Dragonfly Doji Candlestick Pattern Explained With Examples

The Hammer pattern, which has a small body and a long lower shadow, is formed near the bottom of a downtrend, just like the Dragonfly Doji. The Dragonfly Doji is a candlestick pattern that occurs when the high, open, and close prices are equal, or nearly similar, while a long wick has created a session low. A wick is a line used to show where the stock’s price has fluctuated to its opening and closing prices. You’ll notice that the price briefly increased, forming a gravestone doji candlestick.

The bottom of the lower tail tells the lowest asset price traded during that period. This candlestick’s presence is most significant when it appears after a downtrend, preceded by bearish candlesticks. The content presents a strategy using Bollinger Bands where Dragonfly Doji patterns below the lower Bollinger band signal a long trade, while those above the upper band indicate a short trade. The fact that buyers didn’t manage to push prices past the open, while sellers made the market perform a deep dip, becomes a sign that the market is hesitant about moving higher. As such, the buyers succeed to push prices back to where the market opened. However, there they find that sellers are have created a resistance around the open of the bar, and refuse buyers to push the market higher.

This suggests additional buying pressure during a downtrend and could anticipate a price gain. The signal is validated if the candle following the dragonfly raises, closing above the dragonfly’s close. The reversal is more reliable if the rally is more substantial on the day following the bullish dragonfly. A dragonfly doji candlestick is typically a bullish candlestick reversal pattern found at the bottom of downtrends.

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In contrast to other doji patterns, the dragonfly doji has a long lower shadow and an absence of an upper shadow. This pattern’s unique characteristics suggest that buyers have gained control and that the market may be ready for a potential uptrend. While Doji patterns can be valuable indicators of potential market reversals, they are not infallible. Market factors and subsequent price action may not follow the signal provided by the Doji. The takuri line candlestick pattern is a one-bar bullish reversal doji pattern that’s almost the same as a dragonfly doji. The difference between a takuri line and a dragonfly doji is that a takuri line has a longer lower shadow and occurs in a downtrend.

Dragonfly Doji is a basic candle shaped like a Hanging Man pattern (in an uptrend) or Takuri Line (in a downtrend). Due to the identical opening and closing prices, it is classified as a doji candle. The Japanese name means not only “dragonfly”, but also a bamboo-copter or bamboo dragonfly (jap. taketombo, 竹蜻蛉), which is a toy helicopter rotor that flies up when its shaft is rapidly spun. Shimizu notes that the market after the appearance of the Dragonfly Doji may behave as unpredictably as the toy –- they both rise and fall. Ideally, to increase the accuracy, we want to trade the Dragonfly Doji candlestick pattern by combining it with other types of technical analysis or indicators.

1. The dragonfly doji pattern is a single candlestick pattern that typically occurs after a downtrend and suggests potential bullish reversal.
2. With no more sellers left in the market, buyers are able to enter at the beginning of the next uptrend.
3. Multiple types of doji candlesticks lead to confusion for many technical analysts.
4. However, it is worth noting that the inability of buyers to push the price above its open level may indicate a potential weakening of bullish momentum.
5. At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content.
6. Other forms of confirmation could be a break above resistance levels or the appearance of bullish divergence on an oscillator like the RSI or MACD.

Dragonfly Doji With Bollinger Bands

We teach day trading stocks, options or futures, as well as swing trading. Our live streams are a great way to learn in a real-world environment, without the pressure and noise of trying to do it all yourself or listening to “Talking Heads” on social media or tv. They are much harder to find but are reliable reversal signs within a defined trend. After a downtrend, the Dragonfly Doji can signal to traders that the downtrend could be over and that short positions could potentially be covered.

Our trade rooms are a great place to get live group mentoring and training. It’s a smaller reversal candle, and the success of the pattern depends on the strength of the bullish pattern after the reversal. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs.

It provides bullish signals and is considered a neutral pattern as it provides continuation and reversal signals, depending on its context within a trend. The meaning of a dragonfly doji is that there is uncertainty in the market, and traders are prompted to carefully analyse other factors before making trading decisions. A Dragonfly Doji is a type of candlestick pattern that can signal a potential price reversal, either to the downside or upside, depending on past price action. The pattern is more significant if it occurs after a price decline, signaling a potential price rise. If it appears after a price advance, it indicates more selling is entering the market and a price decline could follow. The pattern needs to be confirmed by the candle following the Dragonfly Doji.

What are other types of Doji Candlestick Patterns besides Dragonfly Doji?

The dragonfly has no upper shadow, but it has a very small body and an extended lower shadow, while the hammer has a body at the top of the candlestick and a long lower shadow. The hammer typically appears after a downtrend, signalling a reversal, while the dragonfly doji appears in uptrends and downtrends. Traders often pay close attention to them when making trading decisions.

The Dragonfly Doji pattern is significant as it suggests a potential bullish reversal in the market. It indicates that selling pressure has weakened and buyers are stepping in, potentially leading to an upward trend. Second, the dragonfly doji pattern lacks consideration for trading volume, which is usually a pretty important part when confirming the strength of a signal.

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1. The dragonfly doji is a type of doji that opens and closes near the high.
2. The body of a candlestick is equal to the range between the opening and closing price, while the shadows, or wicks, represent the highs and lows of the trading period.
3. Yes, we work hard every day to teach day trading, swing trading, options futures, scalping, and all that fun trading stuff.
4. Combining the Dragonfly Doji candlestick pattern with the Supply and Demand indicator can help traders make more informed trading decisions.
5. It suggests that the preceding trend might be about to reverse, with the Doji Star representing a period of indecision.
6. The result is that the open, high, and close are all the same (or about the same) price.

Prior to making any decisions, carefully assess your financial situation and determine whether you can afford the potential risk of losing your money. Traders should always seek additional confirmation from other technical indicators to validate the signals generated by the Dragonfly Doji. The Dragonfly Doji is characterized by a long lower shadow (or wick) and no upper shadow, with the opening and closing prices at the high of the day. A doji is a name for a session in which the candlestick for a security has an open and close that are virtually equal and are often components in patterns.

It is difficult to estimate the return of a trade that is made according to pure dragonfly doji analysis. Traders need to use other technical indicators or patterns to identify the proper time for an exit. They usually create orders right dragonfly candlestick after the confirmation candlestick appears. A trader can long a stop loss below the low of a bullish dragonfly or short a stop loss above the high of a bearish dragonfly. The dragonfly doji is a powerful candlestick pattern that can provide valuable insights into the market’s sentiment. In this section, we will discuss the significance of a dragonfly doji and how it can be interpreted in both bullish and bearish markets.