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

The market appears to be more bearish when a double Gravestone Doji appears, and bull power is fragile. There was previously mentioned the fact that the main feature of this pattern is its long wick. When it comes to looking for this pattern on the chart you should definitely start with a wick. PEST analysis is a strategic tool that helps understand the external factors that shape financial opportunities…

Learn how you can follow the “smart money” with a fresh UOA trade idea each week – including technical levels so that you know where to enter and exit. You can learn more about how to interpret candlesticks in the article How to Read Candlestick chart. As the name suggests, a gravestone doji is an ominous sign that the current trend is being exhausted and is about to reverse. Although these two formations are talked about as separate entities, they are essentially the same phenomenon. The word ‘usually’ is used because in book terms the low, the close and the open prices should be equal but it is a very rare case, therefore, an allowance is applied.

A doji is not as significant if the market is not clearly trending, as non-trending markets are inherently indicative of indecision. In technical analysis, Doji candlesticks signify market indecision and commonly occur before a price reversal. If the gravestone Doji candle pattern appears at the end of a downtrend, then it indicates that sellers cannot push prices lower, and a bullish trend reversal is likely to happen. The standard version of the gravestone Doji candle pattern is bearish.

A “Gravestone doji” is a bearish “Doji” pattern, typically formed at the top, indicating an imminent downward price reversal, warning market participants in advance. A “Gravestone doji” candlestick is one of the most reliable reversal patterns at the top, yet it has its nuances. “Gravestone doji” and “Dragonfly doji” patterns both signal a trend reversal, yet there are differences between them.

How Can I Trade a Gravestone Doji?

The gravestone doji and long-legged dojis are visually distinct doji candlestick patterns, and both of them paint a different story in the charts. What appears gravestone doji meaning to be a gravestone doji oftentimes forms into a shooting star candlestick pattern, as they are both rejection candles with a long upper shadow. The key distinction between them is that a shooting star’s candle body can be bigger, which is what usually occurs.

In this blog section, we will delve into the introduction of these two patterns, exploring their origins, definitions, and the key differences between them. The gravestone could be either a bullish candlestick or a bearish candlestick. What matters is where these patterns occur, near resistance levels or the top of trends.

1. The XAUUSD daily chart above shows that the pattern formed close to the top of an uptrend.
2. As you can see, the doji candle pattern emerged following a little pullback inside of an uptrend that had just started.
3. For example, if a Shooting Star occurs in a low-volume market or during a period of consolidation, it may not carry as much weight as when it forms during a high-volume period.
4. For this reason, its success rate is greatly increased when the candle forms at a market top.
5. Doji and spinning top candles are commonly seen as part of larger patterns, such as the star formations by technical analysts.
6. Thus, the short signal comes on the second candle after the doji with a break and close below the trigger line.
7. According to our Price Action indicator, that draws candlestick formations automatically, it’s a very hard task to find a candle where the close, low and open prices are the same.

The dragonfly doji forms when the stock’s open, close, and high prices are equal. It’s not a common occurrence, nor is it a reliable signal that a price reversal will soon happen. The dragonfly doji pattern also can be a sign of indecision in the marketplace.

Gravestone Doji: How to Trade Using This Reversal Candlestick to Strategize

Gravestone doji candlesticks make up candlestick patterns and tell a price action story. Estimating the potential reward of a doji-informed trade also can be difficult because candlestick patterns don’t typically provide price targets. Other techniques, such as other candlestick patterns, indicators, or strategies, are required to exit the trade, when and if profitable. A gravestone doji is most effective when it forms at a resistance level or when other technical indicators suggest bearish conditions. It is particularly significant when it appears during a broader downtrend, indicating that sellers are in control and likely to push prices lower.

1. As a category, they are best described as a transitional pattern rather than a reversal or continuation pattern.
2. When momentum slows, the RSI declines, making it useful for spotting potential reversals through divergences.
3. Broadly, candlestick charts can reveal information about market trends, sentiment, momentum, and volatility.
4. The Gravestone Doji chart pattern is an inverted “T”-shaped candlestick that’s created when the open, high, and closing prices are nearly equal.
5. An example of this pattern is illustrated below in the 30-minute stock chart of Walgreens Boots Alliance Inc.
6. Both the Gravestone Doji and the Shooting Star patterns are considered bearish reversal signals.
7. On the contrary, the trend reversals are usually heavily anticipated and traders are looking for the start of the movement in the opposite direction.

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It works most efficiently in timeframes of one hour and longer, increasing the profit from one trade. As you see, there is a significant gap down the next day, which bulls can’t close. It is essential to consider exiting the transaction before the price falls and the bears entirely seize control of the authority. 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.

Stay ahead of the market!

This pattern occurs after a sustained uptrend and suggests a potential trend reversal to the downside. This pattern suggests indecision in the market and can be a sign of a potential trend reversal. For example, a dragonfly doji looks like a T, a gravestone doji looks like an inverted dragonfly, a long-legged doji has long upper or/and lower shadows.

A doji (dо̄ji) is a name for a trading session in which a security has open and close levels that are virtually equal, as represented by a candle shape on a chart. Based on this shape, technical analysts attempt to make assumptions about price behavior. Doji candlesticks can look like a cross, an inverted cross, or a plus sign. Double gravestone dojis are rare occurrences where two gravestone dojis appear right next to each other.

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The Shooting Star suggests that the bulls attempted to push prices higher during the session but were ultimately overpowered by the bears, resulting in a potential reversal. By understanding the introduction and key differences between the Gravestone Doji and the Shooting Star, traders can make more informed decisions when analyzing candlestick patterns. These patterns serve as valuable tools in identifying potential reversals in the market and can enhance trading strategies. However, it is essential to consider other technical indicators and analyze the overall market conditions before making any trading decisions.