Gravestone doji candlesticks are reversal candles found at the top of an uptrend or near resistance levels. They are shaped like an upside-down T with a slim real body and signify a possible reversal to the downside. Look for the price to fall below this candle to confirm the reversal.
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What Are Gravestone Doji Candlesticks?
Gravestone doji candlesticks are a member of the doji family. They are typically found in up trends signifying a potential reversal to the downside. They have a small flat real body, longer upper wick, and look like an upside-down T.
Gravestone doji candlesticks make up candlestick patterns and tell a price action story. A “GS” candlestick is a bearish candle. Plain and simple.
This candlestick can be found in bearish trends. However, it’s typically found in a bullish trend that’s about to reverse.
What do gravestone doji candlestick pattern tells us when stock trading? First, while they can be found at the end of a downtrend, they’re mostly found in an uptrend when a stock is about to reverse.
Its open price and the close and low of the day are all pretty much near each other. The high of the day creates a long shadow. The gravestone doji candlestick is an upside-down T.
That long upper wick tells us the bulls had control throughout the day. Then the bears came in and drove the price back down to end the day, forming the pattern. It shows strong bears during that time frame. An even stronger confirmation would be if found near a key support or resistance level.
Similar But Different
It is important to remember that different dojis may look similar; however, they all have that real short body that tells us that day ended in indecision.
Learn to feel the flow of the candlestick chart without being caught up in the exactness of the candle.
What Does It Indicate?
Gravestone doji candlesticks are bearish indecision candles. These dojis may signal the trader to take their profits or losses.
A trader going short or buying put options could see this and make that trade. As always, the reversal signal of a gravestone doji needs confirmation and depends on price action. If you can’t read the price action, it will cause you many headaches. Technical analysis also comes into play and is an important part of a gravestone doji candlestick pattern.
How to Trade Gravestone Doji Candlesticks
- Traders take a short at the break of the low and use a close above the high as a stop.
- They might take a long position when the price breaks above the candlestick’s high.
- Then use a candlestick close below the low as a stop level.
Reversal Continuation or Algo
Knowing whether a pattern is a reversal or continuation pattern is important. For example, gravestone doji candlesticks are typically a part of reversal patterns, but that does not mean they do not show up in a continuation pattern.
Traders will see lots of gravestone dojis on a low-volume chart. HFTs or Algos are trading these stocks without “real” buyers.
Just computers trading with each other on low volume. Don’t fall into these traps! Only buy when volume shows there’s a real presence. So, it would be best to wait until confirmation by the next few candlesticks, as well as, moving averages.
