The doji is a candlestick that can be helpful tool when trying to find the tops and bottoms of a given stock. There are four major kinds of these candlesticks.
1. The first is the regular doji. This is when the stock did pretty much nothing during the day. It may have swung back and forth every now and then, but overall the security remained unchanged. If this candlestick comes after a big bull run it could mean that the bulls are losing strength. However it could also mean that the stock is just pulling back.
2. The long legged doji is pretty similar to the regular doji. The only difference is that with the long legged doji the day had a much higher swing. The stock had a pretty big high and a pretty big low but in general it still did nothing. The log legged doji can give the same signals as the regular doji, but the signal is stronger because it shows a bigger struggle between the bulls and bears.
3. The gravestone doji can be a bearish reversal pattern when it comes after a bull run. During this day the stock opens and starts to rally. Somewhere during the day however the stock starts to fall. By the end of the day the day closes flat, or close to it. This is an indicator that the bullish run is starting to lose steam.
4. The last types of doji is the dragonfly doji. This can be used as a bullish reversal indicator when it occurs after a bear run. During this day the stock market opens and starts to fall. During the middle of the day the buyers come in and start to buy. This pushes the stock up. By the end of the day the stock finishes flat. This can show that the stock is starting to strengthen.
The doji can be a helpful indicator but should never be tooken as a stand along buy or sell signal. It should be used as a way of strengthening another indicator.
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