Gravestone Doji Candlestick Trading Strategy and Backtest Definition & Meaning

gravestone doji meaning

We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Once again, as soon as the next (next) candlestick closes above the gravestone gravestone doji candle, the trend changes and the price rises again. In this case, a stop loss is placed below the lowest level of the bearish trend, and TP is placed at one of the previous price swing peaks.

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  • As to its appearance, it has a long upper wick, no lower wick, and opens and closes around or at the same price.
  • These doji can be a sign that sentiment is changing and that a trend reversal is on the horizon.
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It could easily be a break from the continuing uptrend, and there is no real trend reversal. Traders preparing to exit the market usually take their position during the formation of the next candle. A gravestone doji can be described as a pattern in technical analysis. It is a bearish pattern that appears between a reversal and indicates a price decline. Traders use it to find trading opportunities and decide when to close their trades, whether they are bullish or bearish.

How is the Gravestone Doji Candlestick Pattern Formed?

It suggests that bullish trends tried to find the upper limit of price, but the presence of strong bearish trends pulled down the closing price to the level of the opening price. It represents a bearish pattern during a reversal that will be followed by a downtrend in price. Traders can use the pattern to determine when to take profits—either through a bearish trade or on a bullish position. The Gravestone Doji candlestick pattern can be interpreted as a bearish reversal when it occurs at the top of uptrends.

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The doji shadow indicates price movement, following which the price reverted to the same level at the close data point. However, the Gravestone Doji is characterized by the presence of the body as a line, indicating an opening and closing price that are near-identical. It takes 5.5 candles to confirm it and 5.6 to invalidate the

price movement. With a 0.196$/$ expected outcome, you can earn $19.6 for every

dollar you risk.

What Is a Gravestone Doji? Definition & Example & How to Trade Using Gravestone Doji

Besides, you should use other techniques such as moving

averages, MACD, RSI, and Fibonacci levels to confirm the impending price

movement. While not common, the bulls might hijack the market pushing prices

back up again. However, it can also suggest market

ranging, forcing prices to stagnate within a certain range before a downtrend.

gravestone doji meaning

It is essential to consider exiting the transaction before the price falls and the bears entirely seize control of the authority. In the following article, we will discuss what a Gravestone Doji is, how it works, and how traders can use this tool to their advantage. If the low of the Gravestone Doji holds, the price may resume its upward trend.

Data Mining And Boredom (The Same Strategy Can’t Be Used On All Stocks)

When a low occurs below this level, a short trading position is assumed. Gravestone doji appears at a later stage in the uptrend and indicates loss of control by the bulls and a possible price drop. As the bulls lose control, the bears have more control over the market. Furthermore, it needs to be known that this charting pattern may appear in a bullish as well as bearish setup. Gravestone Doji indicates bearish dominance and its chance of success increases when the candle formation occurs at the market top. The candle forms when the security prices to go up at a level that cannot be sustained.

The long wick above the session opening and closing price indicates bearish trading sentiments for the trading session covered by the candlestick. In stock trading, technical analysts use different

candlestick patterns to curve out a possible price action. Some of the most

popular being the doji, hammer, morning star, and others. If the gravestone doji pattern has been formed, traders can wait for prices to fall before taking action to open buy positions.

Double gravestone doji

Further, to confirm the trend reversal, you should use other momentum indicators such as the RSI, MACD, and Fibonacci support and resistance levels. In financial charts, the Gravestone Doji trend is a bearish reversal trend. It indicates a potential trend reversal when it shows up at the upper side of an uptrend or after a prolonged period of bullish market activity. The pattern is frequently used by traders in conjunction with other candlestick patterns to spot possible entry and exit points for a trade.

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It can hint that the price is about to fall, especially if it appears after one long uptrend or near a resistance line. Doji and spinning top candles are commonly seen as part of larger patterns, such as the star formations by technical analysts. A spinning top also signals weakness in the current trend, but not necessarily a reversal. If either a doji or spinning top is spotted, look to other indicators such as Bollinger Bands® to determine the context to decide if they are indicative of trend neutrality or reversal. However, this is not a limitation and dojis can appear on any chart pattern. Some key signs to identify before trading are the presence of an uptrend, the shadow position, and the price channel.

Setting Stop loss on Continuing the Trade

This is particularly true during lower volume trading sessions, where a lone candle can reveal little about overall market sentiment. While it forms at the close of a downtrend, it is more

efficient at the end of an upward trend. The doji is popular with many traders;

however, most act on it until the next candlestick confirms a price movement


Either way, the gravestone Doji candle is a trend reversal pattern you must know. Read on to learn how to identify, and trade the Gravestone Doji pattern in the forex market. However, in some cases, the gravestone candle pattern can occur at the end of a downtrend and may signal a bullish reversal. While the Gravestone Doji is a helpful candlestick pattern for investors and traders to spot possible market reversals, it does have some constraints that should be considered. However, the Gravestone Doji Candlestick should be interpreted in tandem with other indicators and chart patterns to corroborate the bearish trend.

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