Understanding the Dragonfly Doji Candlestick Pattern

A dragonfly doji with high volume is generally more reliable than a relatively low volume one. Ideally, the confirmation candle also has a strong price move and strong volume. The lack of a body on the candle is the reason why the books say pin bars have a higher chance of causing a reversal than dragonfly and gravestone doji candlesticks. Candlestick patterns are powerful tools used by traders and investors to analyze price movements and make informed trading decisions. Among the various candlestick patterns, one that stands out for its unique appearance and potential significance is the dragonfly doji.

Prices will go much lower than the open price and then close the day close to or at the open price. Keep in mind that the size of a candlestick is relative and should be interpreted concerning previous candles. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

Dragonfly Doji Pattern – Learn to Spot Bullish Reversals Early

The probability of leading to a profitable trade (or, in the worst case, breakeven) is very high. This Japanese candlestick means that there is a downward trend, and a bullish corrective movement followed this. However, the buyers took over the market at the end of the day. At the close of the Dragonfly Doji, buyers, therefore, still have control over the market. The Dragonfly Doji chart pattern is a “T”-shaped candlestick that’s created when the open, high, and closing prices are very similar.

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• Estimating the potential reward of a dragonfly trade can also be difficult since candlestick patterns don’t typically provide price targets.

You can change your settings at any time, including withdrawing your consent, by using the toggles on the Cookie Policy, or by clicking on the manage dragonfly doji consent button at the bottom of the screen. However, the buyers were unable to create a new session high, hence why it is considered weak.

What Does a Dragonfly Doji Candlestick Tell?

Since the opening and closing is very closer to the low of the day, it might suggest that the up-trend might be coming to an end. In most cases, the length of the lower shadow is used as an indication of the strength of an upcoming reversal pattern. My book,

Encyclopedia of Candlestick Charts,

pictured on the left, takes an in-depth look at candlesticks, including performance statistics. Additionally, be aware of the overall market context and consider factors such as support and resistance levels, as well as the strength of the prevailing trend. As the price moves in your favor, consider using trailing stops or other risk management techniques to lock in profits and minimize potential losses.

The following S&P 500 SPDR ($SPY) chart shows several gravestone doji that were automatically identified using TrendSpider. In each case, the gravestone doji were followed by a bearish reversal, as the candlestick pattern would predict. These reversals could be confirmed with other indicators as well. This candle has a small body (either bullish or bearish) at the upper end of the price range, a long lower shadow (typically at least twice the length of the body), and a small or nonexistent upper shadow. The long lower tail of a dragonfly doji indicates that large amounts of selling have flooded the market, which caused downward pressure on the security price during a certain period. However, at the end of that period, the close price is still able to stay at the level of the open price.

When this pattern can happen?

The traditional formation of this pattern occurs when a security’s open, high and close are the same. However, we still consider it a valid formation when there is a little wick above the high. The Doji Dragon is, therefore, no exception to the general rule of Doji. This candlestick is often a sign that investors do not know which direction the market should take. However, as with all patterns of a single candlestick, one or more confirmation candles are required.

The Doji candlestick pattern is characterized by its distinct “cross” shape, where the opening and closing prices of an asset are either equal or very close to each other. The Doji symbol represents a state of indecision and balance between buyers and sellers in the market. Candlestick charts are great for providing decision support to technical indicators and chart patterns.