Definition:
Long Legged Doji is characterized by very long shadows.
It is an important reversal signal.
Recognition Criteria:
1. The real body of the Long Legged Doji is either
a horizontal line or it is significantly small (its
length is not more than a few ticks).
2. Both of the upper and lower shadows are long and
they are almost equal in length.
Explanation:
Long Legged Doji shows that there is a great amount
of indecision in the market. This pattern is formed
when prices trade well above and below the day's opening
price, but then close almost at the same level as the
opening price. It means that the end result is not different
from the initial open despite the whole excitement and
high volatility during the day. This implies a loss
of sense of direction and that there is a great amount
of indecision in the market.
Important Factors:
Long Legged Doji is especially important at tops.
Long Legged Doji is a single candlestick pattern. Hence,
a confirmation is definitely required in the form of
an opposite move to the prior trade on the next trading
day in order to judge that a reversal may be starting.
