Doji Dragonfly Candlestick: What It Is, What It Means, Examples

The idea here is to trade pullbacks to the moving average when the price is on an uptrend. Support and resistance levels are great places to find price reversals. Opposite to the Gravestone Doji in our last post, The Dragonfly doji can be spotted dragonfly doji as a “T” candlestick on a chart. The price breakdown of the doji suggests a complete Buy-back of a once Red Candlestick (Refer to “Low” in Image). Essentially wiping off any price decline the candlestick may have had (refer to image ).

Traders would buy during or shortly after the confirmation candle. In this case, traders may want to see if Dragonfly has any confirmation which will be seen in its next candle or candles after it occurs. In this article we will dive into how to spot a dragonfly doji. The best strategy to trade it and examples of how they have played out in the past. Moving averages are great trading indicators to trade trends. The Dragonfly Doji candlestick pattern is formed by one single candle.

Is a Doji pattern bullish or bearish?

A candlestick consists of two parts – “the body” and the “tails.” The top of the upper tail tells the highest price that the asset has ever been traded at during a certain period of time. The bottom of the lower tail tells the lowest asset price traded during that period. A doji is a name for a candlestick chart for a security that has an open and close that are virtually equal. Dojis are often used as components in patterns used to detect trading opportunities.

• A candlestick consists of two parts – “the body” and the “tails.” The top of the upper tail tells the highest price that the asset has ever been traded at during a certain period of time.
• Typically, a dragonfly doji with a higher volume is more reliable than one with a lower volume.
• The reason for this is that this is a bullish reversal pattern that must reverse following a previous trend reversal.

Without other information, a doji candlestick is a neutral indicator, as it alone does not provide sufficient information to make trading decisions. There are three types of doji candlesticks – the gravestone doji, the long-legged doji, and the dragonfly doji. Dragonfly doji candlesticks are reversal candlesticks found at the bottom of downtrends. They are shaped like a T and signal a potential reversal to a new uptrend. As mentioned above, the other two types of doji patterns are the gravestone doji and the long-legged doji. The gravestone doji is in the reversed shape of the dragonfly.

Dragonfly Doji Candlestick: What Does It Mean?

Candlestick patterns seldom work very well on their own, and most traders would agree that you need to include some type of filter or extra condition to make them tradable. The market is in a bearish trend, and the dominant market sentiment is bearish. As such, most market participants believe that the market is going to head lower. The market is in a bullish trend, and continues to head higher. As such, the dominating market sentiment is bullish, and market participants are long in belief that the market is going to continue higher. This price pattern is not only very toxic at the top of an uptrend, but also you should be very cautious especially when it happens on higher time frames.

Tradingindepth.com makes no warranty that its content will be accurate, timely, useful, or reliable. Hammer candle always has a bigger body in comparison to dragonfly doji. As we discussed above, dragonfly doji is a kind of doji candle which means they have a small body. Moreover, You should pay attention when and where this candle forms and if it’s near the support zone in a chart.

What is a Marubozu candlestick pattern and how to trade it?

Typically resembling a plus sign or a cross, this small signal (formed of just one candlestick and lacking a body) is still important. In fact, it has the power to change traders’ buying and selling strategies. And when a basic Doji lacks an upper or lower shadow, it becomes either a Dragonfly or a Gravestone Doji.

The dragonfly doji is a Japanese candlestick pattern that acts as an indication of investor indecision and a possible trend reversal. 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. Trading based on a dragonfly doji candlestick is very tough because it’s rare on charts.

Strategy 3: Trading The Dragonfly Doji With Moving Averages

Note that most traders will verify the possibility of an uptrend by waiting for confirmation the following day. The body of a candlestick is equal to the range between the opening and closing price, while the shadows, or wicks, represent the highs and lows of the trading period. In the case of a dragonfly doji, the opening, the high, and closing price are the same. Such a pattern can only occur when the market trades down and then reverses but does not move above the opening price. The dragonfly doji rarely occurs, but price reversal happens constantly.

Thus, the dragonfly doji is not a highly reliable indicator of price reversals. Even with the confirmation candlestick, it is not guaranteed that the price will continue the trend. Typically, a dragonfly doji with a higher volume is more reliable than one with a lower volume. Conversely, when the market has shown an upward trend before, a dragonfly doji might signal a price drop, known as a bearish dragonfly. The downward movement of the next candlestick will provide confirmation. Estimating the potential reward of a dragonfly trade can also be difficult since candlestick patterns don’t typically provide price targets.

The dragonfly doji pattern doesn’t occur frequently, but when it does it is a warning sign that the trend may change direction. Following a downtrend, the dragonfly candlestick may signal a price rise is forthcoming. Following an uptrend, it shows more selling is entering the market and a price decline could follow. In both cases, the candle following the dragonfly doji needs to confirm the direction. The dragonfly doji is an interesting name for a candle that is supposed to act as a bullish reversal. If you see

a dragonfly doji in the bush, do not be frightened.

So the open, high, and close are all the same (or about the same) price. This signal’s presence is most significant when it appears after a downtrend, preceded by bearish candlesticks. It suggests that the trend’s downward direction may soon reach a turning point.