Nowadays, many traders are using candlestick patterns trading strategies for their trading. One of the most recognizable candlestick patterns is the “Long Legged Doji.”
It is a type of Doji candlestick pattern with a distinctive look. It can convey important information about market sentiment and price action.
Understanding this long legged doji candlestick pattern can help you make good decisions about when to take the entry or when to exit from a trade. In this article, I will explain the Long Legged Doji’s characteristics and how to identify and trade using this doji candle.
Table of Contents
What is a Long Legged Doji?
A Long-Legged Doji is one of the powerful candlestick patterns that consists of a long upper and lower shadow and a very small or non-existent real body. It forms when the opening and closing prices are the same or very close to each other. Please have a look at the below image to see how it looks.
The long shadows indicate significant price movement during the trading session, but the open and close prices look the same or almost close to each other, resulting in a small or non-existent real body.
The Long-legged Doji candle indicates there is indecision in the market. However, if you combine it with other technical indicators, it can be a powerful tool for predicting price movements.
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How to identify a Long Legged Doji?
To identify a Long-Legged Doji, you need to find a candlestick with a long upper and lower shadow but with a small or non-existent real body.
The upper and lower shadows should be roughly equal in length and at least two to three times the length of the real body.
The colour of the real body is not important in this pattern, as the size of the shadows indicates indecision in the market.
This candle can form in any market and in any timeframe. But it is best if you find this candle appears after a prolonged uptrend or downtrend. Because there, its works perfectly.
How to trade using Long Legged Dojis?
The Long-Legged Doji is a powerful signal of indecision in the market. It tells us that the trend may be reversing.
Suppose this candle appears after a huge uptrend. In that case, it indicates that buyers are losing their momentum, and the bears may be taking control.
Conversely, suppose the pattern appears after a huge downtrend. In that case, it indicates that sellers are losing their momentum, and the bulls may be taking control.
But you need to wait for confirmation of a trend reversal before taking a position.
Also, it’s important to note that this doji pattern is not a standalone trading strategy. You must use it along with other indicators or support and resistance lines.
For example, you could use this doji pattern along with the pivot point indicator. Let’s say the stock price touches the support line after the massive downward movement and forms this doji candle. You can consider it an entry signal, and please consider the price action also (swing low and swing high levels).
If everything looks good, you could take an entry if the next candle breaks the high of this doji candle. Please don’t forget to put a stop loss below the low of the doji candle. Please check the below image to get clarity on it.
Please remember that you need to be cautious when trading this pattern, as it can be a false signal in certain market conditions.
Also Read: Mastering the 3 Triangle Pattern: Tips and Tricks for Successful Trading
Conclusion
As already said, the Long-legged Doji is a powerful candlestick pattern, and it shows us the indecision in the market. So, you can find the reversal zone using this candle and trade accordingly.
By understanding how the Long Legged Doji forms and how it works at various levels, you can take entry at the low-risk level and make a decent profit. But please be aware of the false signal also.