Finance

Doji Candle and Its Function to Shows the Warning Signal of Market Trend

It is quite complicated to achieve great success in trading. Basically, trading is about buying and selling at the right time. When you miss the opportunity, it means that you will also miss your chances to gain the profits. Even, wrong decision will lead to serious failure where you can lose big sum of money. In this case, trading require you to understand the market situation and its sentiment so later you can analyze and predict the market direction. Thus, you can find the opportunity to buy the assets and sell them in the right momentum. This may sound simple, but it needs good understanding. At least, you need to have analytical approach and method that will be useful for you to get the market perspective so you will be able to make projection of the directions. In this case, there is doji candle that becomes useful trading candlesticks that will provide the information that you need. This will be able to provide you with early warning signals that can help you to know the situations better.

Candlestick charts are important in trading. These become charts to make technical analyses. The candlestick depicts the trading market sentiment of certain trading instrument. The wick and body of the candlestick can provide representation of prices or values of assets. Then, the pattern of candlesticks can be used to make prediction of market and price movement. The Doji Candle is one of those candlestick charts that can be utilized. Doji is word in Japanese and it means mistake or blunder. The doji candle can be utilized to avoid the blunder and mistakes in making decision during trading. The candlestick shows “+” that can be easily identified in the charts. The regular candlesticks will have the body of the candlestick that shows movement of trading instrument. Then, the length of the candle body shows differences of opening and closing price. However, doji candlestick do not have body and it is only represent the “+” shape. This is because the doji candlestick has same opening and closing price although there are still fluctuations of price that will become the high and low price in the candlestick.

It is quite unique to see the doji candlestick since it shows the indecision in the market sentiment. That is why the opening price can be the same as closing price although there can be high and low price as the fluctuation. The indecision can show the movement of buyers and sellers. The indecision becomes situation that can occur when buyers try to push the price higher but it is not successful while sellers push the price so it can be lower but it is failed. Thus, the prices end with the same value as its opening ones. In this case, the indecision can lead to a pause of the market trend. It may also indicate a reversal of the market situation. Both of them are possible and these are the warning signals that will be useful for traders. Since market can show different types of situations and trends, there are also different types of doji candlestick. There are common doji, log legged doji, gravestone, and also dragonfly doji. Each of them is different in term of the position of open and close price between the price fluctuations.

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