Gravestone Doji: Definition, How to Trade It, and Example

In this article, we’ve covered the gravestone doji candlestick pattern. We’ve looked at its meaning, how to identify the pattern, and provided some tips on how to improve the pattern as well as a few example trading strategies. Gravestone Doji is a bearish candlestick used by traders for technical analysis. 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.

Gravestone doji candle — this candlestick has the open and close near the low. It can indicate a potential reversal to the downside in an uptrend, particularly if the next candlestick closes below the body of the Gravestone Doji. I believe the gravestone doji is only profitable on long trades because of the stock market’s inherent upward bias.

Therefore, proper risk management and waiting for confirmation from following trading sessions are always recommended. Volume, existing market trends, and subsequent trading sessions are all critical in corroborating its signals. While it provides vital signals, it’s crucial to combine it with other technical indicators and fundamental analysis for a comprehensive view of the market. This dynamic indicates a possible loss of bullish momentum and a potential shift toward a bearish trend.

1. The general property that defines this Japanese candlestick is a small real body with an extremely long upper shadow (similar to an inverted ‘T’).
2. Traders can assume that the reversal will be accompanied by a downtrend in the security’s price.
3. That said, you must confirm that the indicator and the price movement indicate the same, otherwise, there’s a divergence.
4. Learn to feel the flow of the candlestick chart without being caught up in the exactness of the candle.
5. Also important is that this pattern does not indicate a particular reversal over a 10-day period; the data suggests one should go long.
6. The Dragonfly Doji shows a session where both opening and closing prices are at the day’s high, whereas the Gravestone Doji is the opposite, with open and close prices at the day’s low.

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This pattern, often seen at the peak of an uptrend, signals that buying pressure may be diminishing and a bearish reversal could be imminent. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are gravestone doji candle taking with each trade. HowToTrade.com helps traders of all levels learn how to trade the financial markets. Once again, as soon as the next candlestick closes above the gravestone candle, the trend changes and the price rises again.

Yet, as we mentioned earlier, you must confirm the gravestone pattern with other indicators to maximize the chances of success and know exactly where to enter and exit the position. In addition, it is similar to the dragonfly Doji and has an inverted T letter, which suggests that buying or selling pressure stops. It looks like an upside-down version of the Gravestone and it can signal a coming uptrend. The construction of the Gravestone Doji pattern occurs when bulls press prices upward. Although these two formations are talked about as separate entities, they are essentially the same phenomenon. Information in this article cannot be perceived as a call for investing or buying/selling of any asset on the exchange.

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So, it would be best to wait until confirmation by the next few candlesticks and moving averages. Use proper risk management techniques when trading a gravestone doji candlestick. Green Gravestone Doji is a particular form of candlestick pattern, frequently seen in technical analysis of financial markets like stocks, bonds, and forex. Traders frequently use this candlestick pattern to forecast possible trend reversals or to validate current trends.

1. They are found near support levels and signify a trend reversal to the bullish side.
2. At the start of the session, buyers are in control, driving the price upwards.
3. This candlestick pattern’s presence is most significant when it appears after an uptrend, preceded by bullish candlesticks.
4. What do gravestone doji candlestick patterns tell us when stock trading?
5. This is covered in- depth in our guide to building a trading strategy.
6. After an uptrend, the Gravestone Doji can signal to traders that the uptrend could be over and that long positions should probably be exited.

My Gravestone Doji Candle Testing

To some extent, range provides the same information as volume, since they often are correlated. High volume usually translates into big range candles, and vice versa. In our own trading, we use volume to improve quite some strategies, and sometimes we actually use volume as the base for a strategy as well. However, any filter, regardless of how good it is won’t work on all markets. As such, you will have to resort to backtesting to know what works and not!

How to Trade a Gravestone Doji Candlestick

The result is a candlestick with a long upper shadow and little to no lower shadow—our Gravestone Doji. For a Gravestone Doji to be a valid indicator, it should appear after an uptrend or at least a significant bullish candle. The Gravestone Doji Candlestick pattern is extremely uncommon, due to the particular requirements that must be fulfilled for it to form. A specific combination of an open and close that are close to or at the period low, a long upper shadow, and a tiny or nonexistent lower shadow are necessary for the pattern to appear. The Gravestone Doji Candlestick pattern is rarely observed in the market because these circumstances are not always met. The long upper shadow is generally interpreted by technicians as meaning that the market is testing to find where supply and potential resistance is located.

According to our testing, the facts are that the Gravestone Doji is not popular because it is highly profitable. In 1,553 trades, the Gravestone Doji buy signal was accurate 57% of the time. Its accuracy is far from perfect and should not be relied upon as the sole indicator for making trades. The primary market action behind a Gravestone Doji is an initial bullish move followed by a significant bearish reversal. It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career.

This additional candle provides stronger evidence of a shift in momentum. Randomly trading Gravestone Dojis that appear throughout the market would be less effective. In these kinds of scenarios, the Gravestone Doji gives you the ability to make informed decisions based on what the market is trying to communicate. 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.

Other common Doji patterns include the Long-legged Doji and Four Price Doji. The Gravestone Doji is primarily considered a bearish reversal indicator. However, this interpretation is most effective when confirmed by a subsequent bearish candlestick, further reinforcing the reversal sentiment.

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Standard doji candle — the classic doji candlestick, characterized by a small body. It typically appears during periods of low volatility and may indicate a pause in the current trend, market anticipation of significant news, or other factors. The Gravestone Doji is a candlestick pattern that reflects market indecision. It is identified by its resemblance to a gravestone, formed by the candle’s open, close, and low prices being closely aligned.