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Double Doji Candlestick Pattern

Technical experts believe that the price reflects all available information about the crypto asset, showing that the price is efficient. However, previous price performance does not predict future price performance, and a crypto current price may not reflect its actual or intrinsic worth. Therefore, technical analysts adopt several different methods to find the trades with the best possibility.

In the 18th century, Japanese rice trader Munehisa Homma created one unique tool, the candlestick chart. Candlestick pattern analysis is one of the most popular types of price action trading. It helps traders with price movement and provides insightful analysis of market activity.

Traders use several different candlestick patterns. The Double Doji candlestick pattern, which will be the topic of this article, is one of the most prevalent types within this category.

Double Doji candlestick

Double Doji Candlestick Pattern

A Doji candlestick can signal market uncertainty as well as potential moves in a direction. They are well-known and frequently used by traders because they are easy to spot and provide excellent data for placing stops.

The Doji candlestick is a reversal pattern candle where the open and close price levels are equal or nearly identical for the specified time. Generally, it denotes a potential trend reversal or shifts in the trend.

A standard Doji candlestick stands alone. Traders look at the historical price behavior that adds up to the Doji to understand the significance of this candlestick.

When two consecutive Doji candlesticks form, the pattern is known as a double Doji. It displays the market’s range and denotes a pause in price movement.

DOJJI

Types of Doji Candlesticks

Doji candlesticks are available in four various types, and each pattern represents a different concept. Additionally, the placement of pattern formation on the chart plays a significant role.

1. Neutral Doji

This one is the most popular form of the Doji candlestick pattern. It has the appearance of a cross shape. The top and bottom wicks within the candle will seem very short and equal in length, with the opening and closing prices being almost equivalent.

This pattern suggests that the market is uncertain and that the bulls and bears are competing for dominance. It also shows that the trend’s future direction is unpredictable.

Additionally, this pattern shows up when buying and selling are almost equal.

lONG LEG

2. Long-legged Doji

The Long-Legged Doji pattern resembles the neutral Doji pattern in appearance. Their opening and closing are almost the same levels. However, the wicks are longer and spread out. The fact that prices might move pretty high up and down shows that the market is more unpredictable.

Although there is more volatility, the conclusion is still one of market uncertainty. It can sometimes result in high swings as prices break out from either side.

Additionally, this pattern appears when the supply and demand variables are in equilibrium.

3. Dragonfly Doji

The Dragonfly Doji pattern shows a T-shaped arrangement. The candles open and close are placed close to the high. Moreover, it has a reasonably long wick that extends to its bottom, implying rejection of lower prices and a solid closing for the bulls.

It can be a strong indicator, especially if the Dragonfly Doji emerges toward the bottom of a down-trending market. Traders can anticipate that prices will increase after this pattern is complete.

Moreover, this pattern emerges when the supply and demand variables are in balance near the bottom of the decline.

Dragonfly Doji

4. Gravestone Doji

An upside-down T shape represents the Gravestone Doji pattern. It is a stronger bearish reversal indication because the open and close of this pattern are at or very close to the bottom after prices were rejected to the upward. Therefore, the candlestick opens and closes at the day’s low point.

This pattern appears near the end of an upswing when supply and demand forces are equal.

Down doji

Doji Technical Analysis

A single candlestick is insufficient to illustrate the entire market structure on a chart. However, the likelihood of success in an analysis improves when two Doji candlesticks emerge.

In technical analysis, traders can use the Doji candlestick pattern to identify ‘pause and reflect’ price action, which can benefit them.

Traders might consider the Doji pattern as a sign that the purchasing momentum is fading if it emerges as the market starts moving upward. Contrarily, it can also suggest that sales are gaining momentum. Traders may consider it as an indication to close out a long position.

For example, a gravestone or dragonfly Doji signals a trend reversal. However, the likelihood of the outcome increases when two consecutively forming candlesticks of the same type.

Please remember that the Doji candlestick patterns don’t convey as many details to reach a decision. Therefore, one must always consider various tools and indications before responding to any signal.

Call to action

Limitations of a Doji

A Doji candlestick is a balanced indicator that gives minimal insight when it is single. In addition, since Doji is uncommon, they are not a good indicator for events like price reversals.

Additionally, reversals don’t always happen with reliability. There is no guarantee that the price will keep moving in the direction predicted after the confirmation candle.

The entry position for a trade may sometimes be far from the stop-loss position, depending on the length of the Doji tail or wick and the size of the confirmation candle. It implies that traders will be required to find a different spot for the stop-loss. Moreover, traders may need to cancel the trade since a stop-loss that is too large might not be justified, given the possible benefit of the transaction.

Conclusion

Candlestick analysis is significant for many price action trading systems. A Doji is a candlestick pattern in which the starting and closing prices are equal, giving the appearance of a cross.

New traders and market analysts must spend some time becoming comfortable with understanding this crucial pattern because it often appears on the price chart.

Traders could understand the market patterns based on when and where the Doji pattern appears. However, before moving on to any signals, one must always consider additional techniques and indicators.

Saman Ali

Saman Ali is a Professional Financial Researcher, Quantitative Analyst and an Experienced Writer for more than 5 years. Saman’s main passion is for Cryptocurrencies, Stocks, Forex and Blockchain Technology. She holds an MBA in Finance and has specializations in producing high quality content about Cryptocurrencies, FX, Broker’s review, Price Predictions, Fundamental & Technical Analysis, and Educational Content.

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