Page 64 - A Complete Guide to Volume Price Analysis: Read the book then read the market

trend the hammer is called a ‘hanging man’ and when it appears in a candle pattern with a shooting star is signalling weakness.

The final candle in our trio of premier candles is the doji, but not just any doji candle, it is the long legged doji.

The Long Legged Doji Candle

Price action – indecision

There are many variants of the doji candle, and you will see them continuously in every chart. They are all characterised in the same way with the
open and close being the same or very close, and with a wick to the upper and lower body.

This is the price action which creates the unique pattern of t C paer he doji candle, or doji cross. Whilst there are many different sizes and types of
doji candle, there is only ONE which I believe is significant in the context of VPA, and that is the long legged doji.

In itself the doji candle signifies indecision. The market is reaching a point at which bullish and bearish sentiment is equally balanced. In the context
of what actually take place in the session, it is something like this. The market opens, and sentiment takes the price action in one direction. This is
promptly reversed and taken in the opposite direction, before the opening market sentiment regains control and brings the market back to the
opening price once more. In other words, there have been some wild swings in price action within the session, but the fulcrum of price has
remained in the middle.

The key point about this type of doji candle, is that both the upper and lower wicks are long in comparison to the body, and should resemble what I
used to call, a 'daddy long legs' – a small flying insect with very long legs!

The power of the candle lies in it's predictive power as a potential signal of a reversal in trend. Just like the hammer and the shooting star, the price
action alone gives us a firm signal, but when combined with volume, it becomes immensely powerful. The price action in the candle is sufficient, in
itself, to tell us visually that there is indecision. After all, if this were not the case, then the candle would be very different in construction.

Once again, the price action reveals the sentiment, which in this case is indecision and therefore a possible reversal. The long legged doji can
signal a reversal from bearish to bullish, or bullish to bearish, and the change in direction depends on the preceding price action. If we have been in
an up trend for some time, and the long legged doji appears, then this may be the first sign of a reversal in trend to bearish. Conversely, if we see
this candle after the market has been falling for some time, then this may be signalling a reversal to bullish.

However, unlike the shooting star and the hammer candle, with the long legged doji candle we CAN have an anomaly in volume. Once again as we
can see in Fig 6.13 I have shown the candle with three volume bars beneath, and the one which is an anomaly is the first one on low volume.

Let me explain why this is an anomaly, and also introduce another concept here which fits neatly into this section.