A Doji is quite often found at the bottom and top of trends and thus is considered as a sign of possible reversal of price direction, but the Doji can be viewed as a continuation pattern as well. A Doji is formed when the opening price and the closing price are equal. A long-legged Doji, often called a “Rickshaw Man” forex doji candlestick formations the same as a Doji, except the upper and lower shadows are much longer than the regular Doji formation.
The creation of the Doji pattern illustrates why the Doji represents such indecision. After the open, bulls push prices higher only for prices to be rejected and pushed lower by the bears. However, bears are unable to keep prices lower, and bulls then push prices back to the opening price. Of course, a Doji could be formed by prices moving lower first and then higher second, nevertheless, either way, the market closes back where the day started. In a Doji pattern, the market explores its options both upward and downward, but cannot commit either way. After a long uptrend, this indecision manifest by the Doji could be viewed as a time to exit one’s position, or at least scale back. It is important to emphasize that the Doji pattern does not mean reversal, it means indecision.
Nevertheless, a Doji pattern could be interpreted as a sign that a prior trend is losing its strength, and taking some profits might be well advised. Two intra-day examples of how a daily Doji formation is created is presented on the next page. Dear Traders,you are reading my forex trading experiences. Forex trading is a very profitable and very risky business opportunity. If you are a beginner, calm down,have a cup of coffee, and convince yourself that you need to study hard to win in forex trading.