Doji Formations: Learn How to Interpret Them to Help Trading Strategies


When a trader can suitably recognize the dragonfly doji position, it prepares the ground to enter and exit the market at the right time. Similar to other candlestick patterns, trading with the Dragonfly Doji is most successful when you are able to see a confirmation in the nearby candles. In this strategy example, we’ll go both short and long on the dragonfly doji pattern. As you probably remember by now, the pattern is a bullish or bearish reversal pattern depending on if it’s preceded by an up or downtrend. After a decline or long black candlestick, a doji indicates that selling pressure may be diminishing and the downtrend could be nearing an end. Even though the bears are starting to lose control of the decline, further strength is required to confirm any reversal.

Such a pattern can only occur when the market trades down and then reverses but does not move above the opening price. The dragonfly doji is very similar to the hammer candlestick pattern and the long-legged doji patterns. The key difference between the dragonfly doji and the long-legged doji is that the upper shadow is apparent in the long-legged doji.

What is a dragonfly doji candle?

The appearance of a dragonfly doji after a price advance warns of a potential price decline. The Gravestone Doji is less reliable in some market conditions, like low trading or liquidity volume, where the pattern’s emergence may be less significant. Furthermore, the pattern’s significance varies depending on the market and time frame studied. The Gravestone Doji is typically viewed as a sign of possible weakness in an uptrend, implying that the bulls are losing control and now the bears are gaining power. It can hint that the price is about to fall, especially if it appears after one long uptrend or near a resistance line. Since then we have continuously created the new and improved the old, so that your trading on the platform is seamless and lucrative.

For example, you could use the average true range to get a sense of the overall market volatility. Rayner Teo is an independent trader, ex-prop trader, and founder of TradingwithRayner. Even though I just started to learn a few days ago, it is very helpful. If you see many Four-Price Dojis on the chart – stay out of this market. If the price has tested the highs/lows (of the Long-Legged Doji) multiple times, then it’s likely to break out. In a strong trend or healthy trend, the market is likely to “bounce off” the Moving Average.

Learn more about trading with candlesticks

Sometimes called a “Rickshaw Man”, the long-legged Doji is like the standard Doji but has very long upper and lower shadows. While the price traded quite high and low during the trading session, it closed unchanged. Traders would also take a look at other technical indicators to confirm a potential breakdown, such as therelative strength index or themoving average convergence/divergence . Conversely, when the market has shown an upward trend before, a dragonfly doji might signal a price drop, known as a bearish dragonfly. The downward movement of the next candlestick will provide confirmation. The Dragonfly Doji is established when a trading period’s open, close, and high are approximately at the same price level, with a long lower shadow and little or no upper shadow. confirmation could come from a gap up, long white candlestick or advance above the long black candlestick’s open. After a long black candlestick and doji, traders should be on the alert for a potential morning doji star. The longer the white candlestick is, the further the close is above the open. This indicates that prices advanced significantly from open to close and buyers were aggressive. While long white candlesticks are generally bullish, much depends on their position within the broader technical picture. After extended declines, long white candlesticks can mark a potential turning point or support level.

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It is also not recommended to enter long after this pattern if there is no retracement in the trend. Either the bulls or the bears may have dominated the session during the session but could only settle for somewhere around the open price by the end of the trading session. The price is always searching for value, and where it settles depends on the forces of demand and supply . By settling around the open price, it means that neither the bulls nor the bears were sure what the right value should be.

Types of Doji: The Patterns All Traders Should Know

For an in-depth explanation read our guide to the different Types of Doji Candlesticks. You should trade this pattern in an uptrend if there is a retracement and there is enough ‘room’ for profits. A doji, referring to both singular and plural forms, is created when the open and close for a stock are virtually the same.

The dragonfly doji is a signal of a potential reversal in security price with the open, close, and high prices virtually the same. A doji is a name for a candlestick chart for a security that has an open and close that are virtually equal. Dojis are often used as components in patterns used to detect trading opportunities. The dragonfly doji is not a common occurrence, therefore, it is not a reliable tool for spotting most price reversals. There is no assurance the price will continue in the expected direction following the confirmation candle. Consider the wider market context, like the trend, resistance, and support levels, trading volume, as well as news events that might impact the financial instrument under consideration.


If you wait for a confirmation that usually means that your risk/reward ratio drops as the entry point is farther away from your stop. The gravestone Doji has a long upper shadow, no real body, and little or no lower shadow. This implies that the session’s open, close, and low prices are at the same level, but at some point in the trading session, the price traded higher. The Doji is a transitional candlestick formation that signifies an equilibrium in the opposing market forces — what some analysts may call indecision between bulls and bears.

Relative to previous candlesticks, the doji should have a very small body that appears as a thin line. Steven Nison notes that a doji that forms among other candlesticks with small real bodies would not be considered important. However, a doji that forms among candlesticks with long real bodies would be deemed significant. Despite the dragonfly doji being the standard doji candlestick, you’ll rarely get an ideal Dragonfly Doji where the price closes exactly where it opened. A Doji candle pattern is a type of candlestick charting pattern that is formed when the opening and closing prices of a security are almost equal.

The Harami Cross pattern and Doji Inside Bar pattern (where high-legged Doji is the mother bar) can give a bullish or bearish signal, depending on the direction of the inside bar breakout. A white candlestick depicts a period where the security’s price has closed at a higher level than where it had opened. A spinning top also signals weakness in the current trend, but not necessarily a reversal. If either a doji or spinning top is spotted, look to other indicators such asBollinger Bands® to determine the context to decide if they are indicative of trend neutrality or reversal.


In his book, dragonfly doji meaning Charting Explained, Greg Morris notes that, in order for a pattern to qualify as a reversal pattern, there should be a prior trend to reverse. Bullish reversals require a preceding downtrend and bearish reversals require a prior uptrend. The direction of the trend can be determined using trend lines, moving averages, peak/trough analysis or other aspects of technical analysis. A downtrend might exist as long as the security was trading below its down trend line, below its previous reaction high or below a specific moving average. However, because candlesticks are short-term in nature, it is usually best to consider the last 1-4 weeks of price action. After an advance or long white candlestick, a doji signals that buying pressure may be diminishing and the uptrend could be nearing an end.

Gravestone Doji vs Dragonfly Doji

Both patterns have long shadows and tiny bodies, indicating market indecision. They can assist in identifying potential market reversal points and can be utilized with other tools for technical analysis to confirm trading decisions. The Gravestone Doji and Dragonfly Doji are two candlestick patterns that are utilized in technical analysis to forecast future price movements. Trades based on Doji candlestick patterns need to be taken into context.

doji candlestick pattern

A confirmation of the pattern can boost the odds of a profitable trade. In conclusion, the dragonfly doji may be formed in a bullish or bearish market space. The bullish perspective is more significant, and the dragonfly doji formation after a downtrend generally signals its end.


The absence or shortening of the lower shadow signifies that there was minimal or no buyer support during the session. The Dragonfly Doji can appear at either the top of an uptrend or the bottom of a downtrend and signals the potential for a change in direction. There is no line above the horizontal bar which creates a ‘T’ shape and signifies that prices did not move above the opening price. A very extended lower wick on this Doji at the bottom of a bearish move is a very bullish signal. In Chart 2 above, the market began the day by testing where support would enter the market. Altria found resistance at the high of the day and subsequently fell back to the opening’s price.

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