The Doji Suite: Trading Market Indecision and Equilibrium Breakdown

1. Market & Order Flow Logic

A Doji forms when open and close prices are virtually identical. It represents a state of temporary equilibrium where buying and selling pressures cancel each other out.

• Standard Doji: Symmetric wicks indicating complete exhaustion of the preceding directional move.
• Dragonfly Doji: Long lower shadow with open/close at the very high—representing full bullish absorption of intraday supply.
• Gravestone Doji: Long upper shadow with open/close at the very low—representing heavy institutional distribution at the highs.

2. High-Probability Entry Rules

• The Confirmation Candle Rule: Never execute inside the Doji itself. Wait for the subsequent candle to confirm direction.
• Dragonfly: Enter long once the confirmation candle breaks above the Dragonfly high.
• Gravestone: Enter short once the confirmation candle breaks below the Gravestone low.
• Standard Doji: Enter in the direction of the subsequent impulse candle that breaks and closes beyond the Doji's range.

3. Invalidation & Stop Loss Rules

• Dragonfly SL: Place stop loss 2 pips below the extended lower wick.
• Gravestone SL: Place stop loss 2 pips above the extended upper wick.
• Standard Doji SL: Place stop loss on the opposite side of the Doji's total range.

4. Multi-Tiered Take Profit Strategy

• TP1 (50% Volume): 50% retracement of the preceding trend impulse leg.
• TP2 (50% Volume): Origin of the preceding trend leg (target 1:2.5+ RRR).

5. Common Pitfalls & Traps to Avoid

• Bank Holiday Illiquidity: During low-volume sessions, Dojis proliferate purely because nobody is trading. Filter out non-liquid session Dojis.
• Pre-News Event Pauses: Dojis often appear right before US CPI or FOMC statements as participants sit on their hands. Do not front-run macro data.

INSTITUTIONAL DESK PRO TIP: A Gravestone Doji that rejects an equal-high liquidity pool during London session open is one of the highest-win-rate short setups in foreign exchange trading.