Doji

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A Doji is a type of candlestick pattern that occurs in the financial markets, and is used by traders to identify potential reversals in price. It is composed of a single candle stick with an open and a close that are at or very close to the same price. In some cases, the open and close may even be the exact same price. The appearance of a doji on a chart indicates that buyers and sellers have reached an equilibrium – neither side was able to gain control over the other. This can signal either that momentum in the market is slowing down, or that there could be a potential reversal in trend coming up soon.

The most common type of doji is known as a "long-legged doji". This type of pattern has extended upper and lower shadows which indicate high levels of volatility during the period when it formed – this means that prices moved significantly higher or lower during the session but closed near where it opened. Additionally, this high level of volatility could mean that sentiment on both sides may be neutralizing as bulls and bears battle it out for control over prices.

Another variation of the doji is known as the "dragonfly doji". This type of pattern has no upper shadow and only a small lower shadow, indicating low levels of volatility during the session and little difference between open/close prices. This again signals an equilibrium between buyers and sellers as neither group was able to gain much ground during trading. Dragonfly dojis can also potentially signal bullish reversal trends if they form after strong downtrends, since they may indicate increasing demand from buyers who are looking for bargains during pullbacks.

Overall, dojis are important patterns for traders to pay attention to when analyzing price charts as they can help identify potential turning points in markets. By recognizing these patterns early on, traders can capitalize on potential reversals before other market participants catch wind of them.

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