Looking at the length of , you’ll be able to speculate the future market movement. In this post, you’ll learn how to read and analyze pattern.
What is Doji?
appears on the trading chart when the market opens and closes at the same price level. It simply means that the market is uncertain if the buyer or sellers are in control.
But there is a variety of with various meaning on each. For now, let us know what usual looks like:
Sample - FinanceBrokerage
is a simple pattern. But it differs when taken into context. It provides the traders the sense of how the market will move. For instance, when spotting a in an uptrend. This simply means that the market is in equilibrium (temporarily). Upon enough rest, the market will move higher on the path with least resistance. Observe the sample graphic below:
Sample in an Uptrend - FinanceBrokerage
Avoid this usual mistake:
Majority of traders spot Analysis in an uptrend and decide to go reverse. That’s a really bad idea. Looking at the market, if a trend is going upward and been moving higher, why would it lose against a single pattern like Doji?
Different types of
In fact Dragonfly rarely occurs in which the price closes on the exact position it opened. Preferably, there is variation in having a small body with a long wick in the bottom. The meaning will be the same. The important point is being familiar with what it means.
Dragonfly usually appears if the opening and closing prices are at the same level with a long lower wick. Below is a sample of a Doji:
Dragonfly Sample - FinanceBrokerage
That shows that whenever the market opens, the sellers are going in and pushing the price lower. But it won’t take a long time before buyers take control of the market, pushing the price higher.
How to trade with Dragonfly Doji?
Support marks an area where possible buying may come in. Go long whenever the price comes to and creates a Dragonfly . The exact scenario tells you that it rejected lower prices with a high possibility to reverse higher. Observe the sample chart below:
Dragonfly in a range market Chart Sample - FinanceBrokerage
When it comes to trending market, the market would likely bounce off the moving average. But you may go long whenever the price pulls back toward a moving average forming a Dragonfly . Observe the sample chart below.
Dragonfly in a trending market Chart Sample - FinanceBrokerage
Gravestone appears whenever the open and close are in the same amount, but with a long upper wick. Below is an example of a Gravestone Doji:
Gravestone Sample - FinanceBrokerage
This type of shows that when the market opens, buyers come and push the price higher. But it won’t take long until sellers gain control and push the price lower. The market finally closes with the same price it opened. This is a sign of weakness because sellers are in control.
How to trade with Gravestone Doji?
marks the part where possible selling pressure could come. Go short when the price gets close to resistance forming a Gravestone . The scenario simply shows that the market rejected higher price and could reverse lower. Observe the sample chart below.
Gravestone in Range Market Sample - FinanceBrokerageWhen it comes to a trending market, Gravestone could make the market bounce off moving average. Go short whenever the price pulls back towards moving average forming a Gravestone . Observe the sample chart below.
Gravestone in a Trending Market Chart Sample - FinanceBrokerage
Long Legged appears whenever the open and close are in the same price, but with a long upper wick and lower wick. Below is an example of a Long Legged .
Long Legged Sample - FinanceBrokerage
This pattern shows that the market is uncertain upon a huge expansion in . This pattern rarely occurs but if it appears, expect to die out for some time before it picks up again.
There are two ways to trade in a Long Legged . Let’s elaborate each.
After huge expansion in , the market will need to take a break before it continues. For a while, the market will be in the range to gain orders before breaking out. That means you can go long on the lows of the Long-Legged . Observe the sample chart below.
A Long-Legged Sample on Chart - FinanceBrokerage
Long Legged Short the Highs on the First Test Sample Chart - FinanceBrokerage
Based on the first sample above, whenever the price tests the high/lows a lot of times, it will likely break out. Look at the sample chart below.
Long Legged Went Into a Range - FinanceBrokerage
Full illustrated article on Analysis