DOJI CANDLE
When the candle starts, Buyers want to buy the stock & price move up, but Seller start selling on the stock, due to which the stock does not go up. In the same way, the Seller want to bring down the price of the stock, but the buyers start buying, and the stock is unable to go down. In this way, buying and selling start happening equally, due to which the opening price and closing price of the candle become the same.
Therefore, there is no real body in the Doji candle, only the Upper shadow and lower shadow which are almost equal.
It cannot be determined whether the market will go up or down through a doji candle. It is also not determined whether the next candle will be bullish or bearish.
Doji Candle is an indecision candle, the Doji candle image is given below.
What should be the entry and stop loss for doji candle?
For a bullish candlestick, an option could be to place a buy order above the doji high, and then place a stop-loss below the low of the doji. If the price does move higher, the entry is triggered, but the risk is controlled in case the price drops after.
For a bearish candlestick, a trader could place a short sell order below the doji low, and then place a stop-loss above the doji high. If the price does drop, the entry is triggered and the risk is controlled if the price moves back to the upside.
There are mainly two types of DOJI CANDLE.
1 DRAGONFLY DOJI
2 GRAVESTONE DOJI
DRAGONFLY DOJI
Dragonfly Doji is a bullish candlestick pattern. In Dragonfly Doji, buyers win over sellers, where the opening, closing, and high of the candle are simultaneously upward, and the rest 90-95% lower shadow is formed.
In Dragonfly Doji, the control of the stock is with the buyers, due to which if the next candle breaks the Dragonfly Doji, then we can go for a long position and move on, then place a stop-loss below the low of the doji. in this way, the Dragonfly Doji pattern works.
For Gravestone doji candles please refer bearish candlestick pattern.
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