Dragonfly Doji: Understanding This Pattern

They both clearly show an action taking place the same way pin bars do and they both have the same effect upon the traders in the market when they form. The similarities between a dragonfly doji candlestick and a pin bar are often referred to as the “ghost in the machine”. This type of candlestick is formed when the open and close price of a security are nearly the same. They are very similar to pin bars, but there is one important difference.

When trading the Dragonfly Doji, we want to see the price first going down, making a bearish move. The pattern is bullish because we expect to have a bull move after the Dragonfly Doji appears at the dragon fly doji means right location. In fact, Doji’s opening and closing session of the candle is almost the same. Prices will go much lower than the open price and then close the day close to or at the open price.

Construction of the Dragonfly Doji Candlestick

A frequency rank of 44 means it is more plentiful than many other candles,
so you should see it often in a historical price series. The performance rank, at 98, is near the bottom of the list. Do not expect price to trend for long after a dragonfly doji. Many pro traders believe that you should confirm dragonfly doji candle price action with the next candlestick on every chart.

• It’s a unique chart pattern and demonstrates a significant swing in momentum to the upside which is perfect for swing trading.
• The length of the lower shadow may vary, giving it the appearance of a plus sign or a cross.
• In this article we will dive into how to spot a dragonfly doji.
• No assurance is given at the price that will continue in the expected direction of the confirmation candle.

It’s a reversal pattern because before the Dragonfly Doji appears we want to see the price going down, thus it’s also a frequent signal of the end of a trend. Risk management for trading the dragonfly doji pattern is hard because you should consider many factors along the way. When price trend is downward, this candlestick shows bears pull the price down, but bulls defend and push it up to close it almost precisely on opening price. Whatever type of Doji you encounter in the markets usually means that the sentiment is mixed. Neither the bulls nor the bears had the upper hand by the end of the session, despite any price action.

Some examples of signals Dragonflies can give during downtrends would be:

The Bullish Bears trade alerts include both day trade and swing trade alert signals. These are stocks that we post daily in our Discord for our community members. People come here to learn, hang out, practice, trade stocks, and more.

To be valid, confirmation candlesticks must be accompanied by strong volumes. Strong volumes accompanying the Doji Dragon also considerably strengthen the signal. In an uptrend, the confirmation candlestick should be a bearish candle closing below the Doji Dragon low. When the confirmation candlestick is bullish, it suggests more of a continuation or a break in the trend. This pattern appears when the opening prices and closing prices are at the same level and when the low is significantly lower than the open, high, and close prices.

How to spot Dragonfly Doji Pattern?

No assurance is given at the price that will continue in the expected direction of the confirmation candle. Traders will need to find other locations for stop-loss that may not justify the potential reward of the trade. The candlestick patterns, indicators are required to exit the trade when it is profitable.

Especially if they are used with another indicator or support levels. Both of these patterns indicate a potential reversal imminently. However, it doesn’t always mean that the trend is guaranteed to change because of this dragonfly candle appearing. This long lower wick suggests that sellers sold aggressively during the period of the candle. Since the candle closed near the open the price was able to recover and close near the high.