Gravestone Doji Candle Definition and Trading Strategies

Gravestone Doji is a candlestick pattern observed when the opening and closing value of the asset is equal, which occurs at the low of the day. The longer the upper shadow of the Gravestone Doji, the more bearish the pattern is considered to be, as it suggests that the selling pressure was strong and overwhelmed the buying pressure. Traders use the gravestone Doji candle pattern as a bearish trend reversal indicator. Further, to confirm the trend reversal, you should use other momentum indicators such as the RSI, MACD, and Fibonacci support and resistance levels. A gravestone doji is a trading pattern that occurs in technical analysis. Traders can assume that the reversal will be accompanied by a downtrend in the security’s price.

How Do You Trade on a Gravestone Doji?

Although reliability increases with volume and a confirming candle, the gravestone doji is best accompanied by other technical tools to guide trading. As the name implies, imagine looking at the side profile of an actual gravestone. Hence the long upper wick and the narrow base at the bottom reflect what a gravestone would look like from the side. The Japanese were fond of naming candlestick patterns for their likeness in real-life.

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Once prices start to make a small move higher, bears quickly move in and establish short positions that are large enough to create a new downward trend in prices. As a protective measure, traders could use a stop-loss order that is placed above the high of the upper wick that is created by the price pattern. The Gravestone Doji became famous in the modern-day trading during 1980s because of the efforts of Steve Nison. Traders from all over the world have started to use candlestick charting as a common technical analysis instrument, after Steve’s contribution. Trading the gravestone candle pattern is straightforward to understand.

Comparative Analysis

By combining the Gravestone Doji with other tools and analysis, you can definitely enhance your probability of making successful trades. This additional candle provides stronger evidence of a shift in momentum. Randomly trading Gravestone Dojis gravestone doji candlestick pattern that appear throughout the market would be less effective. With this zone’s rejection by price, let’s seize the opportunity to go long. In this case, you have a relatively straightforward setup with resistance transitioning into support.

Single Candlestick Patterns

This section will explain its definition, structure, and the trader psychology that gives the pattern its relevance. Although rare, a doji candlestick generally signals a trend reversal indication for analysts, although it can also signal indecision about future prices. Broadly, candlestick charts can reveal information about market trends, sentiment, momentum, and volatility. The patterns that form in the candlestick charts are signals of such market actions and reactions. Conversely, the dragonfly doji is a small-bodied candle showing a bullish reversal pattern after a decline. Its long lower shadow demonstrates buyers firmly stepping in intraday to push prices back up from lower levels by the close.

1. This way, if you move your stop lower, you’ll never be red on the position, giving you patience to let it work.
2. It looks like an upside-down version of the Gravestone and it can signal a coming uptrend.
3. Traders can use the pattern to determine when to take profits—either through a bearish trade or on a bullish position.
4. Therefore, to identify the right gravestone doji, we recommend two things.
5. They use charts, patterns, and other tools that are based on past performance, trading volumes, and price history.

Either way, the gravestone Doji candle is a trend reversal pattern you must know. Read on to learn how to identify, and trade the Gravestone Doji pattern in the forex market. A Doji is formed when the opening price and the closing price of an asset are the same. A long-legged Doji, also known as a “Rickshaw Man,” is a Doji whose upper and lower shadows are much longer than the regular Doji formation, as shown in the image below.

A doji, referring to both singular and plural forms, is created when the open and close for a stock are virtually the same. Doji tend to look like a cross or plus sign and have small or nonexistent bodies. From an auction theory perspective, doji represent indecision on the side of both buyers and sellers. Everyone is equally matched, so the price goes nowhere; buyers and sellers are in a standoff. The Head and shoulders pattern is a reversal trading strategy, which can develop at the end of bullish or bearish trends. It is often referred to as an inverted head and shoulders pattern in…