Long-Legged Doji Explained & Backtested (2024)

The long-legged doji is a frequently-occurring, one-bar indecision Japanese candlestick pattern that historically leads to volatility.

If you’re a candlestick technician, you might be surprised to learn that you can make money from this indecision candle.

Keep reading to learn history’s best long-legged doji trading strategies.

What Is a Long-Legged Doji Candlestick Pattern?

Long-Legged Doji Candlestick Pattern Illustration © Analyzing Alpha
Long-Legged Doji Candlestick Pattern Illustration

The long-legged doji is a type of doji candlestick pattern with an extensive range.

The long-legged doji candle gets its name based on how it appears on a candlestick chart–a doji with long legs.

The long-legged adjective doesn’t provide insight into how to run with this pattern. Let’s learn how to identify this doji and later learn how to trade it. 

How to Identify the Long-Legged Doji Candlestick Pattern

Long-Legged Doji Candlestick Pattern on the Apple (AAPL) November 1st, 2021 daily chart
Long-Legged Doji Candlestick Pattern on the Apple (AAPL) November 1st, 2021 daily chart

The following are the requirements for a valid long-legged doji candlestick pattern:

  • The open and close must be equal or near equal.
  • There must be at least one long shadow.

We see the long-legged doji candlestick pattern on the Apple (AAPL) November 1st, 2021, daily chart.

We see a single candle whose open and close prices are almost identical, having two long wicks. We only need one long shadow for the long-legged doji, and we don’t need to concern ourselves with the trend.

Now that we can identify the long-legged doji candle, let’s learn how best to trade it.

How to Trade the Long-Legged Doji Pattern

History tells us to trade the long-legged doji bullishly in the crypto and stock markets and bearishly in the forex market.

We’ll jump right to the best long-legged doji trading strategies, as traditional trading techniques do not recommend a strategy for this indecision candle.

Long-Legged Doji Bullish Candlestick Trade Setup

Long-Legged Doji Bullish Candlestick Trade Setup on the Ethereum (ETHUSD) October 17th, 2021 daily chart
Long-Legged Doji Bullish Candlestick Trade Setup on the Ethereum (ETHUSD) October 17th, 2021 daily chart

History tells us that bullish price action is likely after a long-legged doji in the crypto markets.

We see a single green doji whose open and close is very near with a long lower wick and a sizeable upper shadow. With the pattern identified, data-driven traders go long when the price moves above the close with a stop loss below the tombstone doji’s low.

We’ll use the Ethereum (ETHUSD) October 17th, 2021, daily chart to make this lucid.

The price moves above our close, triggering an entry the next day at $3,847.13. The stop loss is set below the low of the long-legged doji, giving us excellent risk-reward dynamics on this trade.

The data tells us that forex traders should look in the other direction

Long-Legged Doji Bearish Candlestick Trade Setup

Long-Legged Doji Bearish Candlestick Trade Setup on the Euro (EURUSD) March 9th, 2011 daily chart
Long-Legged Doji Bearish Candlestick Trade Setup on the Euro (EURUSD) March 9th, 2011 daily chart

Professional forex traders go short when the price goes below the long-legged doji close, setting a stop loss above the high.

We saw an example of this strategy’s effectiveness on the Euro (EURUSD) daily chart on March 9th, 2011. The price plummets the next day, providing windfall profits to savvy forex traders.

History tells data-driven stock traders to do it differently.

Long-Legged Doji Bullish Mean Reversion Candlestick Trade Setup

Long-Legged Doji Bullish Mean Reversion Trade Setup on the Netflix (NFLX) October 26th, 2018 daily chart
Long-Legged Doji Bullish Mean Reversion Trade Setup on the Netflix (NFLX) October 26th, 2018 daily chart

Savvy stock traders wait for the price to go below the candle’s low and enter long when the price moves back above the low, setting a stop loss of one ATR.

Watch this play out on the Netflix (NFLX) October 28th, 2018, daily chart.

The candle low is $292.30. Price moves below the low the next day, alerting the mean reversion trader to be ready to go long. The price gaps up the following day, triggering an entry at the open, leading to a significant trading gain.

Speaking of substantial profits, what does the data tell us about the best long-legged doji candlestick patterns?

Does the Long-Legged Doji Candlestick Pattern Work? (Backtest Results)

I backtested the long-legged doji pattern on the daily timeframe in the crypto, forex, and stock markets using the following rules:

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Other Doji Candlestick Patterns

There are multiple flavors of doji, confusing many technical analysts. Understanding these doji differences is essential when trading these one-bar candles.

The four types of doji are:

  1. Long-legged Doji
  2. Dragonfly Doji
  3. Gravestone Doji
  4. Common Doji

As we just learned, the long-legged doji is a doji that has at least one long leg. The dragonfly doji is a doji that closes near the high. The gravestone doji is a doji that closes near the low, and the common doji is a doji that doesn’t fit any prior doji categorizations.

Rickshaw Man vs. Long-Legged Doji

Rickshaw Man Candlestick Pattern Illustration © Analyzing Alpha
Rickshaw Man Candlestick Pattern Illustration

The rickshaw man is a one-bar indecision candlestick that is always a long-legged doji. A long-legged doji is sometimes a rickshaw man. The key is that a rickshaw man requires the opening and closing price near the midpoint, whereas the long-legged doji does not.

Takuri Line vs. Long-Legged Doji

Takuri Line Candlestick Pattern Illustration © Analyzing Alpha
Takuri Line Candlestick Pattern Illustration

The takuri line is a one-candle doji bullish reversal candlestick pattern that closes at the top of the range with a very long lower shadow. If you’re paying attention, you’ll notice that this description also fits some long-legged doji.

The critical understanding is that when a long-legged doji meets the takuri line requirements, call it a takuri line; otherwise, it’s a long-legged doji

The Bottom Line

The long-legged doji is a frequently occurring doji with at least one long shadow. Smart traders can trade these patterns profitably by listening to the history and learning to trade all doji candlestick patterns.

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