Long Legged Doji
The long legged doji candlestick pattern represents a large trading range with a virtual equal amount of indecisiveness between buyers and sellers. This is represented by the equal open and close prices and long upper and lower shadows of approximate, equal length.
Long Legged Doji Candlestick Analysis
The long legged doji candlestick pattern is a reversal signal and is, therefore, most valid when it appears during an established trend. When the long legged doji appears in an established uptrend it provides clues for a possible reversal to the downside. While the appearance of a long legged doji in a downtrend provides hints that the market may be reversing to the upside.
The long legged doji candlestick pattern becomes increasingly relevant when the following occur:
- The long legged doji has an equal open and close, while having long upper and lower shadows.
- It is preceded by a strong trend.
- Confirmation candles are used to confirm the reversal.
- Overbought or Oversold indicators confirm a change in market direction.
Forex Trading Ideas
The long legged doji may be traded alone, or with a combination of signals and/or indicators. For example:
- Step 1 – Wait for a long legged doji to appear during an established trend.
- Step 2 - Confirm the trend reversal with at least one confirmation candle.
- Step 3 – Further confirm overbought or oversold conditions using the RSI – Relative Strength Index.*
- Once conditions 1 – 3 are met place an entry order.
* Additional confirmation ideas – confirm the doji formation when it appears outside of the Bollinger Band or when the Stochastic Oscillator signals oversold or overbought conditions.
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