News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. Understand a pair's spread here: https://t.co/zEEUHZBx7g https://t.co/N2GqH7QoOd
  • RT @mkraju: Manchin signaling he’s open to $1.75T for social safety net bill, per source briefed on matter, but it’s unclear where the pric…
  • Further your forex knowledge and gain insights from our expert analysts @JohnKicklighter and @JStanleyFX on $USD with our free Q4 market analysis guide, available for free today. https://t.co/7G7pWntiyY #DailyFXGuides https://t.co/XYCRng3hEW
  • RT @JournalistRoss: From CNN's @mkraju: The goal among Democratic leaders is to have a vote Wednesday or Thursday on the infrastructure pac…
  • *Reminder: Weekly Strategy Webinar tomorrow at 8:30am ET on @DailyFX !! https://t.co/lxd5fZnn4H
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/L15w1dzclc
  • Wow Liverpool... https://t.co/9Mx6Xmw4iS
  • With the $SPX, Bitcoin and Fed 2022 rate forecasts pushing record highs; the heavy economic docket for the coming week will make for some loaded trading potential. The events and markets I'm looking at ahead: https://www.dailyfx.com/forex/video/daily_news_report/2021/10/23/SP-500-Reversal-ECB-Decision-FAANG-Earnings-Top-Volatility-Themes-Next-Week.html https://t.co/1SGirtalSb
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/wdbXlx7ChB
  • Further your stock trading knowledge and gain informed market analyses from our expert analysts @HathornSabin and @JMcQueenFX on Indexes with our free Q4 guide, available today.https://t.co/YQG1aaIT8C #Dailyfxguides https://t.co/qqYNi1RA2F
Trading the Doji

Trading the Doji

Richard Krivo, Trading Instructor

The doji, which is shown below, is a unique and readily identifiable candlestick. It is definitely easy to spot on a chart.

Trading_the_Doji_body_zpboycf1.png, Trading the Doji

The body of the candle is very short, almost non-existent while the wicks are elongated relative to the body. The short body shows that the opening price and the closing price were very close to one another…virtually equal. The elongated wicks show that even though the opening price and closing price were quite close, during the time that the candle was open, price fluctuated quite a bit.

Taking all this into consideration, the doji signifies indecision since the buyers and the sellers pushed price around quite a bit. But, in the end, they finished up about where they started. This indecision also points to the potentialfor price to change direction.

So when a trader sees a doji, they would look to determine the direction that the pair was moving prior to the formation of the doji. If the pair was moving up prior to the doji appearing on the chart, we would be looking for a reversal to the downside after the doji closes. The opposite would be true if the pair had been moving down prior to the doji.

One of the advantages of using the doji for trading signals is the guidance that it offers in placing a tight stop. Take a look at the 4 hour chart of the GBPCHF below…

Trading_the_Doji_body_eyyualcz.png, Trading the Doji

Created with Marketscope/Trading Station

In the above scenario, price had been moving down toward the 200 SMA (green line), since price initially broke above the 200 SMA. When the doji forms right along the 200 and “wicks” below it, this long wick provides an ideal guide for our stop…just below its wick.

Since price had been moving lower prior to the doji, the potential change in direction would be to the upside. Once the doji closes, a trader could take a long position with the stop placed just below the wick as noted on the chart.

The benefit of a trade such as this is that there is very little risk and the potential for gain far surpasses the risk.

Bottom Line: we have entered a trade with a solid Risk Reward Ratio.

As with all things in trading, there are no guarantees and trading with a doji is no exception. All trades based on dojis will not work out but with a prudent Risk Reward Ratio, we can put the longer term trading probabilities in our favor.

Also, anytime a doji signals taking a trade in the direction of the overall Daily trendthat will be a higher probability entry.

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

DISCLOSURES