What are Dragonfly & Gravestone Doji Candlesticks? Find out how to recognize and use them in your trading

Do you want to know which is the best way to interpret Dragonfly & Gravestone Doji Candlesticks? Watch our latest video to find out the best tips.

When do Dragonfly & Gravestone Doji Candlesticks appear and what does it mean?

Hello, traders! Today we are going to review one of the most basic strategies, Candlestick patterns, that is, you most probably have already heard about, or read about, it’s called Doji. However, this is one tool specific, there are three versions of Doji and today we are going to review two versions that happen at the extreme sides of trading, so, at the end of an uptrend and at the end of a downtrend. So, these two Candlestick patterns are actually called, “Dragonfly and Gravestone Doji”. So, you must ask yourself, especially if you’re new to trading, and you are now very much confused with all these different candlestick patterns, so I will briefly start by explaining, what is the difference between certain Candlestick patterns.

So, Doji, as a candle, it’s one candle and it’s very easy to identify because all Dojis usually show that there is indecision in the market and market is unsure rather to go. So, if you can look at this chart. For example, this particular candle here. This is a long-legged Doji because it has upper weak, lower weak and almost no body. This is, again, the same thing, down weak, up weak, and then there’s, more or less, no body. Of course, if it has more body, then it’s a Spinning Top. So, this usually, is like a neutral Candlestick, because you see the price pushed higher and then it pushed down and then it closed stronger, where it actually opened in the first place. So, this is the Doji that has long weaks, it’s called, as I said, long-legged Doji. The Doji that has a very, very small weak leg, for example, this one here, it is called simply a Doji, that’s like a basic Doji version.

And today, what we’re going to review is the Gravestone Doji and the Dragonfly Doji. And these two are the rarest versions, so you’ll find them very rarely in charts, you really have to dig deep, in order to identify them and if you really want to identify one or another, meaning if you really want to meet all conditions.

So let’s start. First, we had this rectangle here. Let me review it here so you can see that here we have an uptrend. I am zooming in so you can see better. So, we have a downtrend, I’m sorry, and then, we are looking then, to form a bottom and to make a correction because, as we know, nothing happens in a vertical manner. So, here what happened is we pushed lower, lower, lower and then, look at the Candle here. This is a great example of a Dragonfly Doji. So, you can see it has a huge, huge lower weak that goes really really low, in this particular, case and the price pushes lower, all the way lower, and then, it closes more or less where it started. So, this is a Dragonfly Doji. So, it has a long lower tail or a weak, but almost has no upper tail, or in this case, very, very short upper tail. And it looks like a capital letter T. So, as I said, it’s very rare to find, but it’s extremely reliable. Once you see this, especially with this long week, you can be sure that the market is turning and the correction is coming. As you can see here, we push a bit higher, we create a higher low and then we go and we get more upside in the market.

So, this is more or less, the product of this candle, because what investors see here is, they see that the push, in this particular case, you see that we pushed 60 pips lower, but we closed and then reopened. So, the price could not close, meaning there is a great buying interest here and this is why the price has been pushed higher. And then, we go to the, as I said, we go higher, and then you have the opposite situation here. We have an uptrend, and then, the uptrend is finalized with the upside down capital letter T. You can see this Candle here is a capital letter T, when you turn it around, upside down, and this one is, as I said, called, “Gravestone Doji”, and it’s extremely bearish, or a reversal pattern. Again, meaning that we pushed higher, look, we pushed above these two highs, but then, we closed at the bottom and we have no body, which means it’s a Doji, since it has no body and it means, in this case, a lower weak, more or less, does not exist or it is very, very short. Perfectly, it would have no lower weak, or in this case here, with the Dragonfly Doji, it would have no upper weak, but these two are extremely rare to find and you can tolerate a very short weak on a different side. And, as I said, it’s a rare one to find, but once you find it, you can be pretty much sure that you are going to get a trend reversal.

So, what is the difference between this, in this particular case, Gravestone Doji and a Shooting Star? They are very similar. The only difference is that the Shooting Star has a body. So, for example, this here, this is a Shooting Star. Long weak, we close at the bottom, so the weak is longer than the body, but it has a body. It still has a body. This, here it’s a Doji since, as I said, it has no body. The same thing applies to the Dragonfly Doji. What is the difference between the Dragonfly Doji and the Hammer? The only difference is that the Hammer has some body and, for example in this, was to form a Hammer, and the price would have closed at the very top of the Candle and then it will have body and this will be a Hammer and not a Dragonfly Doji.

So, here, again, Dollar/Yen, another example. Look at this, we have something very close to Dragonfly Doji here. It’s something between Hammer and Dragonfly Doji, since, as I said, ideally it will have no upper weak. It will only be like a capital letter T. And then here, again, we push higher, we make a correction, again, this short downtrend actually finishes with Dragonfly Doji here. A bigger downtrend. If you look at this downtrend, it’s a 300 pips move. It finishes with the Dragonfly Doji. We continue to push higher and we create new highs and you can see here, again, this is also a very good example of Gravestone Doji, but Gravestone Doji without a follow-up. Since, obviously, it happened in the Asian trading, where there is not a lot of volume present.

So, I wanted to show you, as I said, I wanted to show you these two examples, where you can actually see that the Gravestone Doji and the Dragonfly Doji are very reliable, and very much, you can be sure that the trend is going to… The reversal of the trend it’s going to happen soon after, because the investors see that, in this case, since we’re looking at this chart, Dragonfly Doji Candles, the investors see that the bears have lost a short term control here, because if they still had control, then the close would be somewhere near the bottom, in both cases, and then, there is a lot of short covering here and the price is pushed higher. It’s also very good for trading. You can immediately enter the trade after this Candle is formed and you enter the trade here, you put your Stop-Loss below the low, and then you can look and get the first resistance to take profits off the table.