How to Trade Dragonfly Doji Candlesticks

Dragonfly doji candlesticks are a reversal candlestick that are found at the bottom of downtrends. They are shaped like a T and signal a potential reversal to a new uptrend. They have a long shadow and almost no upper body. Enter trade long on the break above the top of the candle. Watch our video on how to identify and trade dragonfly doji candlesticks.

What Is a Dragonfly Doji Candlestick Pattern?

Dragonfly Dojis

Dragonfly doji candlesticks are an indecision candlestick and aren’t as common as other patterns. They are part of the doji family. They look like a T with a long lower shadow and no upper wick. Many of times they are black or a neutral color on stock charts. If you want to trade them, make sure you’re buying them (or selling them) at a significant level of support or resistance.

They confirm indecision among traders and are a more difficult pattern to find. These candlesticks tell a story whether they’re alone or together with a group. Watch our video above to learn how to identify them.They confirm indecision when stock trading. The dragonfly doji candlestick is a more difficult pattern to find. These candlesticks tell a story whether they’re alone or together with a group.

Candlestick charts have been apart of trading for many years. In fact, they were first implemented back in the Japanese race trade. The Japanese rice trader Homma realized that trading has a lot of emotional energy was transparent in candlestick trading.

This emotion can and will translate into the price of a stock. He came up with candlesticks as a way to track how emotion affects supply and demand. As a result, here we are hundreds of years later using his methods.

4 Data Entries

Dragonfly Doji Candlesticks

Candlesticks have 4 data entries that form them. Dragonfly doji candlesticks forms when the open, high of day and close are all the same but the low of the day creates a long shadow. As a result, they look like a T.

It has a long lower wick but no top wick. This is telling you that there were a lot of sellers for most of the day. As a result, buyers came in at the end of the day and pushed the price back up.

The price is moved back up to the high of day forming the T shape. These indecision candlesticks show signs of a reversal.  A bullish candlestick is green while a bearish is red. We teach how to trade them on our live daily streams. We teach day trading as well as how to trade stock options.

What a Dragonfly Doji Candlestick Tells You

Dragonfly doji candlesticks show a reversal. But the implications of said reversal depend on price action and confirmation.

The long wick shows evidence of buying pressure. There is that long tail though so sellers are in abundance as well. They are a lot harder to find but within a defined trend, they’re a pretty reliable reversal sign.

Sometimes the price of the stock doesn’t show it’s actual value because it’s fallen so low. The bulls see that and come back in to buy which in turn pushes the price back up. It’s all about supply and demand. When price heads back up to the high near close, dragonfly’s tell you that demand is starting to outweigh the supply.

Dragonfly Dojis

Is a Dragonfly Doji Candlestick Bullish or Bearish?

A dragonfly doji candlestick is typically is a bullish candlestick reversal pattern found at the bottom of downtrends. They look like a hammer candlestick but have much thinner real bodies. They are also found at support levels signifying a reversal to the bullish upside. 

Paired With Technical Analysis

dragonfly doji candlesticks

A dragonfly doji candlestick pattern used with technical analysis can be pretty powerful. These candlesticks tend to form around support and resistance depending on the trend the stock is in. These are indecision candles that help confirm reversals.

When a stock hits support or resistance and doesn’t break reversals usually happen. That’s why you need to know technicals. You can using moving average lines like the simple moving average or VWAP as a guide to support and resistance.

Real bodies of candlesticks as well as wicks are also commonly used to find support and resistance. After a downtrend, when they are found at support this can signal a bullish reversal.

Comparatively, after an uptrend, when they are found at resistance this can signal a bearish reversal. Candlesticks as well as moving averages are vital to support and resistance.

Download our candlestick charts free e-book.

Dragonfly Reversal Candle Setup
A 15 minute Dragonfly reversal on $MSFT. The stock gained several percent after.

Inside Patterns

Candlesticks group together to form patterns. One thing you need to remember is that doji candlesticks can look similar. Don’t get caught up trying to figure out which doji is which.

Look at the bigger picture. They all have a small real body which means they’re indecision candles. They’ll either signal a reversal or continuation. Looking at all the candlesticks together gives you the bigger picture.

Traders are creatures of habit. They trade patterns. Whether bullish or bearish, candlesticks form patterns. Look at the patterns in conjunction with technical indicators to get a trend and direction.

Always look for a confirmation though. Patterns aren’t 100% accurate and can break down. If they were always accurate, everyone would succeed 100% of the time.

If everyone was always succeeding in the stock market, the whole world would be trading. Take our candlesticks patterns course.

How to Trade Dragonfly Doji Candlesticks

  • Knowing how to trade dragonfly doji candlesticks is quite simple: 
  • Traders take a long position when price breaks above the high of the candlestick.
  • They use a candlestick close below the low as a stop level. 
  • They might take a short at the break of the low and use a candlestick close above high as a stop.

Using the Dragonfly Doji Candlestick

Dragonfly doji candlesticks may not be the most common pattern out there. As a trader, whether it’s day trading or swing trading, you should always be aware of what candlesticks represent.

Candlesticks are uniquely used to tell a story as well as key support and resistance levels. You will need to spend the time studying together with practicing.

Only then can you put this knowledge to good use when you’re trading for real. Take our free online trading courses.

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