What a doji is
A doji is a candle whose open and close are at or very nearly at the same price. The body collapses to a line, and all you are left with is wick.
Read it literally: price moved up and price moved down, and it ended where it began. Neither side gained ground. That is genuine information — but note carefully what it is not. It is not a direction. "Nobody won" is not the same statement as "the other side is about to win".
The four variants
- Standard doji. Wicks of similar length on both sides. A clean stalemate.
- Long-legged doji. Very long wicks both ways. A violent, genuinely undecided period — often seen right after a news release, when both sides get a turn and neither holds.
- Gravestone doji. Long upper wick, no lower wick. Buyers pushed price up the whole period and sellers took it all the way back to the open. It looks bearish, and after an advance it can be — but on its own it is just a failed push.
- Dragonfly doji. The mirror: long lower wick, no upper wick. Sellers pushed down and buyers recovered everything. Looks bullish; after a decline it often is.
Why the "doji means reversal" rule fails
You will read that a doji at a top is a reversal signal. Sometimes it is. But dojis appear constantly — in quiet periods, in chop, mid-trend — and most of them precede nothing at all. If you traded every doji you saw at a swing point you would be trading very often and being right about half the time.
The honest use is as a change in the quality of the move. After a long, clean run of big-bodied candles, the appearance of a doji means the trend has stopped producing conviction. It does not say reverse. It says the move that was working has stopped working, which is a reason to tighten a stop or take partial profit — not a reason to reverse a position.
How to check this yourself
Find every doji on the last three months of a daily chart — they are easy to spot because the body is a line. Count them. Then count how many were followed by a reversal within three bars. The number will be much lower than the pattern books imply, and that gap is exactly what "context is the signal" means.