The upper and low shadows on the doji indicate the degree of volatility or consolidation. Short upper and lower shadow form when there is limited movement and indicate consolidation. Long upper and lower shadow form from wide swings and indicate volatility. No matter what the size of the upper and lower shadows, doji reflect indecision and neither the bulls nor the bears could gain control. During the day, the market may have been swayed up and down, but by the close the market finishes where it began and little or no movement has actually occurred.
Indecision marked by a doji can signal that the current trend is about to stall.
After an advance, a doji may signal that the advance is nearing an end. After a decline, a doji may signal that the decline is nearing an end. Doji only serve as an alert to watch what happens next for further clues of a possible change or slowing in the current trend. In the case of a doji, the trend can be as short as a few days or as long as a few months. Another type of doji is the gravestone doji.