Long-Legged Doji

What Is the Long-Legged Doji?

The long-legged doji is a candlestick that consists of long upper and lower shadows and has approximately the same opening and closing price, resulting in a small real body.

Understanding the Long-Legged Doji

A long-legged doji signals indecision about the future direction of the underlying security's price. Long-legged dojis may also mark the start of a consolidation period, where the price forms one or more long-legged dojis before moving into a tighter pattern or breaking out to form a new trend.

Long-legged doji candles are deemed to be most significant when they occur during a strong uptrend or downtrend. The long-legged doji suggests that the forces of supply and demand are nearing equilibrium and that a trend reversal may occur. This is because equilibrium or indecision means that the price is no longer pushing in the direction it once was. Sentiment may be changing.

For example, during an uptrend, the price is getting pushed higher and the close of most periods is above the open. The long-legged doji shows there was a battle between the buyers and sellers but ultimately they ended up about even. This is different than the prior periods where the buyers were in control.

The pattern can be found across any time frame but has greater significance on longer-term charts as more participants contribute to its formation. It is part of the broader doji family that consists of the standard doji, dragonfly doji, and gravestone doji.

Long-Legged Doji Trading Considerations

There are multiple ways to trade a long-legged doji, although trading based on the pattern is not required. The pattern is only one candle, which some traders feel is not significant enough, especially since the price didn't move much on a closing basis, to warrant a trade decision.

Some traders will want to see more confirmation — the price movements that occur after the long-legged doji — before acting. This is because long-legged dojis can sometimes occur in clusters, or as part of a larger consolidation. These consolidations may result in reversals of the prior trend, or a continuation of it, depending on which way the price breaks out of the consolidation.

If looking to trade the pattern, here are some general trade ideas:

Long-Legged Doji Example

The following chart shows a few examples of long-legged dojis in Tesla Inc. The examples show that the pattern isn't always significant on its own. The overall context, or market structure, is though.

Image by Sabrina Jiang © Investopedia 2021

On the left, the price is falling and then forms a long-legged doji. The price consolidates and then moves up. Ultimately the price can't gain traction, though, and the price falls once again.

As the price continues falling it forms another long-legged doji. This is once again the start of a consolidation period. The price breaks above the consolidation and moves higher overall. The long-legged doji didn't cause the reversal, but it did foreshadow the consolidation or indecision present in the market before the reversal higher.

On the right, the price falls and consolidates. The long-legged doji forms after the consolidation, dropping slightly below the consolidation low but then rallying to close within the consolidation. The price then broke higher. This doji had a slightly larger real body.