Single Candlestick Pattern

As the name suggests, a single candlestick pattern is formed by just one candle. If your trading signal is generated based on single candlestick pattern, it can be profitable only if the pattern has been identified and executed correctly. In this case, length of the candle plays a very significant role i.e. longer the candle stronger the buying / selling activity and vice versa. So trades need to be based on the length of the candle and if the candle is short, trading decision should not be based on that. Same aspect has been stressed upon in explanation of different single candlestick patterns.


What is a doji?

Doji is a very commonly found pattern in candlestick chart. Going by the text book definition, doji is formed when opening price and closing price are exactly the same, the upper shadow and lower shadow can be of any length. But, we have to keep in mind the rule that we need to be flexible and quantify accordingly. So, even if opening price is not equal to closing price but if it is closer, then it is considered as Doji . Also, it indicates small trading range since the candle length is usually small. Even though it is mentioned earlier that if candle length is short, trading decision should not be based on that. But, doji is still considered as a important pattern because it provides crucial information about the market sentiments as it reflects market indecision,  and sometimes also serves as reversal signal in trend. These information is very useful for analysts as it helps them in deciding whether to continue to hold their position or to exit.


Here in the above infy chart, dojis appeared in the upward trend  after which market reverses its direction and corrects. 




In the above HDFC bank chart,  Doji formed in the downtrend, after which there is reversal in trend.
    



In the infy chart above, several dojis formed in the upward trend indicating market indecisiveness where in it is not advisable to take any new position as it would not result in any profitable trade. 





In the HDFC chart, several dojis formed clearly indicating indecisiveness in the market during which no trade is advisable to be taken as it will not result in any profit.

To summarize:

1. Doji by definition do not have any real body. But in reality, even if a wafer-thin body appears, it is acceptable.
2. It can indicate indecisiveness in the market during which time it is advisable to not to take any trade.
3. It can also appear at the end of the good uptrend / downtrend after which there can be reversal in the trend.
4. Any smart  analyst would identify this pattern and apply caution, as it could either mean correction or reversal.









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