Professional traders use the candlestick patterns to predict whether the price will continue moving in a certain direction or whether a reversal will happen. Moreover, You should pay attention when and where this candle forms and if it’s near the support zone in a chart. This support zone could be a specific Fibonacci level, lower band of Bollinger, moving average line or historical support level. Dragonfly doji candlestick gives you a sign of a price reversal 50% of the time or ranging before price continues its upward movement. Dragonfly doji candle and gravestone doji candlesticks are very similar, and we discuss the difference further.

dragon fly doji

The dark-cloud cover pattern is the opposite of the piercing pattern and appears at the end of an uptrend. It is a dual candlestick pattern with the first candlestick being light in color and having a large real body. The second candlestick must be dark in color, must open higher than the high of the first candlestick and must close down, well into the real body of the first candlestick. The deeper the second candlestick penetrates the first, the more reliable the pattern becomes. Look at the patterns in conjunction with technical indicators to get a trend and direction. The following chart shows a bullish Dragonfly Doji that appeared just after a bearish signal on the daily time frame.

Dragonfly Doji: Example

In this case, you notice that the highs and the lows of the Long-legged Doji actually became resistance and support on the lower timeframe. When you see this chart, it can difficult to just trade off it directly. It’s like a regular Doji but this time around, the highs and lows of the candle is very long. Stop loss above the high, and you can look to take profit just before this area of support. That is the key thing down here and you have to kind of anticipate that there are variations that could occur, especially in the FX markets.

What does long upper shadow mean?

Four price doji is a candlestick where open, high, low, and close are all the same. This candle reflects the highest extent of indecision between bulls and bears. This candle is normally seen on low trading volume. It often appears in pre-market and after hours trading.

When a dragonfly doji is confirmed in an uptrend it is considered a weak signal, or a continuation pattern as the buyers still managed to be active. The significance of the dragonfly doji is that it doesn’t appear too often, in comparison to other candlestick patterns. Doji patterns indicate a transition in prices or that the market is undecided about the direction prices will take. As a category, they are best described as a transitional pattern rather than a reversal or continuation pattern. Specific types of Doji patterns – like the Dragonfly or the Gravestone – can signal a possible reversal in prices but are best used in conjunction with other indicators.

Dragonfly Doji: Three Trading Tidbits

This can also suggest that the trend is losing strength, and while it’s difficult to mark the Dragonfly Doji as a powerful signal, it’s not something to be ignored. A Dragonfly Doji is a sign of strength because it shows you rejection of lower prices, a variation of this candlestick pattern is the hammer. So for example, if the market is in a downtrend, you can look for it to pull back to a moving average, pullback to previous support turned resistance, or whatever. Most importantly, you should combine it with other volume-based indicators like the money flow index and the accumulation and distribution indicator. The benefit of using such volume indicators is that they will help you know whether the price action is supported by strong volume. When price trend is downward, this candlestick shows bears pull the price down, but bulls defend and push it up to close it almost precisely on opening price.

dragon fly doji

The price wasn’t dropping aggressively coming into the dragonfly, but the price still dropped and then was pushed back higher, confirming the price was likely to continue higher. Looking at the overall context, the dragonfly pattern and the confirmation candle signaled that the short-term correction was over and the uptrend dragon fly doji was resuming. In addition, the dragonfly doji might appear in the context of a larger chart pattern, such as the end of a head and shoulders pattern. It’s important to look at the whole picture rather than relying on any single candlestick. Cory is an expert on stock, forex and futures price action trading strategies.

What A Dragonfly Doji Candlestick Tells You

Other indicators should be used in conjunction with the Dragonfly Doji pattern to determine potential buy signals, for example, a break of a downward trendline. The long lower shadow implies that the market tested to find where demand was located and found it. Bears were able to press prices downward, but an area of support was found at the low of the day and buying pressure was able to push prices back up to the opening price. Thus, the bearish advance downward was entirely rejected by the bulls. The dragonfly doji is an interesting name for a candle that is supposed to act as a bullish reversal.

What Does The Dragonfly Doji Look Like?

And it’s really not too important to concern yourself whether there is a small body or no body on the candlestick pattern. One thing to take note is that a Doji has no body on the candlestick dragon fly doji pattern. How to recognize it and how to find profitable trading opportunities using the Doji candlestick pattern. If the dragonfly doji is in an uptrend, then read about the northern doji.

Raindrop Charts®

Traders take a long position when price breaks above the high of the candlestick. If everyone was always succeeding in the stock market, the whole world would be trading. If the price moves into the oversold zone, the Dragonfly Doji’s signals are much more substantial, giving it a lot more headroom dragon fly doji for growth. Technical analysts and investors are continually finding new ways to take advantage of market conditions, and a robust understanding of how the market functions can go a long way. The Dragonfly Doji is created when the open, high, and close are the same or about the same price .

What do doji candle indicate?

The doji is a transitional candlestick formation, signifying equality or indecision between bulls and bears. A doji is quite often found at the bottom and top of trends and thus is considered as a sign of possible reversal of price direction, but the doji can be viewed as a continuation pattern as well.

In fact, they were first implemented back in the Japanese race trade. The Japanese rice trader Homma realized that trading has a lot ofemotional energy was transparent in candlestick trading. The Dragonfly Doji exists as part of a variety of similar patterns that are very easily confused. For example, the Hammer looks almost identical to the Dragonfly Doji but instead has a larger body. They are both primarily bullish signals, so confusing them isn’t too dangerous. However, confusing the Dragonfly Doji with the Hanging Man would be.