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Candlestick Strategies: The Doji Formation

Covered in this video:


Doji Star Formations

There are two types of Doji Star formations, also known as Morning Doji Star and Evening Doji Star formations.


Doji Stars indicate indecision about the price action. 

Doji Stars occur when opening and closing price action are almost equal. There is a stalemate between bulls and bears with no one side winning out.  They are relevant in both bearing and bullish market settings. When you're in the highs of a trading range, or the lows of a trading range, especially at support or resistance levels are strong indicators that there may be a possible trend reversal. Doji stars are not to be confused with spinning tops, which have considerably more price action between the open and the close.


Doji Stars are powerful in overbought or oversold situations

Looking at this situation, we can see that the doji stars represent indecision and buyers below. During this period the RSI was a very low 13 (extreme oversold levels) and now rising, this is a signal to open a long position. It's very important, first, to look at monthly support and resistance levels before leveraging the Doji Star formation and entering trends.

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