The Dragonfly and Gravestone Doji strategy is a powerful candlestick-based approach used to spot high-probability market reversals. These two distinct Doji variations reflect extreme rejection of one side of the market—bulls or bears—and when they occur at key levels or after strong trends, they can offer excellent entry opportunities.

This article breaks down how to correctly identify, interpret, and trade the Dragonfly and Gravestone Doji patterns using technical confluence, confirmation, and precise risk management.

What Are Dragonfly and Gravestone Doji Candles?

Both patterns are single-candle Doji variants:

• Dragonfly Doji:
  • Open, high, and close occur at (or near) the same price.
  • Long lower wick, no upper wick.
  • Signals rejection of lower prices → Potential bullish reversal.
• Gravestone Doji:
  • Open, low, and close occur at (or near) the same price.
  • Long upper wick, no lower wick.
  • Signals rejection of higher prices → Potential bearish reversal.

Why These Doji Patterns Are Important

These patterns signal extreme rejection and indecision, often seen at market tops or bottoms:

• They indicate that one side (bulls or bears) attempted control but failed.
• Ideal for spotting trend reversals, false breakouts, or exhaustion.

When combined with confirmation and technical levels, these patterns become highly reliable.

How to Trade the Dragonfly & Gravestone Doji Strategy

A structured approach is key. Here’s how to turn these signals into profitable trades.

1. Confirm the Context

Both Doji patterns are only effective when they appear:

• After a strong trend or price swing
• At major support/resistance or round numbers
• Near trendlines, Fibonacci levels, or moving averages

Avoid Doji patterns in sideways markets or mid-range—they carry little weight there.

2. Identify the Candle Shape Accurately

Dragonfly Doji:

• Appears after a downtrend
• Long lower shadow, no upper wick
• Close = Open = High

Gravestone Doji:

• Appears after an uptrend
• Long upper shadow, no lower wick
• Close = Open = Low

Small variations are acceptable, but extreme wick rejection and small real bodies are crucial.

3. Wait for Confirmation

Since both are indecision patterns, don’t enter on the Doji alone. Wait for the next candle to confirm direction:

• Bullish confirmation (Dragonfly): Strong green candle closing above the Doji’s high.
• Bearish confirmation (Gravestone): Strong red candle closing below the Doji’s low.

Entry:

• Conservative: Enter after confirmation candle closes.
• Aggressive: Enter on break of the Doji high (Dragonfly) or low (Gravestone).

4. Place Strategic Stop-Loss and Target Levels

Stop-Loss:

• For Dragonfly: Below the Doji’s low
• For Gravestone: Above the Doji’s high

Take-Profit Targets:

• Nearest swing high/low
• Fibonacci extensions (127.2%, 161.8%)
• Round numbers or key structure zones

Aim for a 2:1 risk-to-reward minimum.

5. Combine with Indicators for Precision

• RSI Divergence: Strengthens the reversal case
• MACD Crossovers: Signal momentum shifts
• Volume Spike: Confirms institutional involvement in the rejection
• Bollinger Bands: Doji forming outside upper/lower band often indicates mean reversion

6. Use Appropriate Timeframes and Markets

Timeframes:

• 1H, 4H, Daily are ideal
• Weekly for position trading

Markets:

• Forex, stocks, indices, gold, crypto

The strategy is most effective in volatile, trending markets where price overextends and then sharply rejects.

Strategy Summary Table

Criteria	Dragonfly Doji	Gravestone Doji
Prior Trend	Downtrend	Uptrend
Wick Structure	Long lower wick	Long upper wick
Confirmation Needed	Bullish candle above high	Bearish candle below low
Entry	Break or close beyond Doji high	Break or close below Doji low
Stop-Loss	Below Doji low	Above Doji high
Best Used At	Support, trendlines, round numbers	Resistance, trendlines, round numbers
Risk/Reward Ratio	2:1 or better	2:1 or better

Conclusion: Mastering the Dragonfly & Gravestone Doji Strategy

The Dragonfly and Gravestone Doji strategy offers a clean, disciplined way to catch market reversals with minimal risk and high conviction. By combining these candlestick formations with confirmation, key levels, and supporting indicators, traders can build consistent setups that align with institutional flows and price action logic.

To build mastery in using candlestick strategies like these as part of a complete trading system, explore our Trading Courses at Traders MBA and learn how to trade with precision across all markets.