Further, as explained above, the gravestone candlestick pattern can be either bullish or bearish, meaning you’ll have to know how to identify this pattern in both market scenarios. Trading the gravestone candle pattern is straightforward to understand. As a trend reversal indicator, traders are looking to enter a position when the gravestone candle is completed, and the following candle signals that the market is about to reverse. The Gravestone Doji is a single candlestick pattern that signals a trend reversal.
The gravestone or tombstone doji should be traded bullishly in all markets going long at a break of the close with a stop loss below the low expecting a more extended risk-to-reward trade. Now that we can identify the gravestone doji candle, let’s learn how best to trade it. Have you begun to understand how candlesticks can give you great insight into market momentum? This trade example shows how the Gravestone Doji can be used to help traders make smart choices, taking advantage of the key moments when bears gain momentum at key resistance levels.
How to Read A Candlestick Chart
Keep in mind that this pattern isn’t one that occurs very frequently. A doji is a trading session where the security’s opening and closing levels (or prices) are either equal or virtually equal. Although a gravestone doji can mark the end of a downtrend, it’s more often seen at the end of an uptrend. Although the gravestone doji is popular, it suffers from the same reliability issues as many visual patterns. Traders usually wait for the next candle to confirm a reversal before acting on a gravestone doji.
When the Candle Speaks: What the Gravestone Doji Tells Traders
Regardless if the body is small or non-existent, the implications are generally the same. On the chart, it looks like the bears are ready to win the tug-o-war. Just because a Gravestone Doji shows up doesn’t mean the whole trend is over, especially in a strong uptrend or when the market’s moving sideways.
- A “Gravestone doji” candlestick is one of the most reliable reversal patterns at the top, yet it has its nuances.
- Traders usually wait for the next candle to confirm a reversal before acting on a gravestone doji.
- A gravestone doji is a candlestick pattern that suggests a potential bearish reversal.
- There is also a fourth key factor to keep in mind when it comes to identifying gravestone dojis, and that’s the location at which the pattern has formed.
Step 3: Determine Your Stop Loss (SL) Level
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. This pattern is supposedly bearish, but our testing disproves that theory. TrendSpider is the best software for trading candlestick patterns due to its integrated candle backtesting and pattern recognition. If you value a large community of traders sharing ideas and strategies, then TradingView is a great alternative.
Don’t Gamble with Your Future. Learn to Ride the Market Tides.
Intelligent traders can profitably trade these patterns by listening to the data and learning other bullish candlestick patterns. A green “Doji” candlestick can emerge when the closing price settles slightly above the opening price. However, the long upper shadow still indicates that the price is trading at the resistance level. A “Gravestone doji” is the opposite of a “Dragonfly doji” pattern, which is more often observed at the bottom, warning market participants of an upward reversal. Moreover, a “Dragonfly doji” pattern lacks a candlestick body and has a long lower shadow, with the opening and closing prices at the level of the candlestick’s high.
Conversely, if the pattern appears near the support line, a stop-loss order should be placed below the candlestick and the support level. A “Gravestone doji” pattern comprises a single candlestick with no body and has only an upper shadow. In the modern world of trading and investing, it has become common to rely on technical indicators and trading robots, bypassing conventional chart and candlestick patterns. 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.
The opposite pattern of a gravestone doji is a bullish dragonfly doji. The dragonfly doji, which isn’t a very frequent pattern, looks like a “T” and it is formed when the high, open, and close of the session are all equal or nearly the same. Unlike the gravestone doji, the dragonfly doji pattern has a long lower shadow.
There is also a fourth key factor to keep in mind when it comes to identifying gravestone dojis, and that’s the location at which the pattern has formed. A gravestone doji can only be considered bearish if it’s formed after an uptrend, therefore it’s easier to find valid gravestone doji patterns at key resistance levels. However, being a doji candlestick pattern, the gravestone doji also signals indecision, and can be fairly inaccurate as a signal. It requires additional confluences and confirmations to be traded with consistency.
- Start with a monthly chart, then move down to the weekly, then the daily chart.
- There should also be a relatively small tail or else the pattern could be classified as an inverted hammer, shooting star, or a spinning top.
- It tends to pop up near the top of an uptrend and suggests that buyers might be running out of steam.
- That is, instead of having a long upper wick, it has a long lower wick.
What does Green Gravestone Doji Candlestick mean?
That long upper wick tells us the bulls had control throughout the day. Then the bears came in and drove the price back down to end the day, forming the pattern. An even stronger confirmation would be if it were found near a key support or resistance level. A trader going short or buying put options could see this and make that trade.
The Gravestone Doji candlestick pattern takes shape when a trading session’s opening, closing, and low prices are almost identical. This kind of candle looks like a gravestone, with a tall wick on the top. It indicates that buyers failed to push the prices up, and the sellers were able to bring them back down to around the opening price at the end of the trading session. The Gravestone Doji is a Japanese candlestick pattern used in the technical analysis of stocks, currencies, commodities, and bonds. The Gravestone Doji has similar opening and closing prices that appear at or close to the day’s price low and a long high wick. The Gravestone Doji, a candlestick pattern commonly used to identify reversals gravestone doji candlestick in uptrending markets, has a few faces – and can show a few different variations in appearance…
How to Identify the Gravestone Doji Candlestick Pattern
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. I tested Gravestone Dojis on 1,553 trades spanning bull and bear markets on 575 years of data to discover the facts. My research involving 1,553 test trades demonstrates that the Gravestone Doji is the third most profitable candle pattern to trade, with the fourth-best risk-reward ratio. Join 1,400+ traders and investors discovering the secrets of legendary market wizards in a free weekly email. Multiple types of doji lead to confusion for many technical analysts. Understanding these critical differences is essential when trading doji candles.