How to correctly use Doji candlesticks to spot a reversal?

I can take your criticism pretty easily because I'm profitable for years by using a few simple patterns. (BTW I'm a full-time trader).
"Easy" and "difficult" are relative terms. Maybe you are the one who's been brainwashed by the notion, "trading is difficult." Sure! I can agree that trading can be difficult. But I rather say, trading can be easy

Wow, the arrogance and yes I'm sorry, just plain idiocy of some of the posts here just amaze me. A member comes in with first, an observation and next, a simple QUESTION about that observation seeking other's views. As usual, with the single exception of Magix, the crowd of "Trader-Osterone" filled folks come in with all kinds of unrelated BS and no real effort to address the OP's question.

The OP wasn't claiming that Doji's were BS or wondering if anyone could make a living from trading. He/She was simply looking for OTHER SIGNS about Dojis that MAY HELP determine any DIFFERENCE between a reversal or continuation. Please allow me to HIGHLIGHT the OP's post for those that seem to have missed the observation and subsequent question. Just "maybe" we can steer this back to the OP's original intent?? And then, as this is actually the "discussion" section, just maybe have an INTELIGENT and CIVILIZED discussion on the subject??

Now I'm sure this post will receive the usual 3 responses. 1) Praised by some. 2) Ridiculed by some. 3) Ignored by most. The good news for any new traders reading this is, it should become quickly apparent who are 1) The ones who know. 2) The ones who don't. 3) The ones making an honest effort to dig into the subject for expanding their own knowledge. I consider myself both #3's by the way. Ignored by most and still making the effort...LOL

Now for me, S/R is not only relevant but the KEY to ANY "candle" structure. I don't care what TF we're taking about. Anyone who doesn't know this should perhaps start here. http://www.babypips.com I did (among other sources) and can say it's a great beginning to learning the basics.

Basically, regardless of candle size and shape on any TF, for me it boils down to Location Location Location. That location of course is the S/R area(s) in which the candle is found.

I'll stick to the May 8th EUR/USD reversal brought up here as the example. As posted here http://www.forexfactory.com/showthre...49#post7536449 I don't have a 4H Doji and the 4H is useless "IMO" to me anyway. But I do have a small 1H Doji. So just for fun, and because I have some time, and because most often making at least an attempt to answer a question teaches me even more on a subject, I'll like to drill down into that 1H Doji a bit.

The 1H chart with the Doji in question and the S/R levels marked by their strength as determined by both the 1H and higher TF's. These S/R lines (less the labels) are carried through to all the lower TF's I'll be looking at. The 2 yellow vertical lines (second one in view 30M and under) mark the start and finish of that 1H Doji and they will remain to keep that in focus. For a real time versus hindsight, I've done my best to capture these charts as they would appear in real time trading.



30M - Well, no real helpful info here as to reversal versus continuation except it would seem price has stalled a bit under a weak S/R. Signs of weakness? A little perhaps but not enough "for me" to determine the outcome...yet. Of course you can see a 30M Doji here but, being the 1H was a Doji, no real surprise there right? Let's drill down a bit more.



15M - Hmmm.... Sings of a little strength again? Not much as the last two bullish 15M bars are within each other. The first making a new high with it's wick but closing very close to the last swing high. The second closing higher but still under the wick of the first. I'm still watching (S/R in mind) at this point.



5M - Certainly a little pop of strength shown but a quick fall off right after. Still watching.



1M - Nothing for me yet except signs that price is still moving nowhere between moderate S/R below and weak S/R above by the fact that the last 1M bar did close (1.39489) only a hair above the last 1M swing high of 1.39487 (Yellow line and arrow). On my feed (.2 pip) above...lol



So for me at least, and to the OP's original question, on this particular 1H Doji I cannot determine any additional information as to whether price will reverse or continue. Without hindsight, can anyone else? So, I'm still watching for reaction at or near the top or bottom of strong and moderate S/R zones. An interesting note however, price on the 1M did break the last swing high, then fall back through and is now testing that S/R. So for me I'd have to wait and see if it breaks or is rejected significantly by it. That was fun!

