A doji candlestick pattern is mostly a plus sign (+) sign but what does doji candle indicate? If it gives an indication of a bullish market, then how to trade the doji candlestick pattern?
In this article, learn about different trading strategies using doji candlestick patterns and maximize your profits in the market.
Doji Candlestick Trading Strategy
Now there are different types of doji candlesticks, among them the most common ones are long-legged, gravestone, and dragonfly doji candles.
Depending upon their position and color these candlestick gives an indication of continuation and reversal.
Yes, most of the time it gives an indication of indecision as well, and in that case, it is suggested not to take any trading position in the market.
Now, let’s have a look at how to trade the doji candlestick pattern.
Doji Candlestick Reversal Strategy
Doji candle show reversal when it is formed near the support or resistance level.
For example, the dragonfly doji formed near the resistance gives a bearish reversal signal.
Now on confirming this signal, one can trade by taking the position at the right time.
Right time?
What does it mean?
Well, if you want to take a trading position using dragonfly doji candlestick then take a long position near the high of the candle and add a stop loss value at the low value of the wick.
In this case, if the market goes bullish then you would be able to book profit. However, if the market goes south, then you would be able to cover your losses by exiting the trade at the nearest stop loss value.
Double Doji Trading Strategy
Now a single doji means there is indecision among buyers and sellers. But if there are two Dojis being formed one after another? How to read candlestick pattern in such a case and what does it indicate?
This can show a strong breakout.
Now if two doji candles are formed one after the other in the uptrend market and near resistance, then it gives a signal of breakout and hence the trader can hold their long position and new traders can take long position.
On the other hand, if the double doji candle is formed in the downtrend and near support then one can go short after confirming trade signal using RSI or other momentum indicators.
You can learn more about trading doji pattern by referring right candlestick pattern book or by joining the stock market courses.
Conclusion
Doji candlestick comes along with a lot of limitations. One of the most common limitations is that it is not often formed.
Concluding, there are multiple chart patterns and indicators, and traders should learn candlestick patterns and analyze before taking any decision in the market so the risk factor is minimal and there are more chances to gain profit.
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