The Doji candle is often taken as a reversal signal, which can happen. Additionally, what this candle is really telling us is that, during its formation, the bulls and the bears were in a tug-of-war for control. Naturally on completion, there was no overall ‘winner’, leaving the project directionless. Therefore, this is why the candle is best described as a candle of ‘indecision’. From a trading perspective, Doji candles can generate strong two-way price action. However, it more often causes choppy, volatile trading conditions. Fortunately, the example we have on the monthly chart for the DXY had a really wide range – over 200 pips which explains why this week the price action has been more muted.
Understanding candle patterns and blending them with the Quantum indicators can help to determine where the price is likely to pause and reverse. In this example, we have price-based support & resistance from the Camarilla pivots and volume-based resistance derived from the volume point of control.
By Anna Coulling – creator of volume price analysis
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