Doji Candlestick Chart Patterns (also known as “Bullish or Bearish Hanging Man”) are a type of candlestick chart pattern that corresponds to a price trading range. When the Doji is the first candle in a new session, it means that there was no clear winner or loser in the prior session. However, when this pattern appears after an extended downtrend, it suggests exhaustion and that investors should try selling into any pullback rather than buying. In this article, we will look at the different types of Doji Candle Chart Patterns.
Different Types of Doji Candlestick Chart Patterns
1. Dragonfly Doji Pattern
A Dragonfly Doji Pattern is formed when a Doji appears after an extended downtrend. It suggests that the market is reversing from a bearish trend to a bullish trend. This pattern confirms a change in the market direction, and can be used for trading either for long or short positions. A Dragonfly Doji appears at the end of an uptrend (Bullish Engulfing Pattern) and is used to signal a trend reversal.
A Dragonfly Doji also appears after a very long and strong downtrend (Bearish Engulfing Pattern). A Doji that appears during a trend can be viewed as stochastic candlestick patterns are being formed. As seen in the chart, a Doji that corresponds with a market reversal is a Dragonfly Doji Pattern. It can also act as the confirmation pattern, which signals more movement down in price.
2. Gravestone Doji Pattern
A Gravestone Doji Pattern is formed when a Doji appears after an extended uptrend. It suggests that the market is reversing from a bullish trend to a bearish trend. This pattern confirms a change in the market direction, and can be used for trading either for long or short positions. A Gravestone Doji appears at the end of a downtrend (Bearish Engulfing Pattern) and is used to signal a trend reversal. A Gravestone Doji appears at the end of an uptrend (Bullish Engulfing Pattern) and is used to signal a trend reversal.
A Gravestone Doji also appears after a very long and strong downtrend (Bearing Engulfing Pattern). A Doji that appears during a trend can be viewed as stochastic candlestick patterns are being formed. As seen in the chart, a Gravestone Doji Pattern corresponds with a market reversal and can be used for trading either for long or short positions.
3. Doji Star Pattern
A Doji Star is a Doji that has a long upper shadow and a short lower shadow. This pattern appears at the end of an impulse move and after a major pivot point. It is most commonly found in an uptrend or bearish market condition, which makes the Doji star very similar to the Dragonfly Doji; however, there are subtle differences between the two patterns.
The Doji Star pattern will appear when the market is in an uptrend, and the price has made a sharp reversal. The Doji star forms at the end of an impulse and suggests that the market has reached a temporary equilibrium. Therefore, there is little difference between a Doji star and a gravestone Doji. A Doji star can either be a reversal or continuation signal, depending on the current trend and if it’s part of an ongoing trend.
4. Hammer Doji Pattern
A Hammer Doji is a Hammer candlestick pattern, with a long lower shadow and short upper shadow. The Hammer Doji is formed after a long downtrend and can be identified on the chart by looking for the horizontal wide body line that crosses the other line and then turns. It signals that there is the exhaustion of all previous upward momentum, and above all, it acts as a signal for traders to either buy or sell into the weakness.
This pattern is formed when there’s a sharp reversal in the market, which makes it a butterfly pattern. It’s derived from the shape of the hammer and is used to signal that the market is more likely to fall than rise, as opposed to its cousin, The Hammer candlestick patterns.
5. Long-Legged Doji Pattern
A Long-Legged Doji is a Doji that has a long upper shadow and a long lower shadow and appears at the end of an extended downtrend. A bullish or bearish trend will appear to have ended, but what is important about this pattern is that it suggests that sellers and buyers are almost equally matched. In other words, the market is now in equilibrium.
Also, a Long-Legged Doji suggests that the market is exhausted or has reached the end of the range. This is why a Long-Legged Doji often signals traders to sell into a pullback and then buy once the market has pulled back after an extended downtrend.
In conclusion, Doji Candlestick Chart Patterns are important for identifying the reversal or continuation of a trend. This can be used for short or long trades, depending on the pattern and location. Doji Candlestick Chart Patterns are not very reliable on their own and should only be used in combination with other tools.
