How to read Doji & High-Wave candles?
How to read Doji & High-Wave candles?
Doji and high wave candles is the topic we have missed to discuss so far, which we will be covering in this episode.
There are different types of doji formations.
Doji formations:
Plain doji indicates balance and not imbalance in price and represents the indecision in the market. Same is applicable for Long Legged Doji as well, but in long legged doji, the zone formation is different. In this case, we cannot include both the wicks together while drawing zones, as the wicks are too long. From a price action perspective, long legged doji also represents balance and not a good imbalance
When it comes to dragon fly Doji, there is a big imbalance and buyers are in full control as they pushed the price up after a huge sell off. Remember, price opened at top, went down all the way, reversed and closed again at top. So this indicates huge buying and buyers are in full control. This creates a good imbalance and can form a good demand zone.
When it comes to gravestone fly Doji, there is a big imbalance and sellers are in full control as they pushed the price down after huge buying. Remember, price opened at bottom, went up all the way, reversed and closed again at bottom. So this indicates huge selling pressure and sellers are in full control. This creates a good imbalance and can form a good supply zone.
High Wave Candles:
High wave candles are very similar to plain/long legged doji formation in the structure and behaviour. Only difference between Doji and high wave candle is size of body. Doji will have very negligible body whereas high wave candles have a relatively bigger body when compared to Doji. High wave candles indicates balance and not imbalance in price and represents the indecision in the market. In this case also, we cannot include both the wicks together while drawing zones as the wicks are too long.
So whenever you look at Doji formations going forward, do not just blindly think it represents indecision in the market. Based on the type of Doji formation, it can represent indecision, bullish or bearish sign, so try to understand the price action behind the candle as well.
For more details and examples, checkout the video: