This candlestick is formed when the opening and closing prices are virtually equal.
1. The length of the body is null or close to null.
Candlestick Requirements and Flexibility
Ideally, the body should be colorless and have zero length. However, candlesticks with close-to-zero body lengths and white or black body colors are also accepted as Doji.
Doji is a particular signal showing indecision about the direction of the market and it represents a tug of war between buyers and sellers. It simply shows that prices have moved above and below the opening price during the day, but then the session closed either exactly at or very near the opening price. The overall result is a standoff. It shows that neither the bulls nor the bears were able to gain control during the day and it is possible that a turning point could develop soon.
Doji is an important candlestick. It provides information on its own. It also features in other patterns as an important element. It needs to be interpreted in terms of a preceding trend or preceding candlesticks. The appearance of a Doji after an advance or a long white candlestick signals that buying pressure is getting weaker. Its appearance after a decline or a long black candlestick signals that selling pressure is diminishing. Essentially, Doji gives the message that the forces of supply and demand are becoming more evenly matched and consequently a change in trend may be near. However, Doji alone is not enough to identify a reversal and further confirmation by following signals may be warranted.
The importance of Doji as a signal is somewhat relative and depends on the characteristics of the market. It is actually important only in markets where you do not see many Doji. If there are many Doji on a particular chart, the appearance of a new Doji in that particular market is not very meaningful and its signal has negligible value.