BAJAJ BROKING
February 19, 2025
7 mins read
Analysing the market trends and patterns is crucial to widening the profit window and making the most out of the market conditions. Across the board, market participants rely on different tools to understand market patterns. Read on to learn more about the long-legged doji that occurs when the market has reached an equilibrium point and is expected to show a reversal trend.
The long legged doji candlestick pattern is a reliable tool for traders to analyse the entry and closing points in the market. Let’s delve into the details of the long-legged doji candlestick pattern to understand its working, usage and benefits.
The long-legged doji is a candlestick pattern that represents a state of equilibrium in the market that traders and market participants rely on to make investment decisions. When there is a delicate balance between demand and supply in the market, a long-legged doji pattern can be observed on the graph. Now, this becomes a crucial point for market participants as it represents a state where demand and supply are nearing equilibrium, thus suggesting a trend reversal. Remember that a trend reversal after an equilibrium level is expected because the prices are no longer moving in the direction as it was.
A simple example to understand the expected trend reversal after equilibrium would be: When there is an uptrend, the prices are moving higher and the closing points are mostly above the opening points. However, when a long-legged doji pattern is observed, it suggests that there was a battle between the buyer and the seller where they ended up being even, unlike before when buyers were in control.
Know that the long-legged doji pattern can be observed across different time frames but is most reliable on long-term charts.
In a nutshell, the long legged doji candlestick pattern indicates that the opening and closing prices are almost the same, thus forming an elongated upper and lower shadow. To understand the workings of the long-legged doji candlestick pattern, you must know about its four essential elements:
Elongated Shadows
One of the most significant elements of the long-legged doji candlestick pattern is its elongated upper and lower shadows indicating one of the widest price ranges observed over a specific time period. The wide gap between the upper and the lower shadow reflects the price volatility throughout the trading cycle.
Colourless Presentation
The focus in discerning long legged doji is more on observing a small-sized candle rather than focusing on the filled or hollow pattern.
Contextual Consideration
To get a precise identification through the long-legged doji candlestick pattern it is advised to consider it within specific market context or conditions rather than a general context. If there is a prolonged upward or downward trend, it is marked as a hint for potential reversals in the trend.
Compact Body
Remember that while observing long-legged doji on a broad chart pattern, the central body appears to be small thus indicating a minute price difference between the opening and closing windows. This also indicates the market’s indecision.
While observing market patterns through tools like long-legged doji candlestick patterns, it is important to keep in mind both have pros and cons. Let’s take a quick look at the pros and cons of the long-legged doji candlestick pattern:
Pros
Helps Analyse Entry and Exit Points
One of the biggest advantages of relying on the long legged doji candlestick pattern is that it helps analyse entry and exit points to make better trading decisions.
Compatible with Versatile Timeframes
Another advantage of using the long-legged doji candlestick pattern is that it is compatible with diverse time frames, thus allowing you to implement trading strategies effectively.
Helps Understand Market Sentiments
The long-legged doji candlestick pattern is considered a reliable tool to understand market sentiments and predict trend reversals. Using this tool, you can strengthen your trading decisions.
Can be Used with Technical Indicators
Observing market trends through different technical indicators helps in better decision-making. Market participants across the board use the long-legged doji candlestick pattern along with other technical indicators like moving averages to analyse the market better.
Cons
Might Give False Signals
Relying solely on the long-legged doji candlestick pattern might lead to false signals and wrong trading decisions. Therefore, it is important to carefully observe the market through different technical indicators.
Not Compatible with All Types of Securities
Another drawback of the long-legged doji candlestick pattern is that it is not compatible with all types of securities and assets.
Demands Expertise for Accurate Results
Observing market sentiments through the long-legged doji candlestick requires you to have expertise and experience. If you are a novice trader, these patterns can be confusing at first.
Now that you have a fair understanding of the long-legged doji candlestick patterns, let’s take a look at some of the strategies that can help you effectively trade in the market through the long-legged Doji candlestick:
Wait and Watch
A simple rule of using any type of technical indicator is to not make quick decisions. While using the long-legged doji candlestick pattern it is advised that you adopt a wait and watch strategy to observe the price movement better. Make sure to see whether the highs and lows are going beyond the doji to understand entry and exit points precisely.
