Gravestone doji candlesticks are reversal candles that are 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 price to fall below this candle to confirm reversal. Watch our video on how to identify and trade gravestone doji candlesticks.
What Is a Gravestone Doji Candlestick Pattern & How to Identify These 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. Many of times they are black or a neutral color on stock charts.
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. Watch our video above to learn how to identify gravestone doji’s.Candlesticks actually come from Japan. The rice trade had been in full swing for awhile when a trader named Homma realized something. He began to see the correlation between the price action of a stock and emotions. Emotions, sentiment, fear, greed. All drive prices.
As we all know, emotions can move a market. In fact, traders trade the greed and fear. We can take advantage of the stories candlesticks make by learning the patterns they make.
They leave clues which hint at direction. The main thing the tell us is a story of whether the candlesticks are bullish or bearish. Hence why being able to read candlesticks is so important for traders to increase the odds of success.
What does a gravestone doji candlestick pattern tell us when stock trading? While they can be found at the end of a down trend, they’re mostly found in an uptrend when a stock is about to reverse.
It’s open price along with the close and low of day are all pretty much near each other. The high of the day creates the long shadow. The gravestone doji candlestick is an upside down T. Remembering that a T is a gravestone doji is very helpful.
That long upper wick tells you 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. If you find one near a key level of support or resistance, you’re getting even a stronger confirmation.
Similar But Different
It’s important to remember that different dojis can look similar. In fact, they all have that short real body which tells you that day ended in indecision.
As a result, don’t get caught up in trying to determine exactly what the candlestick is. Learn to feel the flow of the candlestick chart without being caught up in the exactness of the candle.
Candlesticks are important regardless of using day trading strategies or swing trading strategies. We teach how to trade gravestone candlesticks on our live daily streams. Check out our trading service to learn more about trading. Also, we teach our members the ins and outs of the trading world and don’t hold anything back. It’s not about money.
We will never make you spend a ton of money to access our content or get our trading edge. We offer it all. What you see is what you get and we take care of our community members!
What Does a Gravestone Doji Candlestick Pattern Indicate?
Gravestone doji candlesticks are bearish indecision candles. In fact, it’s a popular bearish reversal signal. When a trader sees the gravestone doji pattern, they’re getting out of their trade if they’ve been long the stock or option. The gravestone doji is sending a serious signal to the trader to take their profits or losses and get out.
Comparatively, a trader who was going to go short or buy 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’s going to cause you lost of headaches. Technical analysis also comes into play and is an important part of a gravestone doji candlestick pattern. The more technical analysis you do with your charting, (to a limit, there is such a thing as too much!) the better your odds of trading success.
Using Technical Analysis
By now, if you’ve been watching any of our watch list videos, you’ll know that candlesticks show key areas of support and resistance. You can find these levels using the real bodies and wicks (or tails) of candlesticks.
That’s why knowing how to read candlesticks is so key. It’s the first line of defense in technical analysis and putting together your trading plan. You can use moving average lines like the simple moving average or VWAP as well to complement your candlestick trading.
But without candlestick knowledge, the other indicators aren’t going to have as much meaning to you. Knowledge is power and if you can’t read the charts properly, you’re setting yourself up for failure.
Use the two in tandem and then you’ve got a pretty good set up going. Now add into that candlestick patterns.
Patterns Within Patterns
Candlesticks grouped together form patterns. These patterns tell a additional stories. Not knowing how to find candlestick patterns can cause you to make a bad trade. No one wants that! We are here to help you avoid that mistake. We made a ton of free courses that give you a good shot at avoiding the common newbie mistakes.
Patterns will never do what you think they should 100% of the time. As we’ve started many times, emotions move markets. Patterns can set up to make a move and then break down.
When a bull pattern breaks down or a bearish pattern doesn’t continue, that too is a confirmation. Not every pattern will play out how you think. Watch closely to go short or long when a pattern doesn’t hold. The market loves to lay traps, be ready for them and follow the volume and you’ll have a better chance of a successful trade.
Reversal Continuation or Algo
It’s important to know if a pattern is a reversal pattern or a continuation pattern. Gravestone doji candlesticks are typically apart of reversal patterns. But that doesn’t mean you wouldn’t see them in a continuation pattern.
Sometimes you’ll see LOTS of gravestone dojis on a low volume chart. That is because HFT’s or Algos are trading these stocks while there are no “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, you need confirmation. You get confirmation by the next few candlesticks as well as moving averages. Do you see how all this works together? Take our free candlestick reversals course and step up your candlestick game. It’s jam packed with reading and video content for you to study the markets.
How to Trade Gravestone Doji Candlesticks
- Knowing how to trade gravestone doji candlesticks is quite simple:
- Traders take a short at the break of the low and use a candlestick close above high as a stop.
- They might take a long position when price breaks above the high of the candlestick.
- Then use a candlestick close below the low as a stop level.
Gravestone doji candlesticks can be used whether you’re trading penny stocks or options. Learn how to find them in patterns and use them with technical analysis. No trader is successful 100% of the time.
Even the best traders fail 30-40% of the time even with all of these tools. Study and practice, practice and study. That way you can become really good at finding the patterns within the patterns.
It might take you 1-3 years to get a handle on it. Or you could learn it in 1-3 months. It all depends on your personality, aptitude, and lifestyle. Some people are busy, others have a lot of time on their hands.
Don’t rush it! Our content is here to stay, take your time and learn at your own pace. And don’t get discouraged if it takes you longer than others. Everything is relative. Take our candlesticks patterns course.
When you do this, you set yourself up to give yourself the best success. Even if you lose a trade here and there you’ll have the confidence to keep going because you know you have the tools to be successful. Take our free online trading courses.