Both dragonfly and gravestone doji candlesticks contain most of the features found on pin bars but for some reason candlestick books and websites cite them as being different, why they consider them to be different to pin bars is due to a very small occurrence in the open and the close of the candlestick. When a pin bar forms the point where the candle opened and where it closed are always different, you see this as the body of the pin.
When dragonfly or gravestone doji candlestick forms there is almost no difference or a really tiny difference between the open and close price meaning there is no body found on the candlestick.
The lack of a body on the candle is the reason why the books say pin bars have a higher chance of causing a reversal than dragonfly and gravestone doji candlesticks. Dragonfly and gravestone doji candlesticks look incredibly similar to pin bars, you may have seen one before and assumed what you were seeing was a pin bar due to how much they look-alike.
The only difference between the two is when a pin bar forms there is always a larger difference between where the candle opens and closes, with the dragonfly doji and gravestone doji the open and close of the candle are almost exactly the same as you can see in both images.
You can see how there is an obvious difference between where the pin bar opened and where it closed.
Dragonfly Doji
The fact the open and the close are so close together is the sole reason candlestick pattern books state pin bars have a higher probability of causing a reversal. They say if the body of the candle closes into the previous candle it means the sellers or buyers depending on the pin were able to push the market further against the direction to which the rejection was taking place therefore the chance of the market moving in the direction of the rejection is higher.
The problem with dragonfly and gravestone doji candles is there is no candle body, which makes it impossible for the candle to actually close into the body of the previous candle. Any candle which has a wick at the end tells us the banks took some kind of action during the time the candle was forming.
Top 5 Types of Doji Candlesticks
Either they were placing trades — taking profits — closing trades, whether or not the candle closed near its open makes no difference, one of these actions still took place to create the wick on the candle. It will always work best when you are using it with your other technical analysis and favorite trading indicators.
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Because this pattern is a sign of indecision they tend to work best at areas of supply and demand and when trading inline with the overall trend. Below is an example of a dragonfly doji that is inline with the strong trend higher.
A potential entry for this pattern could be to enter when price confirms the pattern on the breakout higher. Once this occurs the stop could be placed below the low of the doji and targets could be set according to your risk reward profile.
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Because this is a one candlestick pattern and it is signalling indecision it will not always work. Below is an example of a doji pattern that will often fake out a lot of traders. This candlestick is up at the extreme high and will often signal price is about to move back lower and not higher as most will look to trade the dragonfly doji. This scanner linked below is a free indicator you can add to your charts that will alert you when a dragonfly doji has formed.
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A nice thing about this indicator is that you can customize it to the exact doji you want to find. Whilst this can be a very useful chart pattern to use in your trading, make sure you keep in mind where it forms and the other price action context.
Dragonfly doji candlestick pattern - Candleopedia
It is also important you take note of other important technical analysis factors such as the current trend, the relevant support and resistance levels, trendlines and if price is stuck within a tight ranging market. How to find, enter and place stop losses on the best price action entries.
If you are new to Forex, then learning how to read a price action chart can be incredibly confusing.
I am using all aspects of technical analysis and price action in my trading with a goal to help you learn to do the same. Skip to content. Table of Contents. Overall Rating Trade Now. Investagal If you are new to Forex, then learning how to read a price action chart can be incredibly confusing.