Incorporate Moving Averages
You can incorporate moving averages while relying on the long-legged doji candlestick pattern. This helps you understand the potential breakout point better. Additionally, you can also wait and observe the next session’s close for a precise signal.
Build Risk Management Strategies
Remember that when you are relying on any type of technical indicator it is important to have a risk management strategy in place to safeguard your capital. You can offer stop-loss orders to avoid emotional decisions.
Relying on the long-legged doji candlestick pattern can be tricky as it requires precision and at times can not be trusted with specific types of assets or securities. Remember that while you are trading in liquid stocks, the reliability of the long-legged doji candlestick is moderate.
Long-legged doji candlestick patterns are reliable when executed with precision, considering market fluctuations, avoiding quick and emotional decisions, and following prudent trading practices.
Across the board, market participants rely on these patterns to understand market dynamics and sentiments, especially when it comes to predicting trend reversals. Even though many argue that the reliability of the long-legged doji candlestick pattern is moderate for some types of securities and assets, if you adopt prudent reading practice and be cautious, the long-legged Doji candlestick can help you make informed trading decisions.
Additional Read: Technical Analysis Guide
Just like any other technical indicator, there are multiple ways to use the long-legged doji pattern to make trading decisions. Remember that a key rule of trading with the long-legged doji is to wait and watch before making a trading decision. Additionally, you can keep these key trading factors in mind to make the most out of market situations:
Entry Points
As discussed above, the long-legged doji pattern indicates an indecisive market sentiment. Therefore, you must wait for the prices to move either above or below the doji. If the prices move above the doji, it is an indicator to enter a long position and if the prices move below the doji, you can enter a short position.
Risk Management
Implementing risk management strategies is crucial. For instance, if you are entering a long position, you can start by implementing stop-loss orders to ensure a restriction in case the price moves below, and vice versa if you are entering a short position.
Creating Profit Windows
Know that the long-legged doji candlestick pattern is only an indicator of the market sentiment and not a signal to implement trading decisions. You would have to analyse the market sentiment carefully to find or create profit windows.
Market Structure
A key rule that you should never forget while relying on the long-legged doji is that the pattern can be considered highly reliable if it is appearing near a significant support or resistance level. For instance: let’s say that a long-legged doji can be observed near a resistance level, then it is safe to assume that the chances of prices dropping below the doji is low.
The long-legged doji candlestick pattern is a reliable tool to observe trend reversals over dynamic timeframes. However, you must perform due diligence for precise results as the pattern indicates market sentiments and not send signals to make trading transactions.
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Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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Share this article: 
A key factor that makes the long-legged doji differ from other doji patterns is its elongated body with significant upper and lower shadows showing how far trading activities are from closing and opening levels.
Yes, the long-legged doji pattern can be used for short-term and long-term trading. However, the pattern is considered more reliable for long-term trading.
The long-legged doji pattern is considered highly reliable in certain specific market conditions like prolonged downtrends or uptrends. These indicate potential trend reversals in the market.
The volume and price action have a correlation with the long-legged doji candlestick pattern as a high volume indicates indecision in the market, thus signalling a potential trend reversal and price changes. On the other hand, a low volume weakens the pattern, thus requiring reliance on other technical indicators.
No, the long-legged doji pattern is not effective in a sideways or non-trending market situation. It becomes invalid. The long-legged doji pattern is effective only in trending markets.
Traders can combine the long-legged doji pattern with other technical indicators like oscillators, moving averages, or volume analysis to make better decisions. For instance, combining the long legged doji pattern with moving averages provides an accurate insight into the market sentiment, especially when it comes to analysing potential breakout or reversal points in the market.
The long-legged doji pattern is a clear indicator of an equilibrium point in the market where the buyer and seller have a near-equal balance, thus suggesting that a trend reversal can be expected.
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