Our test results show that a Gravestone Doji is 57% bullish and 43% bearish. In any ten days following a Doji, the market moves up 57% and down 43%; this move is due to the market’s positive bias, not due to any predictive quality of the Gravestone Doji. In essence, the Gravestone Doji reflects a tug-of-war between buyers and sellers, with sellers ultimately gaining the upper hand. Feel 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.

One interesting way to use the doji pattern intraday is on volume charts. On these charts, new candles are created once a specific number of contracts are traded, which means the volume histogram bars are roughly the same height. Although the cryptocurrency market operates 24/7, trading activity tends to slow down on the weekend. For example, the candle from Saturday, October 19, 2024 (marked as 1) on the Bitcoin Futures chart (data from the Bitcoin Futures exchange). No, according to our testing, the Gravestone Doji is not a bearish reversal pattern. In fact, the Doji has a win rate of 57%, meaning it is 57% Bullish and 43% bearish.

Gravestone Doji: Definition, How to Trade It, and Example

Although the stock price increased by 17 cents, the difference is so small that this candlestick (highlighted by the arrow) is considered a doji. It is advisable to use indicators such as relative strength index (RSI) , moving averages, and rate of change (ROC) in conjunction with Doji patterns. The Doji candle is popular because its name and distinctive shape are easy to remember and identify for traders.

What matters the most is what it’s trying to signify, not that the real body is perfectly level. You’ll see that price action went bearish once these patterns formed. Its open price and the close and low of the day are all near each other. Gravestone doji candlesticks make up candlestick patterns and tell a price action story.

Sometimes you want to limit a strategy to only place trades in a low volatility environment, and other times you want to do the opposite. The opening and closing prices of the candle are nearly identical, signifying the bearish pressure that countered the initial bullish momentum. Lastly, it’s vital to remember that the Gravestone Doji, like any analytical tool, may give false signals.

How to read Gravestone Doji Candlestick in Technical Analysis?

1. The Gravestone Doji is a single candlestick pattern that signals a trend reversal.
2. According to traditional rules, this candle might be seen as a pause in the ongoing downtrend.
3. Then, enter your position once the next candle closes below the closing price of the candlestone doji.
4. With the pattern formation, when the price closes below the moving average, you can place a short position as a pattern and the moving average confirms the entry.

After confirmation of the current trend, enter the trade and consider a stop loss to limit risk. When trading a Gravestone Doji, it’s important to use confirmations in the form of reliable candle patterns, such as an Inverted Hammer or a Bearish Marubozu. Furthermore, reliable indicators such as the Relative Strength Index (RSI), Rate of Change (ROC), or Volume can be used to determine if the trend will likely reverse or continue. A Gravestone Doji candle indicates a battle between buyers and sellers and is considered bearish. Our 1,553 test trades prove it is the third most profitable candle pattern. When it appears the top of an uptrend,  it is considered a reversal signal.

Four-price doji candle — this candlestick forms when the open, close, high, and low prices are either identical or nearly the same, signaling no price movement during the trading period. This often reflects extreme uncertainty or other unusual market conditions. TrendSpider is the best software for trading candlestick patterns due to its integrated candle backtesting and pattern recognition.

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Liberated Stock Trader, founded in 2009, is committed to providing unbiased investing education through high-quality courses and books. We perform original research and testing on charts, indicators, patterns, strategies, and tools. Our strategic partnerships with trusted companies support our mission to empower self-directed investors while sustaining our business operations. One strategy involves waiting until another candlestick forms following the initial Gravestone Doji to confirm any trend change before executing any trades.

Traders should always confirm the pattern formation in conjunction with other technical tools to avoid false signals. Also, having proper risk management with good risk-reward ratios and practice makes a trader profitable in the long run. While a Gravestone Doji can be a powerful indicator, it has limitations. It can produce false signals, and its interpretation can be challenging, especially in volatile markets. Additionally, a single Gravestone Doji doesn’t guarantee a market reversal, and traders should always wait for additional confirmation from subsequent trading sessions. The Gravestone Doji, like any technical analysis tool, is not foolproof.

1. I believe the gravestone doji is only profitable on long trades because of the stock market’s inherent upward bias.
2. The market experienced a 16% increase on this day but later dropped from 350 to 298 as the Gravestone Doji formed.
3. The Gravestone Doji is a kind of candlestick formed when the opening and closing price of a security in the market is equal, which signifies indecision in the market.
4. The Gravestone Doji chart pattern is an inverted “T”-shaped candlestick that’s created when the open, high, and closing prices are nearly equal.
5. Understanding these critical differences is essential when trading doji candles.

Exiting Trades with the Gravestone Doji

The Gravestone Doji was formed with an initial dominance of bears with an uptrend from the levels of 300 to 348. The market experienced a 16% increase on this day but later dropped from 350 to 298 as the Gravestone Doji formed. Gravestone Doji can be clearly observed in the below chart, it is formed at the top of the uptrend and denotes a bearish reversal of gravestone doji candle trend. The general property that defines this Japanese candlestick is a small real body with an extremely long upper shadow (similar to an inverted ‘T’).

So, three candlesticks that all look similar but one tells a bullish story and the other two tell a bearish story. You’ll notice that the top candlestick rejected resistance in a falling wedge pattern. Seeing gravestone doji or anything similar near resistance levels is something to be aware of because they signal bearish reversals. The two examples in this chart are examples of imperfect-looking gravestone dojis. They almost look like shooting star patterns, with bigger real bodies.