Doji candle (Long-Legged Doji)

22 thg 12, 2020

Japanese name: doji
Forecast: lack of determination
Trend prior to the pattern: n/a
Opposite pattern: none

Construction:

Doji candle
appears on as a long or short line
candle does not meet requirements to be considered as any of the following doji type:
Four-Price Doji
Long-Legged Doji
Dragonfly Doji
Gravestone Doji


This article is devoted to the Doji basic candle.
Candles, in which there is no body, because the opening price is equal to the closing price are called doji candles (jap. fool, clumsy, slip of the tongue).

There are the following types of doji basic candles (do not mix them up with candlestick patterns per se):

Four-Price Doji
Long-Legged Doji
Dragonfly Doji
Gravestone Doji
If we deal with a doji candle, but a candle cannot be considered as any of the above doji types, we say that we have a Classic Doji candle. Usually, we skip "classic" word however and say just Doji. Pay attention to the fact that when we are talking about doji candle, meaning the type, we write it in lowercase, i.e. doji. When, however, we indicate a particular basic candle name, (classic) Doji, we start with an uppercase.

Doji is one of the most important basic candles acting as a building block of many patterns – both single and multiple lines. According to the classic definition, a doji candle is the candle where the closing price is equal to the opening price. Let's look at some of the definitions employed by other authors.

Long-Legged Doji (Basic Candle)

Steve Nison
A doji occurs when the open and close for that session are the same or very close to being the same.

Greg Morris
Doji occurs when the open and close prices are equal. This is an exceptionally restrictive rule for most types of data and should have some leeway when identifying candle patterns.

Thomas N. Bulkowski
Dragonfly Doji: Price opens and closes at or near the high for the day while having a long lower shadow.
Long-Legged Doji: The opening and closing prices should be the same or nearly so, with long upper and lower shadows.

These definitions can cause problems, because what is meant by “the same or almost the same”? Therefore, in the CandleScanner application it is assumed by default that the doji body may be from 0 to 3 percent of the total candle height. This can be changed however for any value between 0% to 5%.

This variable criterion implies, of course, that the number of doji candle occurrences, and the patterns in which the doji exists as a building block, will increase. This increase will vary depending on the particular market or asset group(s). As we have learned from tests, the scale of growth is also clearly dependent on nominal asset prices - the higher the price is, the greater the growth in the number of doji occurrences. This may range from a dozen to several hundred percent. In practice, increasing the size of the doji body is necessary, primarily for values whose nominal price is greater than $20. Then, the body will be noticeable on the chart.

The decision to expand the definition of the doji also has another side to the coin. By increasing the acceptable size of the doji candle body, we must reckon with the fact that we would not see many patterns. For example, such patterns as Hanging Man, Hammer, Shooting Star or Inverted Hammer will be rejected because their candles, having short bodies, will now be identified as being a doji.