Have a nice Sunday folks.

"unrelated BS and no real effort to address the OP's question."



Apologies ..Albchr …….deleted my last post …. just need to vent ... but you are so correct … get things back on track …


PS: feel like a total dick now but thats far from being new territory for me

Actually sir, I caught it and read it. I was going to it. Even though it wasn't to the OP's question, It was quite correct.

EDIT: and oh, congratulations to both you and your boy. I'm rather envious myself.

Lol Milan that is not exactly true you can trade one candle for a living. Heck you can trade only 3 candles and become very rich, mainly the Shooting Star/Hammer (Upthrust/Reverse Upthrust) However you want to call it, and the Doji, the candle is not the issue. The issue is that most traders never took the time to connect the money to the Pattern/the Signal. There is a detach between the market and the trader, a candle is formed, that's well and good, but no one seems to care why it formed, and which currencies were responsible for it, which is the single most important reason why a signal fails or succeed, This is a market of money, but no one talks about it it's just unreal. There are only a couple of traders here who try to understand why money is changing hands in the market, everyone else says the same thing over and over, and that's good if you are profitable doing that. But the market is so much more than candle patterns that it's not even funny. OP if you still want to know what happens at a doji, pick a couple that fail and succeed and PM and we can dissect them there. Then you can compare the information and try to find the bias that you cannot see on a chart.

Cheers Alb


"Now for me, S/R is not only relevant but the KEY to ANY "candle” structure”

So Correct ... all facets of TA boil down to that oft forgotten basic S/R every candle has a S/R that can be observed and quantified including the doji ….. and ultimately applied

Your trading style, or more correctly, your trading goals SHOULD dictate as to how aggressively you analyse a doji …… for me … swing … doji meant nothing more than head out of my arse and wait ……. but my scalper mates would be hoop’n and hollering at the site of one and would tear it apart in seconds have their S/R in place (within the doji) then place an entry, and out before the next 15 minute candle drew breath …… they would quantify every 15 minute candle doji or not ….. for them the 1H chart was used to count down for lunch.
as you rightly point out S/R IS THE KEY and it will/does unlock the doji if you are good enough …… something I’m not by the way


Anyhow ….. that is my little redemption post for the OP
Cheers All … am off to bed

I agree. I look at candles of many types. When I see one of them including dojis, it's a call to attention for me. Especially if the location relative to S/R is right.

So...

We analyze, support and resistance and look for a single candle confirmation...

We see where previous resistance was, we see that it was tested as support and we see a bottom side pattern forming, and then...

The Magical DOJI!!

BUY!!!

OH SHIT!

Maybe they work better on sells...

So, we see resistance created...topside formation in an obvious current down trend...

What pops onto the screen?

A Magical Doji!!

That's what!!!

SELL!!!!!!

Now we've sold support!

SHIT AGAIN!

So the question remains open...

How do you, CORRECTLY use Doji Candlesticks to spot a reversal?

Oh, sure...

I know...

These aren't at the absolute peaks of the spikes...you know why? Because I specifically chose ones that AREN'T!

Do you want to know why?

Because using this as a trade methodology is worthless.

Dojis form inside of trends...all the time.

And unless the trend reverses, nobody even looks at them a second time.

If you want to use this as a trade methodology...feel free...but it really will give you no better than coin toss statistical averages and it is only a single part of a trade methodology...

The issue is with market understanding of NEWBS who continue to try and post shit, just for the sake of posting shit...this causes more confusion than will ever sort and just perpetuates the breakdown of anything meaningful in threads with the request for information.

Do you see this?


Unless these are spotted in hindsight and traded through a time machine...

They cannot be solely relied on...

This questions has many answers because it really depends on the trade pair as well as the current session...are we trading to support, are we trading to resistance?

The basics are as I have said...

When support gets broken, it gets traded as resistance.

In gauging these, I work with the LargeTimeFrame candles, indicator as posted and a series of Moving averages. The moving averages tell me the current trend and triggers, the candles tell me the possible supply and demand levels.

Because I trip the M1 charts...my profit ranges are typically based on the current trend, or counter as it may be...but ultimately, it is just a matter of support and resistance as viewed through my own specific optics.

