Doji¶

OVERVIEW¶

A doji is a single-bar candlestick in which the opening price and closing price are essentially identical, producing a candle with no real body — just a horizontal line with wicks above, below, or both. It signals a standoff: by the end of the session, neither buyers nor sellers gained ground despite intraday movement. Munehisa Homma formalized the pattern in 18th-century Japanese rice markets, and it remains one of the most-referenced reversal signals in Western technical analysis.

HOW IT'S IDENTIFIED¶

A bar qualifies as a doji when the body is negligible relative to the total range. A common quantitative threshold:

|Close − Open| / (High − Low) ≤ 0.05

Four main sub-patterns are distinguished by wick geometry:

Sub-Type	Wick Geometry	Signal Bias
Standard Doji	Symmetric wicks on both sides	Neutral indecision
Long-Legged Doji	Unusually long wicks on both sides	Heightened indecision
Dragonfly Doji	Open, close, and high at same level; long lower wick	Bullish reversal at support
Gravestone Doji	Open, close, and low at same level; long upper wick	Bearish reversal at resistance

Signal strength depends on context — a doji mid-range is noise; a doji after a strong trend, at a Fibonacci level, or on high volume is a tradeable reversal candidate.

WORKED EXAMPLE¶

On a session in early 2026, TSLA opened at $180.50 after a five-day 14% rally. Intraday the stock pushed to a high of $184.20, sold off to a low of $176.80, and closed at $180.55.

Metric	Value
Open	$180.50
High	$184.20
Low	$176.80
Close	$180.55
Body	$0.05
Range	$7.40
Body/Range Ratio	0.007

That is well below the 0.05 threshold — a textbook long-legged doji. The next session, TSLA gapped down 3.2% and rolled over into a two-week pullback, a classic doji-at-the-top reversal.

WHEN TRADERS USE IT¶

Swing traders watch for dojis at prior swing highs, swing lows, or at round-number resistance (AAPL at $200, SPY at $500) as entry or exit triggers. The pattern is rarely traded in isolation — practitioners wait for confirmation in the next one or two bars: a close below the doji's low triggers a short; a close above its high triggers a long. Combined with an RSI divergence or a Bollinger Bands tag, the edge improves materially in backtests.

Intraday scalpers flag dojis on the 5-minute and 15-minute charts near VWAP as potential exhaustion points within a trend.

LIMITATIONS AND COMMON MISCONCEPTIONS¶

Limitation	Detail
Not directional on its own	A doji is not a directional signal on its own — it announces indecision, not direction. Traders who short every doji at a high will be stopped out repeatedly during strong trends, where the pattern simply marks consolidation before continuation.
Low reversal reliability	Published studies (Bulkowski, 2008) measured doji reversal reliability at roughly 50–52% depending on sub-type — barely better than a coin flip without additional filters.
Inflated frequency on low-volatility days	A stock grinding sideways can print multiple dojis per week without any meaningful change in trend.
Timeframe sensitivity	A daily doji on a blue chip means something; a 1-minute doji on a thinly traded small-cap is usually one trade away from resolution.