Take a moment and educate yourself on what a “doji” is and what it might mean.

A standard doji is a type of candlestick pattern that is comprised of a single ‘candle’ where the open and close price are equal (or very close) but the high and low of the candle are distant from the open and close.

The following images demonstrate what it is and what may have happened in the intraday action to cause the pattern.

There is a virtually infinite set of patterns that can create the pattern, but the goal is to understand the basic ‘psychology’ of the concept that creates the doji.

Traditionally, dojis are known as “indecision” patterns, or sometimes that the market is “confused” or even “tired.” In terms of the ’struggle between bulls and bears,’ a doji would represent a sort of ‘tie’ between the two ‘armies.’

Doji candles often gain significance when they appear after a long trend move up or down, or if they appear at a support or resistance level (such as a trendline).

Dojis can appear on any timeframe, but the pattern gains significance if it occurs on longer timeframe charts, especially if there is a true ‘battle’ between supply and demand.

In the recent crude oil chart I posted, there are a few examples of the doji candle at key turning points in the market:

A word of warning – dojis may have powerful predictive power, but they are never to be traded in isolation. Always check the price structure and any indicators you follow for confirmation/non-confirmation. They can be one more tool in your trading arsenal, but – like everything else – they are not the Holy Grail pattern.