What is a Doji?

• A candle session where the opening and closing prices are the same. It is a significant reversal indicator that indicates indecision where the likelihood of reversal with a Doji increases with:

1. Subsequent candles confirm the doji's reversal potential

2. Market is overbought or oversold

3. Market does not have many doji. If the chart shows many doji, an appearance of the doji may not be considered a significant reversal indicator

• Dojis tend to be more successful in calling top reversals than bottom reversals. (Hence doji may need more confirmation to signal a bottom than a top)

• Does not result in an immediate price reversal, rather it can signal that the trend may be in the process of changing

• Need to look and ensure there is a trend before the doji. This is because doji has little forecasting implication if they are in a trading range as there is no trend to reverse. However it can be used to confirm resistance or support if it is at the top or bottom of the trading box range.

What is a doji-like session and when can it be taken as a doji

A doji like session is when the opening and closing sessions are within a few ticks of each other. It can be considered a doji session if:

1. A doji-like session emerges among tall candles. It signals that the current session is signaling something different from the other sessions. This is more significant than compared to sessions with many small candles

2. Market is at an important junction

3. Market is extremely overbought or oversold

4. Other technical signals that confirms the doji

#1 The Northern Doji

This is a doji during rallies/overbought environment and tends to come after a tall white candle.

• The highest high between the doji session and the preceding white candle can be used as resistance

What can be done during such a session

1. Liquidating long positions

2. Selling call options

3. Moving stop loss up