Here is an example...

My Thursday, AUD session Friday...we were retracing to a supported area...I posted this area HERE.

Because we were above support, I had no issue buying...because, when the trend is up, we are above weekly open and we are close to support...this is my best guess as to what would constitute a good chance for a high probability successful trade. I cashed out early on the trade, only shaking a couple sheckles from market...(mostly because my last week, was spent on my ass...I was sick and layed out throughout most of the week...unimportant)...

Anyways...GBP was getting most of the loving, and AUD was moving slow at best...but we were still in trend.

Over the London session, AUD broke support. It is a simple line that was easy to read and if I was still holding the trade, would be looking for a reasonable stop or just cut losses...shit, ya can't be right all of the time...

But now that AUD has come to another area of support (Green dotted line on the chart), I would expect a possible buy here, if not just wait to see a reaction. As support was broken, I am going to go under the assumption that it will be tested as resistance.

The USD cross pairs, play pretty specific and fair for all sessions, so there is typically a lot less risk in this same assumption...If I was to only want to trip with trend...what would I be looking for? A test of resistance where support once held.

Looks like this as a subsequent chart:

This same list on strategy is typically what I am looking for, but on a much faster frame.

The previous chart was an M5 chart and uses the H1 charts superimposed to help define the supply/demand areas...I watch, trigger and trap profits inside of these same things...again, looking to see if we are trading towards a previous resistance or trading towards a current support or just break out trading altogether...

Typically speaking...

As I had mentioned before, I also watch where we are in relation to the Daily Open. AUDUSD is a fantastic pair on daily roll...if we are above, we typically stay above. Are we trading into this or against?

GBPUSD and EURUSD, not a lot different, but really depends on the weekly cycles and a little to do with the press...so, these I look for quicker ranges and typically play into the trend of day as dictated by the direction of London Session in relation to the Previous NY roll.

Once London is off the clock, I typically assume that NY won't have the strength to break out of range and watch for retrace opportunities and once the signals come in...I am back on the trade.

Yes...... I have heard that before....

I work a lot with automation and still watch for anything I can use to drop into a code to see if there is anything else I can make a couple bucks on for the week.

In this, I look for simplicity and think in terms of code.

With this...I have created scads of triggering systems and several different methodologies to determine and define the trend, current or overall, and then follow up with a triggering methodology that will work...

After a week of application...it's pretty easy to look back and see if the logic holds, or if is no better than anything else I have been able to see and apply...

This, I have done by several different market criteria as well as session application.

Like EURNZD and GBPNZD...

A specific set of optics makes it so that I only need to check on these trades at mid hour...If they are buying on a sell cycle, at 30 minutes into the hour, I can take a short...ride it typically for an hour or find possible range...

Again...this too depends on the current session and what else is going on in market.

First immediate available on EURNZD...(active, not EOM)

Wouldn't this make life really easy if all charts where the same?

Seriously...watch this...you will laugh.

This I found, just off of using the largetimeframe indicator...seeing this same pattern, almost impossible without....

Is there any facts to back this up Hanover? what is the increased probability? - I'm yet to find any simple technical patterns that are any more effective than a 50/50 guess. If they we're 'high probability' we would have a high percentage of traders making money.... The facts tell a different story.

How and what I trade, really not much relevance to the thread...

My previous posts were more to do with the identification of support and resistance, instead of waiting for a perfect signal from any single candle...

The logic holds true on all major time frames...H1, D1, W1, MN...YR!

Watching these areas, where they open...where they close helps to determine, are the support (are we trading above open), or are they resistance, (are we trading below open)...

Look at a doji, top and bottom...

You will see the same on the ideal reversals for any given frame...

The real question is...do you even notice?

And when this happens...how would you trade it?

Where do you profit?
Where do you cut loss?

Visit the Trading wiki or babypips or any other source that only and specifically looks for any single criteria...you will see the results...

Mixed bag.

For me...not all perfection...but I know what I am looking for and know what I need to see to get out of a trade...win or lose.

That's really all that matters.