The doji (jp:どうじ 同事, same matter ) is a commonly found pattern in a candlestick chart of financially traded assets ( stocks , bonds , futures , etc.) in technical analysis . It is characterized by being small in length—meaning a small trading range—with an opening and closing price that are virtually equal. The efficacy of technical analysis is disputed by the efficient-market hypothesis , which states that stock market prices are essentially unpredictable.
8-403: The doji represents indecision in the market. A doji is not as significant if the market is not clearly trending, as non-trending markets are inherently indicative of indecision. If the doji forms in an uptrend or downtrend, this is normally seen as significant, as it is a signal that the buyers are losing conviction when formed in an uptrend and a signal that sellers are losing conviction if seen in
16-400: A downtrend. A doji is a key trend reversal indicator. This is particularly true when there is a high trading volume following an extended move in either direction. When a market has been in an uptrend and trades to a higher high than the previous three trading days, fails to hold that high, and closes in the lower 10% of that day's trading range, there is a high probability of a downtrend in
24-418: A given period of time. In the context of a single stock trading on a stock exchange , the volume is commonly reported as the number of shares that changed hands during a given day. The transactions are measured on stocks , bonds , options contracts , futures contracts and commodities . The average volume of a security over a longer period of time is the total amount traded in that period, divided by
32-577: A large number of shares of a certain stock, lower liquidity will force them to sell the stock slowly over a longer period of time, to avoid losses due to slippage . In the United States, the Rule 144 of the Securities Act of 1933 restricts the buying or selling of an amount of a security that exceeds a certain fraction of its average trading volume, also known as relative volume. Therefore,
40-466: The Doji candlestick only shows that investors are in doubt. However, there are main patterns that can be easily found on the chart. Specifically, there are two patterns purportedly providing trend confirmation: Volume (finance) In capital markets , volume , or trading volume , is the amount (total number) of a security (or a given set of securities, or an entire market) that was traded during
48-450: The ensuing days. Likewise, when the market has been in a downtrend and trades to a new low that's lower than the three previous trading days, fails to hold that low, and closes in the upper 10% of that day's trading range, there is a high probability of an uptrend in the ensuing days. A Doji indicator is mostly used in patterns, and it is actually a neutral pattern itself. Thus, when used alone, it doesn't provide reliable signals. By itself,
56-419: The length of the period. Therefore, the unit of measurement for average volume is shares per unit of time, typically per trading day . The volume of trade is a measure of the market's activity and liquidity during a set period of time. Higher trading volumes are considered more positive than lower trading volumes because they mean more liquidity and better order execution. Trading volume is usually higher when
64-411: The price of a security is changing. News about a company's financial status, products, or plans, whether positive or negative, will usually result in a temporary increase in the trade volume of its stock. Shifts in trade volume can make observed price movements more significant. Higher volume for a stock is an indicator of higher liquidity in the market. For institutional investors who wish to sell
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