In this lecture we are going to have a rapid look at the doji before studying separately
the most significant form of dojis. What kind of Candlestick is a doji? A doji is a candle where the opening
price matches with the closing price.
So opening and closing prices are the same. Even if the ideal doji is like this, we can use some flexibility
to this rule.
If the opening and closing prices are within a few pips of each other, the candle could still be viewed
as a doji.
There's no rigid rule about this,
I cannot say something like opening and closing prices must be within five pips, for example, for the
candle to be considered a doji. It is subjective and you will develop your own opinion with time
and experience.
So the doji has just one rule: opening and closing prices are the same or at least they are very close
to each other.
But why am I showing you this candle with the opening and closing prices right in the middle of
the session?
Actually, this is just an example of a doji. As long as the opening price matches with the closing price,
the candlestick is a doji.
So this is a doji, this is
another doji, this is still a doji.
All these candles are dojis. Before we analyze the dojis one by one,
let's see the action behind this candlestick and what it shows us about the fight between buyers and
sellers.
While it's been easy for the previous candlesticks to understand the formation of the shadows, it's not
so easy for the doji.
It can be that buyers were in control at the beginning then sellers pushed the price down and at the
end buyers had the power to close at the opening price.
It can also be the opposite.
Sellers were in control, then buyers pushed the price up and sellers closed at the opening price.
There are so many other scenarios and we can't really know what happened if we don't go to a lower timeframe
to analyze the candle.
But don't worry, you don't need to do it.
Even if we don't know exactly the action that led to the formation of the doji, we know the only necessary
information: the doji represents indecision. Buyers and sellers engaged in a fight
and there's no winner at the moment.
Imagine a tennis match between buyers and sellers.
The doji says that in this moment the score is tied at six to six and they are going to play the
tiebreak.
Now you know what a doji is,
but we need to go a bit more in depth and analyze the different types of dojis.