Indecision In The Marketplace
The doji is actually a very important part of technical analysis using candlestick charts and signals, and interpreted literally, it means that the opening and closing prices on the day were identical. The long-legged doji helps to tell investors that a reversal of the previous trend is on the horizon, and that they should assess the market to either sell or buy.
In order to fully understand the long-legged doji, you must first have a solid understanding of the general candlestick charts, and what they can tell you about the activity of the day, or even this history of activity for a certain stock. The candlestick charts are recognizable by their bar design, which can be black, white, red, or blue. A white candlestick usually indicates an uptrend in the market, while a black, red or blue usually indicates that the market has taken a bearish turn. Once you’re familiar with reading the candlesticks, it’s easy to start spotting signal patterns.
The long legged doji is a candlestick formation that occurs when the day’s opening and closing prices for a certain stock are nearly equal despite the fact that prices fluctuated during the trading day. It appears as a horizontal line with long wicks or shadows coming out of the top and bottom. Technical analysts will interpret the doji to mean that there is indecision in the market about the direction of the security.