Day traders and swing traders who are just getting started in the market can investigate techniques based on technical indicators. Some candlestick patterns can provide precise signals to help you make more money. The Gravestone Doji candlestick is one of these patterns that frequently appears on the candlestick chart.
Gravestone Doji is one of the various Doji formations available. Unlike the Doji star, which denotes market indecision, the gravestone candlestick signals a price reversal. However, traders must wait for the following candle to form to confirm the shift. It appears during a market uptrend, signaling the possibility of a bearish reversal.
Although the gravestone Doji candlestick is uncommon, you must be cautious when identifying one when you see one. It resembles an inverse dragonfly design or an upside-down 'T.' When the open, low, and close prices are all the same, yet buyers were present early in the market to try to push the price higher, this happens. The market's lengthy upward shadow shows that it was looking for and finding the upper resistance level. The bulls attempted to drive the price higher, but a big selling binge ultimately prevailed, completely rejecting the upward trend.
The upper shadow of the Gravestone is quite lengthy, while the body is at the very bottom of the candlestick, indicating that the open, close, and low prices are all the same. As a result, an inverted T-shaped pattern emerges.
While the Gravestone Doji is most often seen around the peak of uptrends, it can also be found near the bottom of downtrends, but this is uncommon. It would help if you did not consider it bullish in this scenario. Instead, consider it a trend continuation signal, as the decline may have more room to run until it reaches the oversold zone.
The Gravestone Doji is formed when the price closes at or near the same level as when it opened, assuming that the open and low are in close proximity. When bulls have the muscle to propel prices upward, but they run out of steam and return to previous levels after reaching a solid resistance area, this pattern emerges.
When the Gravestone is at its peak, bulls encounter stiff competition, and selling pressure pushes prices back to the opening price for a certain period. This indicates that market participants rejected the bullish surge and that a possible decline is on the horizon.
Traders, on the other hand, would either open short positions or close long positions immediately after a Gravestone Doji. The pattern aids traders in better visualizing the resistance level, which may be tested again in the near future, particularly if the market attempts another upward move.
Gravestone Dojis typically appear at the top of uptrends. However, it can occasionally be found at the bottom of an ongoing downturn. It's still a bearish indicator indicating that the trend will continue. Bulls attempted but failed to reverse the negative trend in this situation, and the price is likely to continue falling.
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1) Standard Doji pattern |
A Standard Doji is a single candlestick with little meaning by itself. Traders can figure out what this candlestick indicates by looking at the price activity leading up to it. Doji candlestick patterns must be viewed in context when trading. |
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2) Dragonfly Doji |
The Dragonfly Doji can form at the top of an uptrend or the bottom of a downtrend, indicating the possibility of a direction change. Prices did not increase over the beginning price since there is no line above the horizontal bar, forming a 'T' shape. This Doji's very long lower wick at the bottom of an adverse move is a very bullish signal. |
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3) Long-legged Doji |
The vertical lines above and below the line are simply longer in the Long-Legged Doji. This shows that the price action of the candle moved drastically up and down during the timeframe of the candle but closed at almost the same level as it opened. This demonstrates the buyers' and sellers' indecision. |
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4) 4 Price Doji |
The 4 Price Doji is nothing more than a horizontal line with no vertical lines above or below it. As the candle's high, low, open, and closure (all four prices indicated) are all the same, this Doji pattern represents the utmost in indecision. The 4 Price Doji is a one-of-a-kind pattern that indicates hesitation or a tranquil market. |
A Gravestone Doji can appear on both up and down trends; here is the display of it in both ways and translate it for real-world use.
Gravestone Doji - is most likely to appear at the top of an upswing.
The presentation of the Gravestone Doji at the top of an uptrend signals the conclusion of the trend, and the upswing is most certainly over.
It is essential to consider exiting the transaction before the price falls and the bears entirely seize control of the authority.
Gravestone Doji is always bearish; thus, whether it appears on uptrends or downtrends, you should be cautious.
The emergence of a decline could indicate the continuance of the trend or a shift to a sideways movement and market range. The Gravestone Doji at the bottom isn't a strong bottom confirmation, and the market could possibly fall further.
The market appears to be more bearish when a double Gravestone Doji appears, and bull power is fragile.
When the lower of the two Gravestone Doji breaks, the market usually begins to fall swiftly.
Candles should not be considered solely in these circumstances. You should also look at RSI, Fibonacci levels, MACD, Moving Averages, Bollinger bands, CMF, OBV, and other indicators to check if there is any confluent signal indicating if the market is likely to move down or whether bulls should wait for another chance. However, keep in mind that you must wait for confirmation before acting.
Also Read: How to use Moving Averages in Trading