$XRP
What does a Doji candle mean for traders?
The Doji candle gives an important signal to traders, especially if it forms at the top or bottom of the trend in the daily timeframe, which greatly increases the likelihood of a bearish reversal or correction of the asset.
In the classic Doji pattern, the opening price should match the closing price of the candle, but there can be slight variations in several ticks (the smallest change in price upwards or downwards ticks).
Therefore, when trading using this pattern, it is essential to confirm the signal using candlestick patterns or other technical indicators.
How does a Doji candle form?
The Doji pattern is very popular in trading because it can indicate a top formation, especially if the pattern appears after a long white candle (bullish). When the uptrend continues for some time, there is a peak buying of the asset, and the Doji candle warns buyers of weak demand and the possibility of a bearish reversal.
However, the signal of the Doji candle loses some of its strength during a downtrend because its formation indicates a balance of forces in the market, and the likelihood of a drop is the same as the likelihood of an increase, meaning that the downtrend may continue.
Therefore, when the trend reaches one of the bottoms, it is essential to look for a stronger signal to confirm the price reversal and the start of a new trend. This confirmation can be a three-candle Morning Star Doji pattern.
