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Gravestone Doji Candlestick Pattern – What does it Mean & How to Trade

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Gravestone Doji Candlestick is one of the most controversial Candlesticks should be known as a trader. It is easy to learn but so essential to know the concept beyond as well because Doji candlesticks usually give a Market Reversal or Continuation sign which can further lead to indicate a trading opportunity.

Here we talk about what is a Gravestone Doji, how Gravestone Doji forms and how to trade it correctly and with well-managed risk.


What is a ‘Gravestone Doji’ Candlestick?

Gravestone Doji is a candlestick in which the open and close price of the candle is at the same level or are very close on the same level.

image of bearish gravestone doji candlestick formation
Gravestone Doji Candlestick Pattern in Detail

Gravestone Doji belongs to the group of Doji candles in which the open and close price are at the same level or are very close on the same level

Is Gravestone Doji bullish or bearish?
Gravestone Doji is not bullish. it is a bearish reversal candlestick which mostly occurs at the top of uptrends.

When this pattern is seen it means during the session, bulls lost their bullish power and couldn’t maintain the it (to keep the same price or raise the price to higher levels);
Meanwhile, bears came and took power from bulls and forced the price down to near the opening price.
So there is a tiny body or no candle body in a Gravestone Doji.


How a Gravestone Doji Forms?

A Gravestone Doji candle forms when the Open, Low and Close price of a candle are same or about the same price.

As previously mentioned, it is a bearish candle because bears took power from bulls and were successful to keep it (bringing the price down) till the close of the session and possibly can take the price down even more.

here we will explain how a Gravestone Doji forms:

in the below picture, you can see a gravestone doji which leads to a massive sell-off on EUR/Dollar chart in a 12-hour time frame.

gravestone doji at top in uptrend leading to price drop
gravestone doji candlestick at top leading to heavy price drop

as it is a 12-hour candlestick we zoom in into 45-minute candles, to see what happened from the beginning to the end of this 12 hour, which could form a gravestone doji.

as you can see the opening price in the image below, after opening the session price goes up. as the session going on, price fails to go higher, gets rejected and at the end of the session comes back to near the opening price of the session and thats how you see a gravestone doji on top in the upper imge.

gravestone doji formation example
How a gravestone doji forms during a session


Gravestone Doji Shape

Gravestone Doji is opposite of Dragonfly Doji which is a bullish pattern usually found at the end of downtrends.

To remember Gravestone and Dragonfly Doji shape and pattern, this is better to imagine how a dragonfly or a grave shape is.

A Dragonfly Doji looks like a Dragonfly and like the word T (which is like having the wings of dragonfly near the head on top). A dragonfly can fly and go up so as a dragonfly Doji can bring the price up and has bull power in it.

A Gravestone Doji looks Reversed compared to dragonfly Doji and is like the reverse of word T (Which is like sticking on the floor at the bottom like a grave). A grave wants to stick to the ground and has bear power.

basic gravestone doji candlestick shape
Gravestone Doji Candlestick Shape

Gravestone Doji is a long line candle which means the shadow should be at least 75 percent or higher of the candle hight.

In some cases, the base candle may resemble some other candlestick patterns. for example, shooting stars (if the body would be present but thin and there would be no lower shadow with the long upper shadow it could resemble a shooting star candle.)

The most important thing in Doji candlesticks is the overall shape and in what context they appear.


Examples of Gravestone Doji in Uptrends and Downtrends

A Gravestone Doji can both come on uptrends or downtrends; here we show the Gravestone Doji in both ways and translate it for real-world usage.


Gravestone Doji in Uptrend (or at Top)

As it is said before, Gravestone Doji is most likely to come at the top of an uptrend.

In uptrends, it is a bad sign for bulls, especially in higher time frames like 4 hours or daily candles but the concept maintains the same in all time frames.
It means that the bulls are losing their power and bears are taking control of the price and are pushing the price down.

in an uptrend the appearance of a Gravestone Doji at the top indicates the announcement of uptrend end and the uptrend is most likely over.

