Today I want to talk about a candle called a dodge. It can be seen often on the price chart. In certain combination with other candlesticks, the dodge pattern can become a signal to enter the market. In other cases, this candle is useless and should be ignored.
How does a dodge look like
If the opening price of a candlestick is equal to the closing price and it has long shadows of almost the same size, it means that we are looking at a classic dodge. But some deviation from these conditions is also allowed. The opening price may differ from the closing price by several points, and the shadows may be of slightly different length.Let’s see how it looks on the chart:
The first candle (green) is the ideal dodge. Open=Close and shadows are almost equal. The second candlestick has a closing price several points higher than the opening price. Finally, the third candlestick has the condition of equal opening and closing prices, but the shadows differ significantly in length.
How to use dodge in trading
Dodge’s pattern can be a strong signal of a reversal of the price movement direction. But the following conditions must be met:
- there was a pronounced trend in the market for a long time;
- before the doji candle formed a strong candle with a large body towards the existing trend;
- the next candlestick after doji also has a large body, but it has a different color, i.e. it has the opposite direction.
Example:
The market has been experiencing an uptrend for a long time. Then, after the consolidation, the price continued to move upwards – a strong bullish candle was formed, and after it – a dodgy. This indicates that the direction of travel may be reversed. But in order to make a trading decision, we need a confirmation in the form of a bearish candle with a large body. And as we can see, she showed up. The dodge pattern has been formed. You can sell. Turn signal is amplified if:
the confirmation candlestick opened with a large gap in the opposite direction to the existing trend;
it closed well below/above the candlestick that appeared before doji (in my example this happened);
dodge candlestick appeared near a strong support/resistance level.
General recommendations
Doji works well on higher timeframes. It’s better not to pay attention to this candlestick at all on charts below one hour.
In the flute period, the dodge signals do not matter, skip them.
The spread is more real if the shadows are not very long.
To make a trade decision, you should look at other timeframes as well.
To learn how to use this pattern, you need to view the history and use a demo account.Fyodorov’s Inga01.10.2018