Dojis appear often and most mean nothing.
- Timeframe changes the picture: a daily doji contains many hourly trends.
- The body threshold changes how many you find.
Knowledge check
Pick an answer to see the explanation. Nothing is saved.