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This tutorial shows you how to recognize three special types of doji candles: dragonfly doji, gravestone doji, and long-legged doji. It also briefly explains how you may decipher each one. If you are not familiar with candlestick charts or doji candles read one or both of the following lessons:

• An introduction to candlestick charts
• Doji candles - Part 1

Dragonfly Doji

When the open/close or rather the real body of a doji appears on top of the candle you are dealing with a dragonfly doji (see image). In this case the size of the upper shadow is either zero or insignificant. Note that the size of the real body of doji - regardless of the type - is also either zero (open=close) or insignificant. I, therefore, prefer to call the real body of a doji either open/close or no-real body.

A typical scenario for dragonfly doji is that the session opens and then price drops to a lower level. The battle between bears and bulls begins but bulls never manage to push the price above the open price of the session. What they manage to do is to defeat the efforts of bears and the price ends up where it was at the open of the session. This shape is very similar to a hammer. None of these two patterns have a significant upper shadow. However, there are some differences:

• Hammer has a small real body while dragonfly's real body is either zero or insignificant (just like any other doji)
• Hammer always appear at the bottom of a downtrend or at least at a level where we see a temporary drop in the price while dragonfly could appear anywhere on the chart
• Hammer is a reversal pattern but we cannot say for sure if a dragonfly is also a reversal pattern

A dragonfly doji usually has bullish implications. I strongly suggest to confirm such signals by other technical or fundamental tools.

Gravestone Doji

When the open/close or rather the real body of a doji appears at the bottom of the candle you are dealing with a gravestone doji (see image). In this case the size of the lower shadow is either zero or insignificant.

This candle is the opposite of a dragonfly doji. A typical scenario for gravestone doji is that the session opens and then price rallies to a higher level. The battle between bears and bulls begins but bears never manage to push the price below the open price of the session. What they manage to do is to defeat the efforts of bulls and the price ends up where it was at the open of the session.

A dragonfly doji has bearish implications but I suggest using other tools to verify the signal.

Long-legged Doji

If the size of a doji is relatively large and the no-real body (open/close) is located somewhere in the middle of the session then you are dealing with a long-legged doji also known as rickshaw man (see image). It seems that the name rickshaw man is taken from a movie with the same name (1958 - Japan). Click here for more info about the movie.

This candle shows a significant yet unsuccessful battle between bulls and bears. The final message of this candle is indecision. If you are in a trade you may consider exiting your trade but consult your other analysis tools. If you are not in a trade then avoid entering one for now.

There is no clear definition for this doji. You may consider a doji to be long-legged if its size is relatively larger than the neighbour candles. You may also use a volatility indicator such as ATR (Average True Range) to define which doji is long-legged.

Locating Doji

I have developed three indicators each in charge of locating one of doji candle types. If you need an indicator to locate doji candles regardless of their type click here. In my opinion as a general rule a candle is a doji if both of the following conditions are met.

• The size of the real body is less than 3% of the range and not more than 5 pips
• The range (i.e. the distance between high and low) of the candle is not less than a pip

To locate a gravestone candle I have also considered another condition which says the size of the lower shadow must be less than or equal to the real body.

To locate a dragonfly candle I have added another condition to the basic doji conditions: the size of the upper shadow must be less than or equal to the real body.

Long-legged candles needed more attention. I believe the following two assumptions on top of the general candle rules could help t o locate them.

• The size of lower shadow or upper shadow is at least 20% of the total range of the candle
• The size of the candle is at least 125% of the ATR (Average True Range) value. This helps to compare the size of the candle with the volatility of the market. Since this ratio is a wild guess I have turned it into an input variable to give the user the ability to change it. For 125% the value for this variable is 1.25.

The following image shows a sample chart with all doji indicators attached to it.

Download Doji Indicators [Dragonfly] [Gravestone] [Long-Legged] [Basic]

The use of these indicators is very easy. All you need to do is to attach them to a chart. They immediately locate relevant doji candles as shown in the preceding image. You may attach one or some of these indicators to the same chart. The existing files are the compiled version of the indicators. The source code of the indicators is available to my paid students only. Click here for more information about my MQL4 course.

If you are not familiar with using custom indicators click here to watch a video.

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Previous Candlestick Lessons:

Lesson 01: An Introduction to Candlestick Charts

Lesson 02: Umbrella Lines - Reversal

Lesson 03: Doji Candles - Part 1