As a trader, you need to master candlestick charting. Candlestick charts have a number of candlestick patterns that can give early warning about the potential trend reversal as well as the trend continuation.

Some candlestick patterns are simple while others are complex. In this article, we will talk about one of the most important candlestick pattern known as a Doji. Doji is a simple candlestick pattern that can give early warning about the potential trend reversal.

Appearance of a Doji on the Candlestick Chart can mean a possible trend reversal. So, you should not take this pattern lightly when it appears on the candlestick chart. There are four type of Doji, the Common, The Long Legged, The Dragonfly and the Gravestone.

The common thing between these four Dojis is the fact that the opening and the closing prices were the same. In other words, the prices closed at the same level at which they had opened.

When a Doji Pattern appears after a long uptrend, it means a potential top.

Similarly when a Doji appears after a long downtrend, it means a potential bottom.

A Common Doji Pattern represents indecision in the market. A Long Legged Doji is a far more dramatic pattern. It means that the prices had moved higher in the day then selling kicked in leaving a long upper shadow on the candle. A close before the midpoint of the candle indicates a lot of weakness.

When a Long Legged Doji Pattern is formed outside the Upper Bollinger Band after a long uptrend, it means a possible trend reversal. If it is confirmed by the sell signal on the stochastics, it is a reliable warning that a reversal is about to happen soon.

A Gravestone Doji indicates that prices had rallied higher on the day but buying could not be sustained in the market and the prices came back and closed at the open. A Dragonfly Doji is the exact opposite of the Gravestone Doji. Prices opened at the high then selling kicked in the market later on buyers found the courage to start buying and the prices came back to close at the open.

Appearance of a Doji Pattern means a possible trend reversal but you need to note in which portion of the trend this pattern had appeared. If it had appeared in the beginning of the trend, it may mean nothing.

Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide.