The final and last kind of Japanese candlestick formation is the doji or sometimes called doji star. Dojis fall into a group all of their own and offer the least more powerful confirmation of a potential change in trend. They can be used at both tops and bottoms of price swings. They typically consist of the following characteristics:
- The open and close of the candle is the same or almost the same.
- The importance of doji is only significant on charts where there are few doji. The more doji there are on a chart the less significance they have.
- While they can be useful for calling both tops and bottoms, they are more useful at tops.
Doji candles show that the market is currently exhausted and has temporarily lost its sense of direction.
Perhaps the best use of doji candles is to warn that a current move may be coming to an end or be exhausted and a trader may consider tightening his stops or closing out positions.
Loading ...
Comments on this entry are closed.