Dragonfly Doji Trading Guide with 2 Confluences

Dragonfly Doji suggests a possible reversal. The candle eventually has no body and a long lower shadow. It typically appears near the end of a decline. The identical opening and closing prices of this candlestick make it special. On the lower side, it features a sizable wick or shadow. The huge wick size indicates the false breakout that leads to a trend reversal



Dragonfly Doji vs Gravestone Doji

Gravestone Doji will signal a bearish trend reversal, while dragonfly Doji will indicate a bullish trend reversal. This is the primary distinction between the two candlestick patterns. Practically, a gravestone doji has a big wick above the candlestick’s closing price, whereas a dragonfly doji has a huge wick below the candlestick’s closing price. 

Dragonfly Doji vs Gravestone Doji


Hammer vs Dragonfly Doji Candlesticks

Both candlesticks have different shapes from one. The price of a Hammer candlestick closes slightly above or below the price of an opening Dragonfly Doji candlestick, which has an identical opening and closing price. Both candlesticks operate in the same way. Both show a reversal in favour of the bullish trend.

Hammer vs Dragonfly Doji Candlesticks


Understanding Dragonfly Doji 

A dragonfly doji is regarded as a warning indicator of a likely price reversal in security. It happens when security’s open, close, and high prices are nearly identical. Traders can locate the support zone or dragonfly Doji near the bottom of the chart.

A dragonfly doji is, therefore, T-shaped and has only a hanging down tail instead of an upper tail. When it has a lengthy lower tail, it means that the market has been saturated with selling, which has pushed the price of security lower for a while.

The closing price, however, can still stay at the open price level at the conclusion of that time frame. It implies that there are enough purchasers on the market to absorb this level of selling and reduce the price. A dragonfly doji may be a sign of a price reversal.

A downward trend in a security’s price may indicate an impending price increase. In this instance, the dragonfly is optimistic. The price reversal is confirmed, and trading options are available if the candlestick that opens immediately following the bullish dragonfly increases in price and closes at a higher price.

In contrast, a dragonfly doji, also referred to as a bearish dragonfly might indicate a price decline when the market had previously seen an upward trend. Confirmation will come from the subsequent candlestick’s downward movement. A dragonfly doji can be used by traders to guide their trading choices. Usually, they start placing orders as soon as the confirmation candlestick emerges.

Understanding Dragonfly Doji 


Indication of Dragonfly Doji Candlestick 

The dragonfly doji is a dependable sign of a trend reversal when it appears at the bottom of a downtrend. This is due to the price reaching a support level during the trading day, which suggests that the market’s sellers are no longer outnumbering purchasers.

A bull movement may occur in the next few days if the asset is deemed to be oversold, necessitating additional technical indicators. This could present an opportunity for more entry opportunities, particularly if the market opens higher the next day.

Price denial from the support area suggests buyers are more powerful than sellers and will reverse the bearish trend into a bullish one. However, the identical candlestick starting and closing prices indicate the market’s lack of liquidity.

Call to action

The break of the candlestick’s high is the only factor that verifies the trend reversal. When the market rises, it will rise before dropping down to the starting price. Price will now break through that level and begin to decline. Due to the enormous momentum of sellers, it will break a crucial level.

The price will return and increase to the opening price because there are sizable awaiting buy orders at the support zone. A Doji candlestick will then be formed when the price closes at its opening level.

Conditions for this Candlestick to Appear

There is no guarantee that a dragonfly Doji candlestick will stop the bearish trend. You must add confluences to boost a trade setup’s chances of success. The two confluences will strengthen the ability of this candle to reverse the trend. During oversold conditions or in the support zone, a dragonfly doji candle will appear. Check whether the price has breached the peak of the dragonfly Doji to see if the trend is changing. It shouldn’t develop throughout the chart’s sideways price trend.

Conditions for this Candlestick to Appear


Drawbacks of Dragonfly Doji

Price reversals happen frequently. Consequently, the dragonfly doji is rarely a very accurate sign of price reversals. It’s not a given that the price would stay in the trend even with the affirmation of candlestick. Generally speaking, a dragonfly doji with a greater volume than another with a lower volume is more trustworthy. It holds true for the confirmation candlestick as well.

Successful traders will generally hold off on confirming the likelihood of an uptrend after a Dragonfly until the next day. After a price increase, the appearance of the dragonfly can signal the possibility of a price collapse. A Dragonfly that is more active than usual is more trustworthy than one that is silent. The doji pattern’s inability to establish price goals is another drawback in conjunction with the reliability issue. The yield of a trade that is executed using only dragonfly doji analysis is impossible to predict. 


The dragonfly, in conjunction with the size of the subsequent candlestick, may suggest a long position from the stop-loss. Since a stop loss that is too long may nullify the benefits of the trade, traders must establish a new stop loss or abandon the trade. When the market’s buyers have successfully pushed the session’s candle from a session down back to the session’s open price, a dragonfly doji has been formed. The Dragonfly Doji trend should be combined with additional indicators to identify possible buy signals. 

Saman Ali

Saman Ali is a Professional Financial Researcher, Quantitative Analyst and an Experienced Writer for more than 5 years. Saman’s main passion is for Cryptocurrencies, Stocks, Forex and Blockchain Technology. She holds an MBA in Finance and has specializations in producing high quality content about Cryptocurrencies, FX, Broker’s review, Price Predictions, Fundamental & Technical Analysis, and Educational Content.

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