Friday, May 11, 2012

Long Legged Doji

Long Legged Doji_Neutral

Type: Reversal
Relevance: Indecision
Prior Trend: N/A
Reliability: Medium
Confirmation: Required
No. of Sticks: 1

Long Legged Doji is characterized by very long shadows. It is an important reversal signal.

Recognition Criteria:
1. The real body of the Long Legged Doji is either a horizontal line or it is significantly small (its length is not more than a few ticks).
2. Both of the upper and lower shadows are long and they are almost equal in length.

Explanation: Long Legged Doji shows that there is a great amount of indecision in the market. This pattern is formed when prices trade well above and below the day's opening price, but then close almost at the same level as the opening price. It means that the end result is not different from the initial open despite the whole excitement and high volatility during the day. This implies a loss of sense of direction and that there is a great amount of indecision in the market.

Important Factors:
Long Legged Doji is especially important at tops.
Long Legged Doji is a single candlestick pattern. Hence, a confirmation is definitely required in the form of an opposite move to the prior trade on the next trading day in order to judge that a reversal may be starting.


Post a Comment