Dragonfly Doji Candlestick

Dragonfly Doji Candlestick

Take a look at Figure 5-8, which includes a few different types of dojis. As you can see, a doji looks more like a cross or a t than a pattern on a candlestick chart. The long upper wick signals the loss of control and momentum on the side of What Is A Stop Market bulls and it signals the impending reversal of the price action. By using the open of the first candlestick, close of the second candlestick, and high/low of the pattern, a Bullish Engulfing Pattern or Piercing Pattern blends into a Hammer.

When prices are returned to the level that they opened, the dragonfly doji candlestick is complete. The dragonfly doji candlestick pattern is a sporadically occurring pattern on the price charts of stocks, ETFs and stock market indexes. The formation of a dragonfly doji candle indicates a potential reversal of the ongoing trend of the prices. For instance, if the dragonfly doji is formed dragonfly candlestick when the price is in downtrend, then the price may start to move up after the formation of dragonfly doji. The dragonfly represents a state of indecision about the future direction of the price movement of the security, which mostly leads to the trend getting reversed. The Shooting Star is a bearish reversal pattern that forms after an advance and in the star position, hence its name.

Doji And Trend

The dragonfly candle is confirmed when the high, open and close prices are equal, or very similar, whilst there is a long wick which has created a session low. The long-legged doji is a candlestick that consists of long upper and lower shadows and has approximately the same opening and closing price. Following the dragonfly, the price proceeds higher on the following candle, confirming the price is moving back to the upside. Traders would buy during or shortly after the confirmation candle.

Especially if they are used with another indicator or support levels. Demonstrates that the market is indecisive, therefore it could either continue in its direction or reverse. This allows you to take advantage of the movement of the trend for as long as possible, therefore, increasing potential profits. So, the best thing you can do is stay open-minded with the trend and move your stop loss higher as and when you see fit. However, the buyers were unable to create a new session high, hence why it is considered weak.


The candle following a potentially bearish dragonfly needs to confirm the reversal. The candle following must drop and close below the close of the dragonfly candle. If the price rises on the confirmation candle, the reversal signal is invalidated as the price could continue rising. You can check all types of doji candlesticks on MetaTrader 4 or 5 and witness yourself how they impact the price action. This means a doji can be classified as both a reversal and a continuation pattern, as it signals there is no firm outcome of who has control over the price action.

Generally, the long shadow should be at least twice the length of the real body, which can be either black or white. The location of the long shadow and preceding price action determine the classification. After a decline or long black candlestick, a doji indicates that selling pressure may be diminishing and the downtrend could be nearing an end.

Dragonfly Doji Cons

When the pattern appears after an uptrend, the confirmation candle will close below the Dragonfly Doji. The low period in the case of a Dragonfly Doji is significantly lower, giving its distinctive ‘T’ shape. When the pattern appears after bullish movement, it generally indicates that a potential price decline is on the way.

Both have small real bodies , long lower shadows and short or non-existent upper shadows. As with most single and double candlestick formations, the Hammer and Hanging Man require confirmation before action. A candlestick that forms within the real body of the previous candlestick is in Harami position. Harami means pregnant in Japanese; appropriately, the second candlestick is nestled inside the first. The first candlestick usually has a large real body and the second a smaller real body than the first.

How A Dragonfly Doji Forms?

It suggests that the trend’s downward direction may soon reach a turning point. The TC2000 dragonfly doji candlestick scan is a rare formation often interpreted as an early warning that recent trend direction is about to shift higher. However, this particular scenario will be a disadvantage for Dragonfly Doji candlestick.

These visual patterns give effective interpretation when being incorporated with other crypto indicators. Thus, it shows various hints of price dynamics and the current market’s status towards an investment or asset. The fact the open and the close are so close together is the sole reason dragonfly candlestick candlestick pattern books state pin bars have a higher probability of causing a reversal. For a Dragonfly Doji to be a reversal candle, there should have been a preceding downtrend. Given the bullish implication of the dragonfly doji, it can only logically “reverse” an ongoing downtrend.

How To Trade The Dragonfly Doji?

Professionals in corporate finance regularly refer to markets as being bullish and bearish based on positive or negative price movements. A bear market is typically considered to exist when there has been a price decline of 20% or more from the peak, and a bull market is considered to be a 20% recovery from a market bottom. The zig zag indicator is a common technical analysis pattern used to filter out insignificant fluctuations in the price of a security and accurately track the existing trend . The zig zag indicator is, however, a very lagging type of indicator. Technical analysis is a form of investment valuation that analyses past prices to predict future price action.

What is an Evening Star candlestick?

An evening star is a stock-price chart pattern used by technical analysts to detect when a trend is about to reverse. It is a bearish candlestick pattern consisting of three candles: a large white candlestick, a small-bodied candle, and a red candle.

A long black line shows that sellers are in control – definitely bearish. The same color as the previous day, if the open is equal to the close. The shadow is the portion of the trading range outside of the body. We often refer to a candlestick as having a tall shadow or a long tail. Candlesticks contain the same data as a normal bar chart but highlight the relationship between opening and closing prices. The narrow stick represents the range of prices traded during the period while the broad mid-section represents the opening and closing prices for the period.

They are often considered to suggest indecision in a given market. Get $25,000 of virtual funds and prove your skills in real market conditions. Increase your income and get compensated for your trading knowledge with ThinkInvest, putting you in control. No matter your experience level, download our free trading guides and develop your skills.

Then, with the price being low, a large rush of buyers could have taken place and pushed the session’s price back up to it’s open. After reading this article, you’ll have a deeper understanding of the powerful dragonfly candle and how to identify it. This creates a «T» shape that is easily identified by technical traders.

Morning Star

However, the trading activity that forms a particular candlestick can vary. 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.

Does technical analysis actually work?

Yes, Technical Analysis works and it can give you an edge in the markets. However, Technical Analysis alone is not enough to become a profitable trader. A trading strategy with an edge. Proper risk management.

But the uptrend continued after a wild fluctuation when the Dragonfly came out. After the Dragonfly, bears have tried a reversal indeed, but bulls came back stronger. It would help if you opened the long position after the first candle closes above the Dragonfly in cases like this. Most strategies involving the Dragonfly Doji require the pattern to form at the bottom of a bearish move. When this primary condition is met, traders will try to find the right moment to open a long position, anticipating a trend reversal. Elsewhere, those who have active short positions would seek to close them.


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