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Doji Reversal Is Not an Absolute

Doji Reversal Is Not an Absolute

Richard Krivo, Trading Instructor

Instructor's Response:

You make some good observations on this...

Keep in mind that the doji indicates indecision and the potential for a change in direction...there is no sure thing or an absolute in trading.

Since this NZDUSD pair is still in an uptrend on a full view of the Daily chart, the higher probability trades will be in that direction. While identifying candlesticks and their patterns to determine the direction to trade a pair is fine, an even stronger tool in making that decision is the trend on the Daily chart.

In this case the prudent trader would wait for the pair to retrace and then let the pair "bottom out" at a support level. Then the trader could go long and buy the pair back in the direction of the Daily trend.

You may also find this helpful as well...

Personally, I prefer to look at a full view of a chart when making trading the very least 75-100 candles. It provides a trader with a much broader perspective as to how the pair has been moving. Then, after that longer range view, the chart can be expanded should the trader choose to do so.

Take a look at the full view of the Daily chart  for a comparison...

chart 10 07 10 A

chart 107 10 B

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.