Doji Candle Types: Dragonfly, Gravestone & More

After a long downtrend, long black candlestick, or at support, a dragonfly Doji could signal a potential bullish reversal or bottom. After a long uptrend, long white candlestick or at resistance, the long lower shadow could foreshadow a potential bearish reversal or top. To trade successfully with doji candles, always consider the broader market context, use additional technical indicators, and wait for confirmation before acting. Whether you’re a seasoned trader or just starting, understanding dojis can help you make smarter, more informed decisions. After all, recognizing market indecision is the first step toward staying ahead in the game.

A dragonfly doji differs from other doji patterns in the position of the horizontal line or body. In dragonfly doji patterns the horizontal line or body is placed towards the very top of the vertical line. As depicted in the image, the gravestone doji pattern has it open, close and low price falling very close to one another. The high price falls much further away from the rest, at the tip of the long upper shadow. The long upper shadow stands for the buyers who held a strong position earlier on in the day only to lose their gains to the sellers towards the end of the day as the price is pushed down. As seen in the image above, a gravestone doji can be spotted by its distinct shape, with a long upper shadow and a small or almost absent lower shadow.

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Because in this post, I’ll reveal the answers and teach you everything I know about the Doji candlestick pattern — so you can finally trade it like a pro. It’s important to remember that the Doji candlestick pattern does not provide as much information as one would need to make a decision. For professional-grade stock and crypto charts, we recommend TradingView – one of the most trusted platforms among traders. The leading chart pattern recognition software for candlesticks is TradingView, TrendSpider, and Finviz. See how they compare in our best pattern recognition software comparison review.

Yes, a single Doji candle can impact trading decisions, especially when it occurs at significant support or resistance levels, or after a prolonged trend. Traders often interpret a Doji as a signal of market indecision and potential reversal, prompting them to exercise caution or consider adjusting their positions. However, further confirmation from other indicators, such as trends, volume, or support/resistance levels, types of doji is critical instead of solely relying on a single chart pattern.

• Investors and traders make interpretations about price movements when they witness the cross or plus-shaped doji candlestick.
• We provide our members with courses of all different trading levels and topics.
• This Doji star is a bullish pattern if it’s the middle candle of a morning star Doji candlestick pattern if confirmation occurs.
• Even though I just started to learn a few days ago, it is very helpful.
• Feel free to ask questions of other members of our trading community.

How to read Doji candlestick?

The first type of candlestick is known as the bullish candlestick pattern. The three main steps to use when trading with doji candlestick patterns are listed below. From the price chart above, the first step is to spot a doji candlestick. Here, a dragonfly doji can be spotted as seen in the circled portion of the image. The dragonfly doji can be identified by its long lower shadow and absent upper shadow.

If you see many Four-Price Dojis on the chart – stay out of this market. This means the market is undecided after a huge expansion in volatility (which usually occurs after a big news event). Thus, you’ll look to go short when the price does a pullback towards a key Moving Average and forms a Gravestone Doji. So, what you want to do is go short when the price comes to Resistance and forms a Gravestone Doji.

Doji Candlestick

For traders aiming to grasp market sentiment and identify potential trend reversals, Doji candlestick patterns offer valuable insights. When combined with other technical analysis tools, the unique signals from Standard, Dragonfly, Gravestone, and Long-Legged Dojis can significantly enhance trading accuracy. Candlestick patterns play a crucial role in technical analysis, helping traders anticipate potential market movements.

Spotting them in higher timeframes or during pivotal market moments can make all the difference in making smarter trading decisions. This doji has long wicks on both sides of the small body, showing that the market moved significantly up and down but ultimately closed at a similar level to where it started. They can show up on a 5-minute chart, a daily chart, or even a weekly one.

• It appears when the market is at a standstill, reflecting indecision between buyers and sellers.
• Understanding these differences can help traders make better decisions.
• All the traders irrespective of the timeframes tend to appreciate the versatility of the candlestick pattern.
• The reversal implications of a dragonfly Doji depend on previous price action and future confirmation.

Trading implications of a Long-legged Doji

However, dojis don’t give direct answers—they raise important questions about what might happen next. This balance often happens because traders are unsure about the next direction of the market. For example, in an uptrend, buyers may begin to hesitate, while sellers test the waters. A bullish doji has no or very small body at all, meaning that the open and close prices are almost equal. A bullish doji pattern is typically a reversal pattern found at either the base of a downtrend or near support levels.

To validate potential reversals, it’s helpful to combine Doji patterns with additional tools like volume analysis, moving averages, RSI, and MACD. This is a very bullish candle as it shows that buyers were in control of the entire session. It usually becomes the first part of a bullish continuation or a bullish reversal pattern.

Each day we have several live streamers showing you the ropes, and talking the community though the action. Also, we provide you with free options courses that teach you how to implement our trades as well. Additionally, you cannot be assured that the price will continue to move in the same direction once the candle is confirmed. The future of the trend’s direction is mainly regulated by the previous trend and the Doji pattern. Thus, technical analysts use tools to help filter through the noise and also to quickly find the highest probability trades. One thing that almost all trading experts believe in is that all the information is reflected in the price of the security.

Before acting on the doji predictions, a technical indicator is used. A stochastic indicator is a momentum-based indicator that studies and compares the closing prices of a security over a time period to predict overbought and oversold levels. An oversold level is suggestive of a bullish reversal and an overbought level indicates a bearish reversal. Here, as the image shows, the stochastic indicator points to an oversold level at the very position of the doji candlestick. The stochastic indicator thus supports the predictions of the doji candlestick. A doji is a pattern that is formed in candlestick price charts wherein the opening and closing price of a security is equal or show very minute variation.

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No, it does not matter if a doji is red or green as the difference between the opening and closing prices in doji candlesticks is very very minute. The psychology behind a Doji candlestick pattern centers on market indecision and the balance between buyers and sellers. In the context of pattern recognition, neither bulls nor bears can gain control, leading to a standoff. Typically, a Doji indicates a period of consolidation, where traders are unsure of the market’s direction, reflecting a significant struggle around a security’s value. The Dragonfly Doji candlestick pattern occurs when the open, high, and close prices are at the same level, but there’s a significant tail below. Still, buyers were able to push it back up to opening level, indicating a potential bullish reversal if it occurs after a downtrend.

Its accuracy is far from perfect and should not be relied upon as the sole indicator for making trades. In 8,032 trades, the Doji candle buy signal was accurate only 55.6% of the time. A Doji candle is an inaccurate pattern to trade; it results in 55.6% of trades winning and 44.4% of trades losing, plus the average winning trade is 3.7% and losing trade is -3.5%.