Long legged Doji Candlestick: Complete Guide


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long-legged-doji-candlestick-example

Definition

The long-legged Doji Candlestick is a Doji candlestick with a longer lower and upper wick. All Doji candlesticks are the same in terms of their opening and closing prices. There is a slight difference in the high and low prices between Doji types.

Doji with long legs symbolizes indecision in the market. The market’s future direction is determined by the long shadows at its upper and lower ends. This helps to identify the market structure.

How do you identify long-legged Doji

Follow these steps to find the Doji candlestick’s long-legged position on the price chart.

  • Confirm the doji candlestick with the same opening and closing prices
  • The doji candlestick should have long shadows at the top and bottom.
  • The size of the upper and lower shadows should roughly be equal

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Structure of Doji candlestick with long legs

We concluded from the candlestick that it has the same opening price and closing price. But the candlestick’s structure shows the ranging period. This means that the price moves in a sideways direction during the shorter timeframe.

Most candlestick patterns indicate a trend reversal signal or trend continuation signal, but the long-legged Doji signals a pause in a trend. This is the consolidation phase after an impulsive period.

The long-legged Doji will see the price move down after the candlestick opens. It will then rise above the opening prices. At the end, it will return to the opening price and then close the candlestick making a long-legged Doji.

Take a look at the image below to get a better idea of the structure of candlesticks

candlestick-structure-1

Long Legged Doji: Information Table

Features Explanation
Number of Candlesticks 1
Prediction Indecision in the market
Prior Trend N/A
Relevant Pattern High Wave candlestick

Long-legged Doji trading psychology

Each candlestick has a story. To become a price action trader, you will need to be able to read the stories behind candlesticks.

The long-legged Doji candlestick is an example of equal power. Both buyers and sellers have the same opening and ending prices. This is the fundamental idea that prices will rise if there are more buyers than sellers, and vice versa.

The number of sellers and buyers are almost equal during long-legged Doji candlestick form, which is why the price moves in a sideways direction.

The long-legged Doji candlestick formation shows that the price is in a neutral state. Only an unbalanced state will cause prices to move up or down.

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Breakout of Doji candlestick

The Doji candlestick’s high and lowest levels act as support and resistance. A bullish price trend will be created if Doji candlestick’s high is broken. Conversely, a bearish price trend can begin if Doji candlestick’s low is broken.

doji-candlestick-breakout-1

Trading strategy

Trading a long-legged Doji candlestick alone is not possible. To make a trading setup that works, you need to combine confluences with the Doji candlestick.

First, filter the Doji candlestick’s best working conditions. If a Doji candlestick with a long neck forms at a key level ( resistance or supply/demand level), then there is a greater chance of trend reversal/trend continuation.

However, if there is a Doji formation within a market structure that is not ranging, the price will continue to move side-by-side until a breakout.

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Confluences that add to strategy

  • Key level
  • Higher timeframe analysis
  • Breakout of high or low of doji candlestick

Key levels

To increase the chances of winning in trades, it is crucial to use key levels. A Doji candlestick that is long-legged forms at the support area. The breakout of Doji’s high will indicate a bullish tendency.

You have increased the chances of a bullish trend reversal by adding a confluence Doji breakout to increase the likelihood of this trend reversal.

Higher timeframe analysis

Trading strategies must include a higher timeframe analysis. This is the way to trade with institutions. Zoom out and examine the trend using the lower high and higher-low methods. Next, match your trade direction to the trend.

Breakout of high or low candlesticks

This is only for long-legged Doji candlesticks. This will help you decide on the trade direction. If you’re looking for a reversal of a support area, then the high of Doji candlestick should be broken.

If you are looking for a trend reversal due to resistance or supply area, then the low Doji candlestick should be broken.
It serves as confirmation of trade entry-level.

Pro tip: Draw horizontal line on the high and low sides of long-legged Doji candlesticks. To confirm a breakout, switch to a lower time frame and wait until the candlestick closes above or below these horizontal lines.

These are the three strategies you should use when trading long-legged Doji candlesticks. The strategy you use determines the stop-loss or take-profit levels.

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The bottom line

One candlestick can hold many secrets. To accurately predict price trends and reversals, you should read candlesticks that are formed at the key levels.

Candlesticks of long-legged Doji form often on the price charts, but you should only trade those that form at key levels.

You should backtest the Doji candlestick thoroughly and you can try to read the market using shorter time frames.


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