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

What they have in common is that they are simple in structure, easy to spot, and not consistently accurate. They are still applicable, but combining the doji patterns with several other signals is always better. It’s safe to say that you can’t tell that much from the doji pattern.

When you see this chart, it can difficult to just trade off it directly. You can exit just below the swing low, or you can even trail your stop loss using a moving average structure. Stop loss above the high, and you can look to take profit just before this area of support. Again, your stop loss should be placed below the swing low, and you can look to take profits at the nearest swing high.

What Is a Dragonfly Doji Candlestick?

However, a hammer candle has a long lower shadow that is almost twice the size of a real body. Usually, following a price decline, a hammer candlestick appears, indicating a potential future reversal. It signifies a candlestick pattern’s bullish reversal, which typically happens at the bottom of downtrends. The hammer candle is useful for alerting traders to the potential end of a downtrend and for helping traders visualize where support and demand are. The distinction between a Doji and a Shooting Star, which is an inverted hammer and a bearish reversal signal, is the same. The Dragonfly doji has a T-like shape and looks like a dragonfly, that is why it is called so.

Doji is a very powerful reversal candle as it creates market indecision between the bears and the bulls. In the description above, we have explained that a doji pattern happens when an asset opens and closes at the same level. Therefore, because of this description, the pattern is often confused with spinning top. When there is an uptrend, a gravestone Doji is usually a signal to exit or start a bearish pattern. There are a few recommendations to follow when analyzing and trading doji candles.

Doji Means Indecision

The pattern tells traders that there is uncertainty in the market. That’s because there is no clear victor between buyers and sellers. This Doji is usually a signal of indecision after a long upward or downward rally. But like all types of candlestick patterns, you need to use several strategies before you initiate a trade. In other words, a single doji is a just a small piece of the puzzle in helping a trader determine a higher probability point at which to either or enter, and/or exit a position.

• The dragonfly doji occurring in the downtrend can signal a bullish trend reversal.
• It was developed in the 18th century by a Japanese rice trader as a tool to determine future price performance.
• A doji formation generally can be interpreted as a sign of indecision, meaning neither bulls nor bears can successfully take over.
• The size of the dragonfly coupled with the size of the confirmation candle can sometimes mean the entry point for a trade is a long way from the stop loss location.

Using it as a definite trend reversal or indecision pattern can be a mistake. Using more indicators to make the situation more straightforward is always better. It’s especially important to confirm your assumptions via other indicators after seeing a doji candlestick. The Doji candlestick pattern can be a meaningful technical indicator when examined in collaboration with other indicators and market trends. It can be beneficial in analysing future price movements of securities by highlighting the momentary indecision in the market. Consequently, they can help identify good buying opportunities in the short term by putting them in the context of broader market trends and events.

results for doji in all

The point of entry when you identify a neutral Doji in an uptrend would be the low point of the formation. In case it appears on a downtrend, the entry point for a long position should be at the breakout or high of the Doji candle. Placing stop-loss is critical to mitigate risk in a trading position.

Even after the Doji forms, further downside is required for bearish confirmation. This may come as a gap down, long black candlestick, or decline below the long white candlestick’s open. After a long white candlestick and Doji, forex traders should be on the alert for a potential evening Doji star. 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.

What is HaiKhuu Trading

Remember, it’s possible that the market was hesitant for a short period of time and then continued moving in the direction of the trend. Therefore, it’s extremely important to conduct a thorough analysis before closing a position. If the closing price is right in the middle, it could be considered a trend continuation pattern. In this case, one can always refer to previous candles to predict future trends.

Similarly, efforts to crash the prices from the sellers’ end get foiled by the buyers. The patterns are calculated every 10 minutes during the trading day using delayed daily data, so the pattern may not be visible on an Intraday chart. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading. Start your research with reviews of these regulated brokers available in , many have free demo accounts so you can preview their technical analysis features. The first doji outlined on Chart 1 in the previous section was a high-low doji, where prices made the highs for the day first, and the lows for the day second. One thing to share first is don’t make this mistake when you’re trading the Doji candlestick pattern.

What happens after a doji candle?

One must, nonetheless, be careful when analysing the possible meaning of Doji candle patterns as they may present false signals. 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. Besides, short-term timeframes feature a lot of price noise, confusing traders. This pattern is a significant signal in an uptrend, which warns of bearish activity at the levels reached, so, bullish traders should be prepared to exit trades.