Gravestone Doji looks a lot like Dragonfly Doji. Gravestone patterns have a longer upper wick than other Doji formations. This is because it lacks a long, downward shadow. It is considered to be bearish and only appears when there is an uptrend.
Gravestone Doji forms when the open, close, and low are identical. The candlestick often has no body and an upward shadow that makes it appear like an inverted T. Gravestone candlestick, like the dragonfly candlestick pattern is a sign of a trend reversal. However, traders must be cautious about designing trading strategies around it. We will be discussing how they can do this in this article.
Gravestone Doji is just one of many formations in the Doji category. Gravestone candlestick, however, is not like Doji star which indicates market indecisions. However, traders must confirm the change by forming the next candle. This candle appears in an uptrend market, which could indicate a bearish reversal.
How can you recognize a gravestone pattern from a photograph? It is rare, so you should be careful when you spot one. It looks like an upside down 'T' or inverted dragonfly pattern. This happens when the open, low and close prices are equal. However, buyers were also present in the market early to push the price higher. The market sought the upper resistance level, and the long upward shadow suggests that it found it. Although the bulls tried to push the price higher, the market ended up rejecting the upward trend with a strong selling spree.
The formation of Gravestone Doji is a crucial indicator for technical traders. This allows traders to visualise where the market resistance is, and possibly when the end of a long position is. However, Gravestone Doji is not enough to confirm anything. To confirm an end to an uptrend, it will need to be confirmed by the candlesticks that are forming near the gravestone. This could be a break in the ongoing uptrend. However, there is no trend reversal. Traders who are preparing to exit the markets usually take their position at the formation of the next candle.
Although a gravestone pattern may form at the end a downtrend it is more common to find it in an upward trend, which signals the beginning of a bearish one. A gravestone is distinguished by its long shadow from other similar formations such as hammer, shooting stars, or spinning top.This suggests that bullish tendencies tried to find an upper limit to price but strong bearish tendencies pulled the closing price down to the opening price.
Traders should ideally exit long positions and enter a short position when gravestone occurs. It has the same reliability problems as other Doji patterns. Before confirming their position, traders should consider the volume of the session as well as previous trends to avoid making mistakes.
To identify an exit point, they often consult other technical indicators like relative strength index (RSI), moving average convergence divergence divergence (MACD) and moving average convergence divergence diversification (MACD). A well-known trading strategy is to position a stop-loss below the upper shadow. This strategy can be used in conjunction with a gravestone candlestick pattern.
In reality, both gravestone candlesticks and dragonfly candlestick are very similar. When confirmed, one signifies a bullish trend while the other indicates a bearish trend. Both of these forms require confirmation from the next candle. Both patterns provide traders with visual representations of uncertainty and help them to test their respective support or resistance levels in markets.
A gravestone candlestick appearing in an uptrend could indicate that a bullish phase is over and that bearish forces are beginning. It allows traders to plan their exits with profit. However, a gravestone pattern is not a sign of a trend shift. To plan their positions, traders need to wait until the next candle forms. This could be a sign of market indecision. However, the market can rise again. Gravestone Doji works best when it is accompanied by technical trading tools.