UK Accounting Glossary
The Doji is a commonly found pattern in a candlestick chart of financially traded assets in technical analysis.
It is characterised by being small in length – meaning a small trading range – with an opening and closing price that are virtually equal.
A doji is a type of candlestick where the day’s opening price and closing price are the same or nearly the same. A basic doji candlestick shape resembles a plus sign. Other possible doji shapes include a cross, inverted cross, or “T.” By itself, a doji represents market indecision about the direction of a stock or security; buyers and sellers are equally active, but neither establishes control. The length of shadow or shadows on a doji reveals the price range of trading activity. A normal doji reveals prices moved within a relatively narrow range, while a doji with long shadows reveals prices moved across a wide range. In combination with other candlesticks, a doji forms patterns that can reveal an impending reversal of sentiment about a stock. For example, a doji that follows a white candle signals that buying interest in a stock is weakening, while a doji following a black candle signals that selling pressure is weakening.
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This glossary post was last updated: 9th February 2020.