You have probably heard or become interested in financial markets at least once in your lifetime. When trading in financial markets like Forex, we often use our knowledge of technical and fundamental analysis. Sometimes we succeed, and other times things may not go as planned. To be more successful, we need to gain a deeper understanding of the market's rules. So, where should we start? you might ask. Learning about Japanese candlesticks can be a good beginning, I believe. In technical analysis, there are various types of single and combined candlesticks. One of them is known as the Long-Legged Doji, a member of the doji candlesticks family. In this article, we will discuss the noteworthy Long-legged Doji among Japanese candlesticks.
What Does Long-Legged Doji Mean?
The term Long-legged Doji meaning describes a candle that shows hesitation in the market. Both buyers and sellers try to take control, but the price ends up closing near the same level where it opened. The long shadows on both sides show that price moved strongly in both directions before settling back.
This candlestick often appears when the current trend starts to lose strength. It reflects a moment of balance and signals that the market may be ready for a new move. The Long-legged Doji candlestick on price charts often signals a possible reversal or a pause before the next big change. While typically indicating market indecision, it can, though less frequently, also suggest a continuation of the current trend.
Overview of the Long-Legged Doji candlestick
This candle has a very short or zero body and long upper and
lower shadows, which shows large swings during the chosen time frame while the
open and close end up almost the same. Such a candlestick points to uncertainty
about the next direction.
Short body or zero body length
The almost equal opening and
closing prices mean neither side kept price away from the start level. During
formation, the market moved up and down but returned near the opening price.
That situation can suggest uncertainty about the intraday direction.
Long upper and lower shadows
Long shadows represent the
highest and lowest traded prices for the time period. Price reached both highs
and lows, then returned to close near the opening level. Those moves reflect a
battle between buyers and sellers.
Candlestick Color
A Green Long-legged Doji candlestick appears when the close is slightly above the open. A Long-legged Doji Red candle appears when the close sits slightly below the open. A colorless or black form appears when open and close are almost identical. All forms show indecision more than clear trend direction. Here are examples of the Long-legged Doji candlestick:
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| Long-Legged Doji Candlesticks |
A Green Long-legged Doji candlestick forms when the closing price is just above the opening price, showing light buying strength. A Long-legged Doji red forms when the closing price ends just below the opening, showing slight selling pressure. Both versions reflect a market that moved widely but finished near where it began.
Is Long-Legged Doji Bullish or Bearish?
The Long-legged Doji can appear in both rising and falling markets, so traders often ask whether it is bullish or bearish. The truth is that this candle shows hesitation rather than clear direction. When a Long-legged Doji forms after a downtrend, it can turn into a bullish sign if the next candles close higher. When it appears after an uptrend, it can act as a bearish sign if the following candles start to fall.
Trading Strategies of Long-Legged Doji
This candlestick can be interpreted as both a Bearish Long-legged
Doji and a Bullish Long-legged Doji in financial markets. The Bearish Long-legged
Doji tends to lead to a decrease in prices, while the Bullish Long-legged Doji
leads to an increase in prices. The Long-legged Doji draws attention in the
market due to increased volatility, conflicts, and situations of uncertainty.
It stands out with the following three main possible interpretations and
suitable trading strategies:
Trend Change or Reversal Signal
Long-legged Doji can be a sign that a trend is ending or weakening. We can interpret this as a reversal signal in the market. A Long-legged Doji in uptrend often shows hesitation among buyers. The market moves higher during the period, but the candle closes near its opening price, reflecting uncertainty about whether the upward trend can continue. This makes it a useful alert for us to watch for a possible change in direction.
Let's now examine this with live examples. In the following 4-hour chart of Euro/USD, a bearish long-legged doji formed at the end of the uptrend and the trend reversed. In this case, we can enter a sell order, taking into account the confirming candle stick. The stop-loss level is determined as the highest point that the price has seen. If the bearish long-legged doji is seen near the resistance level, this may be a more reliable sell signal.
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| Long-Legged Doji in Uptrend |
The chart clearly illustrates the behavior of a Long-legged Doji in uptrend. The candle forms after a series of higher closes, showing that buyers tried to push the price higher but were met with strong selling. The long upper and lower shadows reflect this tug-of-war, while the close near the opening signals hesitation. Trend followers can use this information to anticipate a possible reversal or at least a pause in the uptrend. Observing the next few candles after a long-legged doji in uptrend is essential to confirm whether the market will continue higher or begin to pull back. This makes the candle a useful tool for managing entries and exit points.
Long-legged Doji in downtrend often indicates that selling pressure is starting to ease. Even though the market has been moving lower, this candle shows that buyers are stepping in and that the downward trend may be losing strength. The long shadows reflect the struggle between buyers and sellers, while the close near the opening signals hesitation before the next move.
Another bullish long-legged doji candlestick seen in the 4-hour chart of Euro/USD caused a trend change, namely the start of the uptrend. In this case, it would be more logical to give a buy order. An example of this is given in the following picture. If the Long-legged Doji at support appears, it shows that buyers are defending the level and stopping the price from falling further. This strengthens the reliability of the buy signal and gives more confidence for entering the trade. The stop-loss level is determined as the point just below the lowest price seen, which is marked by the Long-legged Doji at the support level.
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| Long-Legged Doji in Downtrend |
The chart illustrates how the market reacts after this candle forms. During its formation, prices move up and down, but the close remains near the opening level, showing balance between buyers and sellers. Watching the next candles allows us to see if the trend will continue or reverse. A Long-legged Doji in downtrend can show that selling is losing strength, offering a chance for a short pause or a possible change in direction. Combining this with nearby support levels can help make trading decisions clearer and safer.
Continuation Signal
Long-legged Doji can also serve as a signal that the current trend may continue, showing that price action is maintaining its direction. This candlestick appears when the market tests both higher and lower levels but closes near the opening price. On the chart, one example shows the continuation of a downtrend after a very short pullback, while another example illustrates the uptrend resuming without any retracement. It can be seen in both downtrends and uptrends, helping us understand that the market is ready to move in the same direction. A live example of this can be seen in the 4-hour chart of EUR/USD, where both scenarios are visible, demonstrating how the long-legged Doji reflects ongoing trend activity.
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| Trend Continues with Long-Legged Doji |
The chart highlights how the Long-legged Doji behaves in different situations. One example shows a downtrend continuing after a brief pullback, while the other demonstrates the uptrend carrying on without any retracement. Observing these candles helps spot when the trend is likely to keep moving as before.
Technical Correction
The Long-legged Doji can also act as a sign that a technical correction is about to start. This means that even in a clear uptrend or downtrend, the market may pause or move slightly against the prevailing direction before resuming the main trend. For instance, when this candle appears during an uptrend, it may indicate a short pullback as traders take profits. Similarly, in a downtrend, it can suggest a brief rebound before prices continue to fall. A live example of this can be seen in the 4-hour chart of the British Pound/US Dollar, where the candle signals a temporary pause in the bearish trend.
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| Long-Legged Doji Indicates a Trend Correction |
The Long-legged Doji in the above image highlights a clear correction during the downtrend. After a period of falling prices, the market pauses and moves slightly upward before continuing its downward path. This candle signals that the trend is taking a short break, giving traders a chance to see the temporary adjustment. Watching the next candles confirms that the main downtrend resumes after this brief correction.