Dragonfly Doji Candlestick Pattern What Is And How To Trade

If this price is close to the low it is known as a «gravestone,» close to the high a «dragonfly», and toward the middle a «long-legged» doji. The name doji comes from the Japanese word meaning «the same thing» since both the open and close are the same. A chart depicting a doji suggests that no clear direction has been established for this security – it is a sign of indecision, or uncertainty in future prices.

Tradingindepth.com is not liable for any damages arising out of the use of its contents. When evaluating online brokers, always consult the broker’s website. Tradingindepth.com makes no warranty that its content will be accurate, timely, useful, or reliable. Dragonfly doji candle forms when bulls and bears fight hard to move the price during a candle session but none of them succeed in the end. 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. The best strategy to trade it and examples of how they have played out in the past.

Dragonfly Doji Confirmation

So, what you want to do is go long when the price comes to Support and forms a Dragonfly Doji. Candlesticks are graphical representations of price movements for a given period of time. If you are day trading, the Daily Pivot Points are the most popular, although the Weekly and Monthly are frequently used too. Depending on the strength of the trend, different levels are more likely to work better with the Dragonfly Doji pattern. Here you can learn more about the different Fibonacci retracement levels. Since we are looking for moves to the upside, we want to trade the Dragonfly Doji using support levels.

• Sometimes the stock price doesn’t show its value because it has fallen so low.
• Traders can enhance their trading strategies by utilising the free TickTrader platform, which allows them to leverage their price action skills.
• The content on this website is provided for informational purposes only and is not intended to constitute professional financial advice.
• Anyone interested in learning more about the long-legged doji may want to consider enrolling in one of the best technical analysis courses.
• The Dragonfly Doji pattern is also a mirrored version of the Gravestone Doji candlestick pattern.

Our live streams are a great way to learn in a real-world environment, without the pressure and noise of trying to do it all yourself or listening to “Talking Heads” on social media or tv. It’s a reversal pattern because before the Dragonfly Doji appears we want to see the price going down, thus it’s also a frequent signal of the end of a trend. As the price continues falling it forms another long-legged doji. The price breaks above the consolidation and moves higher overall.

A Dragonfly Doji After a Bullish Trend

The color of a Doji candlestick—red or green—can provide additional information about the price action. A red Doji suggests that the closing price is lower than the opening price, while a green Doji indicates the opposite. The concept of these Doji candlestick patterns can be seen across different timeframes. To trade the Dragonfly Doji candlestick pattern it’s dragonfly doji candlestick meaning not enough to simply find a candle with the same shape on your charts. There are multiple ways to trade a long-legged doji, although trading based on the pattern is not required. The pattern is only one candle, which some traders feel is not significant enough, especially since the price didn’t move much on a closing basis, to warrant a trade decision.

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What Does a Dragonfly Doji Mean?

Some traders will want to see more confirmation—the price movements that occur after the long-legged doji—before acting. This is because long-legged dojis can sometimes occur in clusters, or as part of a larger consolidation. These consolidations may result in reversals of the prior trend, or a continuation of it, depending on which way the price breaks out of the consolidation.

Most traders enter the market during the formation of the second candle or shortly after its completion. Aside from the indicators mentioned above, traders would prefer to open positions during periods of higher volume, increasing this candle pattern’s reliability. Since then we have continuously created the new and improved the old, so that your trading on the platform is seamless and lucrative. We don’t just give traders a chance to earn, but we also teach them how.

Dragonfly Doji and Volume

The long-legged doji suggests that the forces of supply and demand are nearing equilibrium and that a trend reversal may occur. This is because equilibrium or indecision means that the price is no longer pushing in the direction it once was. If you spot a Dragonfly Doji at the bottom of a downtrend, traders take it as a strong buy signal. Many trading strategies require certain patterns to form in bearish markets. Candlestick charts can be used to discern quite a bit of information about market trends, sentiment, momentum, and volatility.

In the next section, you’ll another type of Doji that signals the market is about to bottom out. Now, don’t worry if you don’t have the answers to these questions with regard to the doji pattern. The lines above and below, known as shadows, tails, or wicks, represent the high and low price ranges within a specified time period. The filled or hollow portion of the candle is known as the body or real body, and can be long, normal, or short depending on its proportion to the lines above or below it. To find a bullish RSI Divergence we want to see the price on a downtrend first, making lower lows and lower highs.

Additionally, by using my link, you can receive $30 off your subscription after the free trial ends. Dragonfly Dojis are said to be red or green depending on the direction of their next candle. Dragonflies that appear during uptrends will often show as a green Dragonfly and vice versa for downtrends. Feel https://g-markets.net/ free to ask questions of other members of our trading community. We realize that everyone was once a new trader and needs help along the way on their trading journey and that’s what we’re here for. Each day we have several live streamers showing you the ropes, and talking the community though the action.

Again, candlesticks and moving averages are vital to support and resistance. But the implications of said reversal depend on price action and confirmation. Long-legged doji candles are deemed to be most significant when they occur during a strong uptrend or downtrend.

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Doji Candle Types: Dragonfly, Gravestone & More

As we discussed above, dragonfly doji is a kind of doji candle which means they have a small body. Dragonfly doji pattern can’t define a particular profit target, and it entirely depends on price action and especially if the trend is downward or upward. Read previous sections carefully, and you’ll find out how to choose a reasonable profit target.