IndecisionHeuristic1 min read
◆ The PatternOpen ≈ Close — the market is undecided
A Doji forms when the open and close are nearly equal, creating a cross or plus shape. It signals indecision — neither buyers nor sellers won. Context is everything: at a trend extreme, it suggests reversal; mid-range, it's noise.
Variants: Standard (+), Long-legged, Dragonfly (T), Gravestone (⊥)
A doji after a long green candle suggests the uptrend may be stalling — buyers ran out of conviction.
// Doji variants
Key insight: A single doji means nothing in isolation — it needs context. After a strong move, it's significant. In a sideways range, it's normal.
Pattern bridge: Open equals close — perfect indecision, a mean equal to median moment. In ML, a loss of zero at a saddle point looks the same: no net direction.
Worked example
The last bar opens at 100.2 and closes at 100.0, inside a range of 98 to 102: a body of 0.2 against a range of 4, or 5%. Under the 10% threshold, so a doji — after two down days, a session where neither side won.
The example data
The bars the example is worked on.
| Bar | Open | High | Low | Close |
|---|---|---|---|---|
| 1 | 103 | 104 | 101.5 | 102 |
| 2 | 102 | 102.5 | 100 | 100.5 |
| 3 | 100.2 | 102 | 98 | 100 |
Where it misleads
- It signals indecision, not reversal; the next bar decides, and on its own a doji predicts little.
- The 10% threshold is arbitrary, and on quiet days many bars qualify.
- Opening and closing prices differ slightly between data vendors, so whether a bar is a doji can depend on the source.
In code
o, h, l, c = df.iloc[-1][['open', 'high', 'low', 'close']] body, rng = abs(c - o), h - l is_doji = body <= 0.1 * rng # body under 10% of the day's range
Assumes import numpy as np, import pandas as pd, and a DataFrame df with columns open, high, low and close for the data above.
Sources
- Japanese Candlestick Charting Techniques, S. Nison, New York Institute of Finance, 1991
- B. R. Marshall, M. R. Young & L. C. Rose, “Candlestick technical trading strategies: Can they create value for investors?”, Journal of Banking & Finance 30(8), 2006 — they found none on Dow Jones stocks
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