Month: November 2020
PANDIT INVEST:
What is a Long-Legged Doji?
The long-legged doji is a candlestick that consists of long upper and lower shadows and has approximately the same opening and closing price. The candlestick signals indecision about the future direction of the underlying security.
It is used by some traders to warn that indecision is entering the market after a strong advance. It may also warn that a strong downtrend may be experiencing indecision before making a move to the upside.
Long-legged dojis may also mark the start of a consolidation period, where the price forms one or more long-legged dojis before moving into a tighter pattern or breaks out to form a new trend.
Understanding the Long-Legged Doji
Long-legged doji candles are deemed to be most significant when they occur during a strong uptrend or downtrend. The long-legged doji suggests that the forces of supply and demand are nearing equilibrium and that a trend reversal may occur. This is because equilibrium or indecision means that the price is no longer pushing in the direction it once was. Sentiment may be changing. For example, during an uptrend, the price is getting pushed higher and the close of most periods is above the open. The long-legged doji shows there was a battle between the buyers and sellers but ultimately they ended up about even. This is different than the prior periods where the buyers were in control.
