In the next step, in particular, after determining the downward trend line, you can analyze the candlestick chart. You can see that, following a local correction up, the price chart draws the first reversal pattern, a dark cloud cover. Furthermore, the price tries to break out the resistance trendline but sellers return the price back during the same period. A doji candlestick pattern works the best when trading in timeframes of one hour and longer. Dojis appear too often in shorter timeframes, and one can’t take them as serious signals for a particular price movement.

1. Besides, short-term timeframes feature a lot of price noise, confusing traders.
2. However, keep in mind that you must wait for confirmation before acting.
3. Let’s say the next candle after the Shooting Star opens below its body, indicating a potential confirmation.
4. To trade the Gravestone Doji candlestick pattern it’s not enough to simply find a candle with the same shape on your charts.
5. The gravestone doji belongs in the bearish pin bar category, as it has a long upper shadow (selling tail).
6. The relative strength index (RSI) or Bollinger Bands might confirm or contradict what the doji pattern says.

What Does the Green Gravestone Doji Candlestick Indicate?

1. The asset price was in the accumulation phase, but after the formation of a series of „Gravestone doji” patterns, it began to drop sharply.
2. This method was used by Japanese traders to find trends, in order to maximize their profit by the price movement.
3. It is also important to note that candlestick patterns, including the Gravestone Doji, should be used as part of a comprehensive trading strategy rather than as a standalone signal.
4. Among these patterns, the Doji candlestick is particularly popular for identifying potential price reversals.
5. When a pin bar forms the point where the candle opened and where it closed are always different, you see this as the body of the pin.
6. The top candlestick looked the same as the bottom but was a shooting star.

The Gravestone Doji is a bearish reversal pattern that forms when the open, high, and close prices are all at or near the low of the candlestick. Visually, it resembles a vertical line with a small horizontal line extending from the top. The length of the upper shadow is crucial in identifying the strength of the pattern. The longer the upper shadow, the more significant the potential reversal.

A „Gravestone doji” can be confirmed using candlestick reversal patterns such as a „Hanging Man,” an „Evening Star,” a „Dark Cloud Cover,” a „Bearish Engulfing,” and others. Additionally, a „Gravestone doji” can be confirmed with the help of technical indicators and oscillators such as the RSI, MACD, and Stochastic or Fibonacci indicators. A „Long-legged doji” pattern, like a „Gravestone doji,” lacks a candlestick body. However, a „Long-legged doji” has long upper and lower shadows on both sides, indicating high volatility for a certain period and indecision in the market. Therefore, market participants exercise caution when this pattern appears as it signals a possible reversal or a strengthening of the current trend. Various stochastic and trend indicators, as well as volume and cash flow indicators, can be used to confirm a „Gravestone doji” candlestick.

Most often, the pattern can be detected on the H4 and lower time frames. The higher the time frame, the rarer this pattern appears on the chart. A vivid example of a sharp and impulsive price collapse after a „Gravestone doji” formation can be seen below on the 4-hour gold chart. A „Gravestone doji” occurs on various time frames, but it is quite rare. Gravestone Doji, Long-Legged Doji, Shooting Star patterns may look similar at first glance but they have significant differences in their formation and interpretation. The price action is very similar to our last trading example, but in this case the stock does not reverse after hitting our target, but rather continues lower.

The Detailed Candlestick Patterns Cheat Sheet

The upper shadow of the candle represents the local capitulation of the buyers, hence traders start losing confidence in the continuation of the bullish trend. The gravestone doji is a candlestick pattern that is among those that are showing a reversal sign in the trend movement. The gravestone doji in bare outlines looks like the ‘T’ letter but turned around. Usually, the open, close and low prices are at the bottom of the candle, while the high of the candle is far away from them forming a big upper wick. Always check the stochastic or the RSI indicator to receive a better signal when the doji candlestick appears around the resistance of an uptrend or at the bottom of a downturn.

This distinction is important to make as the gravestone doji signals more indecision than the shooting star, making it a less accurate bearish signal. According to Thomas Bulkowski, a renowned analyst, the gravestone doji candlestick pattern only results in a reversal 51% of the time, making it a coin toss. However, a „Gravestone doji” formation, even with a long upper shadow, does not guarantee an immediate price reversal. Similar to other candlestick patterns, a „Gravestone doji” needs additional confirmation from technical indicators and other chart and candlestick patterns. On May 22nd, 2015, an Indian company called Adani Ports formed a Gravestone Doji in its daily charts. The Gravestone Doji was formed with an initial dominance of bears with an uptrend from the levels of 300 to 348.

Suppose a stock opens at $60, reaches a high of $65, but closes at $60 during a specific period. The Shooting Star pattern would be formed if the open price was also $60. This pattern indicates that buyers initially pushed the price higher but failed to sustain the momentum, leading to a potential reversal in the market. 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.

Advantages of Trading the Gravestone Doji Pattern

A gravestone doji candle is a pattern that technical stock traders use as a signal that a stock price may soon undergo a bearish reversal. This pattern forms when the open, low, and closing prices of an asset are close to each other and have a long upper shadow. The shadow in a candlestick chart is the thin part showing the price action for the day as it differs from high to low prices.

As such, it could be a trend reversal indicator or a trend continuation signal. To ensure it is a reversal signal, we added the Relative gravestone doji meaning Strength Index (RSI) indicator and the Moving Average Convergence Divergence (MACD). Unlike the bearish gravestone Doji candle pattern, the bullish version is considered less reliable. This is because the price bounced back up but finished the candle at the lowest level.

Doji Candlesticks are a category of technical indicator patterns that can be either bullish or bearish. The Gravestone Doji is a bearish pattern that can indicate a reversal of a price uptrend and the start of a downtrend. On the other hand, the Dragonfly Doji is a bullish pattern that can indicate an uptrend will occur.