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brownsfan019

Pattern Analyis: Doji

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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: attachment.php?attachmentid=2226&stc=1&d=1186243369

 

 

 

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: attachment.php?attachmentid=2224&stc=1&d=1186243369

 

 

 

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: attachment.php?attachmentid=2225&stc=1&d=1186243369

 

 

 

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

attachment.php?attachmentid=2227&stc=1&d=1186243383

 

 

 

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!

5aa70ded10afc_beardoji.png.a9ee2829f68de637d36e6cbe81f683f6.png

5aa70ded13220_bulldoji.png.382c79f3d2c4d780ac733a370af87735.png

5aa70ded156ee_evendoji.png.a4d8d67b52aee1168a8e75169b6d5c8e.png

5aa70ded17eef_dojicheatsheet.png.f1e4eff630a60b7f06da51eb972bd1d6.png

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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.

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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.

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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.

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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

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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.

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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:)

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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.

 

James - good question, and that's 'step 3' of the process - putting it all together. How/when you enter a candle pattern is an important step. I'll try to get a thread up on that soon. Maybe others can chime in.

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Thanks, this is actually helping me probably better than any book I could buy on the topic.

 

Nate,

Thanks, but make no mistake - getting a solid understanding of the why's and how's of candlestick trading are built on a good library of books and then go from there. I'm trying to post SOME stuff here on TL, but there's just too much to possibly go over in a forum setting. At the very least, get a couple of the Nison books I reviewed here as well.

 

http://www.traderslaboratory.com/forums/f8/japanese-candlestick-charting-techniques-second-edition-1561.html

 

http://www.traderslaboratory.com/forums/f8/the-candlestick-course-by-steve-nison-1560.html

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LOL. Looks like someone already stole my thunder (Apple Doji)............

 

$Idnu valid High Close Doji Pattern.

 

Some things to note:

 

1. Stopping volume on the doji line. We have Ultra High Volume on a Wide Spread candle that closes near its high and down from previous bar. If the volume was selling, then the close should not be in the upper portion. Also the next day should not be up.

 

* T1: possible first target- midpoint of the WRB.

 

* T2: possible second target-obvious top. Look for High volume wide spread bars PRIOR to this level if we are going to go thru. Or a Wide Spread Bar that trades thru this level on Ultra High Volume (pushing thru supply).

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This also highlights a problem with the colouring of the volume bars, for VSA. The stopping volume you refer to is very much a demand volume and as such should not be coloured red. I find it less confusing to use grey for both bars.

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This also highlights a problem with the colouring of the volume bars, for VSA. The stopping volume you refer to is very much a demand volume and as such should not be coloured red. I find it less confusing to use grey for both bars.

 

You're correct and that is why MY charts color volume based on the relationship to the previous bars volume amount. This is a "stock" chart from an internet source.

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Tin using your VSA analysis how did you interpret the doji? I'm still trying to get used to candles so I'll give it a shot and just critique me if you don't mind.

 

The doji right at resistance is right in the middle of the range of the candle so to me that shows indecision by both bulls and bears with there being a "balance" between them...possible turning point.

 

When you look at the low volume on the candle it shows that there is a lack or both supply and demand and because of the indecision, the stock is likely to fall on its own weight.

 

I tend to believe that stocks only like to rise if there's a good reason to (insider knowledge, good announcements, general market rising), and if these conditions don't exist then the weight of price will drag it down.

 

All things constant, the low volume combined with a candle that shows indecision is a strong reversal signal when at a resistance point.

 

Hope that worked well lol!

 

Tin can I also ask how you determined that resistance level? Was it based off a previous high, or from pivots?

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Nick...good start there. What I would say is that the spread was teeny showing no professional interest to continue the up move. If no one wants to continue the upmove, then the path of least resistance is DOWN. The next candle is DOWN on higher volume and then your last chance to get in is that low volume UP candle closing at the highs (4 candles after this doji) showing that there's no demand in this market. Then it heads down. Your analysis was great, tho.

 

As for where I found that resistance, you can see the previous high to the left on that chart.

 

And James, had that volume been very strong and it was still a small spread....my stance would be the same. If you have ULTRA high volume and a narrow spread, what's happening there? There is a lot of volume being traded in a small range. Theory is...if a lot of buying volume is happening, it's being done by the smaller players while the pros are selling into resistance, which is what you normally do see. The amount of selling indicated by the high volume is very telling for the strength of the eminent down move, IMO.

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I am experimenting some candle charts... after reading this doji thread I was looking how dojis after a wrb candle with lower volume would call for some nice scalps... I would apreciate some critics to this 3 min es chart... thanks Walter.

 

attachment.php?attachmentid=4509&stc=1&d=1197776791

5aa70e2c675f3_dojisafterwrbonlowervolume.thumb.png.493bdb766c714d65f632ecbd35e0017f.png

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I am experimenting some candle charts... after reading this doji thread I was looking how dojis after a wrb candle with lower volume would call for some nice scalps... I would apreciate some critics to this 3 min es chart... thanks Walter.

 

Walter,

Nice chart here. You could be onto a nice little trade here. The key being how you define what a WRB is. I've seen many WRB's where the first candle is giant green and the next is a giant red on larger timeframes, so if you take this down to a 3 minute as your example, it could work. The smaller the doji, the better the risk/reward as well. An aggressive play would be to enter at the market on the close of the doji (as we discussed in the chat room this past week) which would give you an even better risk/reward, but could also lead to more stopouts as well.

 

Keep up the good work and let's get some NEW candlestick trading threads going! If we can recruit some of your loyal followers, we can get the candlestick corner back on the map! ;)

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Nick...good start there. What I would say is that the spread was teeny showing no professional interest to continue the up move. If no one wants to continue the upmove, then the path of least resistance is DOWN. The next candle is DOWN on higher volume and then your last chance to get in is that low volume UP candle closing at the highs (4 candles after this doji) showing that there's no demand in this market. Then it heads down. Your analysis was great, tho.

 

As for where I found that resistance, you can see the previous high to the left on that chart.

 

And James, had that volume been very strong and it was still a small spread....my stance would be the same. If you have ULTRA high volume and a narrow spread, what's happening there? There is a lot of volume being traded in a small range. Theory is...if a lot of buying volume is happening, it's being done by the smaller players while the pros are selling into resistance, which is what you normally do see. The amount of selling indicated by the high volume is very telling for the strength of the eminent down move, IMO.

 

That's where I get duped from time to time. A small spread on low volume when it's just a breather or pullback and I think it's no demand.

 

Do yall have any tips for helping me to be more clear on what's just a pullback or "test" as we call it in VSA? I get the concept of no supply and no demand but have trouble being accurate since big volume on a narrow spread usually shows shares handed off to the herd BUT narrow spread on low volume could be just a test OR no professional support.

 

Thanks

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That's where I get duped from time to time. A small spread on low volume when it's just a breather or pullback and I think it's no demand.

 

Do yall have any tips for helping me to be more clear on what's just a pullback or "test" as we call it in VSA? I get the concept of no supply and no demand but have trouble being accurate since big volume on a narrow spread usually shows shares handed off to the herd BUT narrow spread on low volume could be just a test OR no professional support.

 

Thanks

 

Hi Mike, I personally find VSA very dificult to read as volume data sometimes may get tricky, I always say vsa is for very smart people, still sometimes they get tricked as we do on price action readings... so dont go bald ¡¡ jejej cheers Walter.

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