Japanese Candlesticks Part 4
[00:11] – This is Video Number 8 – Reading Japanese Candlesticks Part 4. In our previous video, I have taught about Pin Bar and Engulfing Candles and in this video, I would teach about the Doji Candles. And just like the previous videos, I will show you what a Doji Candles is, and how can it be used as a signal as a signal to take long and short positions in the forex market.
[00:40] – Here are some illustrations of Doji Candles. Doji Candles are candlesticks that have the same or very similar opening and closing price. So the body on a Doji Candles is very small, or there is no body at all. We just get a straight line as the opening closing price is the same. Doji Candles can have a upper wick, and a lower wick or what you think is the rule it doesn’t matter. The main characteristics of a Doji Candles is the body or the lack of a body. The best way to describe how Doji Candles acts as a signal or why they act as a signal is to look at other illustration.
[01:28] – In this illustration, price is moving on the upside. We have our Doji Candles and price reverses. Doji Candles can act as signals for price reversal. The reason being just like Engulfing Candles and Pin Bars, which are self-fulfilling, traders look for Doji when trading for forex market. And many traders would trade Doji Candles and use them as signal; hence we have price reversals. The real main reason why Doji Candles work is they show market exhaustion. As price moves on the upside, we have a number of bullish candles bars the pushing price continually. When we get to this Doji Candle, buyers are unable to push the price any higher. It shows that their buying power has run out. That their momentum is gone and they are unable to push price any higher. Hence the seller then takes the lead and price goes on the downside. Obviously, we could have price coming on the downside, a Doji Candle and a price reversal on the upside.
[02:47] – This is a 4 Hours chart of US Dollar Swiss Franc. Doji Candles are not as common as pin bars and engulfing candles so demonstration that I give you will be very limited. But let’s look at this big swing to the upside. We have an engulfing candle, a bullish engulfing, a bullish pin bar, another bullish engulfing and price is moving very strongly on the upside. As price reaches the top of the push, there is a very clear Doji Candle. Their opening closing prices are the same. We have more body on this candle. It’s a straight line. After Doji Candles, price reverse and goes on the upside. It is also interesting to know after this Doji Candles, we have a bearish pin bar, signaling that sellers are coming in to the market and is also engulfing candle. So at the top of this push, we have all three signals in one. That is a very clear opportunity to take a short position and price falls on the downside.
We have another Doji Candle here. Price is coming up. We have a Doji Candle and soon after price goes on the downside.
[04:33] – In summary: Doji Candles have the same or very tight opening and closing price. And they can act as signals of price reversals because they show exhaustion of the preceding price action. So far in these videos, we have covered price behavior, price trends, our price ranges, and we looked at Japanese Candlesticks. I have given an introduction to Japanese Candlesticks. And I have taught you about Pin Bars, Engulfing Candles and Doji candles.
In coming videos, I will teach you about Support and Resistance. One should know about support and resistance, Japanese candlesticks and how price behaves. You will have a very strong trading foundation and I will demonstrate that just by knowing these three areas of financial trading, you can open many profitable positions in the forex markets. As mentioned in previous videos, jyst knowing signals like pin bars and Doji candles is not enough. I can teach you which signal has higher probability of working and which signals don’t have the higher probability of working.
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