The doji candlestick is the purest sign of indecision on a chart. Price moved during the session but closed almost exactly where it opened. Unlike most bullish candlestick patterns and bearish candlestick patterns, a doji does not point in a direction by itself. This page explains how to read it, its variants, and how traders plan the doji stop loss and target only after the next candle.
What a doji looks like
- Open and close are equal or nearly equal, so the body is a thin line. A common rule of thumb: the body is no more than about a tenth of the day's full range.
- Wicks can be any length above and below.
Variants, named by where the wicks sit:
- Long-legged doji: long wicks on both sides. Price swung widely and ended where it started.
- Dragonfly doji: a long lower wick, little or no upper wick; the open and close are near the high. Sellers pushed down and buyers brought it all back.
- Gravestone doji: a long upper wick, little or no lower wick; the open and close are near the low. Buyers pushed up and sellers took it all back.
What it suggests, and the trend context it needs
A doji says that buyers and sellers ended the day in balance. What that means depends on what came before.
- After a rise: the buyers who were in control failed to push higher. That can be an early warning that the uptrend is tiring, especially near resistance. A gravestone doji here is read as the more bearish variant.
- After a fall: the sellers failed to push lower. That can hint that the downtrend is slowing, especially at support. A dragonfly doji here is read as the more bullish variant.
- In a sideways range or consolidation: dojis are common and mean very little.
How traders confirm it
A doji has no directional trade plan of its own, so traders wait for the next candle:
- A next candle that closes above the doji's high after a fall suggests buyers have taken over.
- A next candle that closes below the doji's low after a rise suggests sellers have taken over.
- A next candle that stays inside the doji's range means the indecision continues; there is nothing to do yet.
Volume on the confirming candle and a location at support or resistance add weight.
Stop-loss and target
Only once the next candle has chosen a direction does a plan exist. For a long trade after a fall, the doji stop loss usually goes just below the low of the doji (or of the confirming candle, whichever is lower). For a short after a rise, it goes just above the higher of the two highs. The doji target is the nearest resistance or support in the trade's direction, or a reward-to-risk multiple such as 2R.
Sizing the trade
Size from the stop, with your risk per trade fixed first:
Shares = risk amount ÷ (entry − stop)
Example: a ₹2,00,000 account risking 1% has ₹2,000 at risk. After a doji at support, the next candle closes higher; entry is ₹210 and the stop below the doji's low is ₹200, a risk of ₹10 a share. ₹2,000 ÷ ₹10 = 200 shares, a position of ₹42,000. The Position Size Calculator does this for you.
Common mistakes
- Treating a doji as a buy or sell signal on its own.
- Reading meaning into dojis in a quiet, sideways market where they appear constantly.
- Entering before the next candle has closed.
- Forgetting that a long-legged doji can make the stop very wide; check the size before entering.
How often it fails
Very often, if "fail" means "no reversal follows". Many dojis are just a pause, and the trend carries on. Waiting for the next candle filters out some of these, but nothing makes a doji reliable or guarantees the move that follows. Its use is to tell you to pay attention, not what to do.
Related patterns
- Hammer: similar to a dragonfly doji, with a small body.
- Bullish engulfing and bearish engulfing: two-candle reversals that often follow indecision.
- Double bottom: a larger reversal pattern.
- Also related, coming soon: spinning top, morning star, evening star, shooting star and inside bar.
Updated 2026-10-16
Educational content only. It is not investment advice and not a recommendation to buy or sell any security. Prices in examples and illustrations are made up. Patterns and rules fail often; past behaviour guarantees nothing.