It should be taken into account to get out of the trade before the price goes down and bears completely take control of the power.

Gravestone Doji at top of the uptrend followed by confirmation
Gravestone Doji at top of an uptrend can indicate uptrends end

There may be a chance to get out on highs in the next candle if bulls try more but its not always likely, and it is better to get out of the trade sooner if you are in a long position.

Gravestone Doji is a candlestick which is a strong confirmation to show the market top.


Gravestone Doji in Downtrend (or at Bottom)

Gravestone Doji in all cases is bearish so never mind it comes on uptrends or downtrends you should be careful about that.

The appearance in a downtrend my suggest the continuation of a trend or move to sideways trend and market ranging.

Gravestone Doji at the bottom is not a considerable bottom confirmation, and the market may still have room to go down even more.

gravestone doji at bottom of downtrend
gravestone doji at bottom of downtrend does not indicates downtrend end


Double Gravestone Doji

When seeing a double Gravestone Doji, the market looks more bearish, and bull power is so weak.

Usually, if the low of the two Gravestone Doji breaks, the market starts to go down quickly.

You should not consider candles only in this situations. You should also look at RSI, Fibonacci levels, MACD, Moving Averages, Bollinger bands, CMF, OBV,… to see is there any confluent sign of whether the market is likely to go down or wait and give a new chance to bulls. However, remember, it is essential to wait for a confirmation and act upon it.


Triple Gravestone Doji

Triple Gravestone Doji is also like a double Gravestone Doji’s.

Wait for confirmation and check other indicators to prepare yourself for best market reaction both mentally and for risk management side.


Gravestone Doji with Gap-up

In gap ups, it usually is a market top, and you should consider an exit. Maybe it is a gap down in the next day.


Gravestone Doji with Long Shadow

If you see a Gravestone Doji with the huge shadow it is very bearish in a high time frame, it may also be like a shooting star candle, and the appearance of them are showing the market is very bearish, and the price might go down soon (depends on the timeframe it appears on the chart.)


How to Trade a Gravestone Doji?

Now that we know the basics of a Gravestone Doji candle let’s get to know how to trade it.

What you should know before we dive into the details is that you should consider your trade with some confluent reasons.

Candlestick analysis is just one of the tools you have in your hands, although it is vital to know and use but it gives you best results when you combine it with other tools and methods like Fibonacci levels, horizontal support, and resistance levels, moving averages, analyzing momentum with RSI, MACD, OBV, CMF,… so set your trade accordingly.


Opening a Gravestone Doji Trade

As we said during the article, when you see a Gravestone Doji candlestick after a strong uptrend, it is likely that a trend reversal is going to happen.

Once you identified Gravestone Doji, a simple strategy can be opening a short position when you saw a confirmation, and low of the Doji breaks down.

Remember your trade trigger should be when the low of the Doji breaks down. If it holds market may hold and go higher, you never know.


Risk Management when Trading the Gravestone Doji Pattern

When you enter a trade based on Gravestone Doji like any other trade, you should preserve your capital and place a proper stop loss on your trade to avoid huge losses if the trades go in the opposite direction.

The best place to put your stop is slightly above the wick (shadow) of the Gravestone Doji.
The problems are that your risk level may vary by the wick size. It may both be very small or very far and you risk too much which you may not be comfortable.

If you want to precisely look for a stop loss point, where it is not too tight that you get caught by stop hunters and also is not too far that your level of risk be too high you can use volume profiling and identify the exact point.

If you want to know more about the volume profiling and how to set a stop loss intelligently with the help of volume profiling you can check out this link.


Profit Targets for the Gravestone Doji Pattern

As it’s critical to enter a trade on proper time, you won’t be profitable or lose your profits if you don’t have an exit plan on your trading.

With Gravestone Doji, we recommend you to use the candle wick to exit it a trade. How exactly? I’ll explain with more details.

It would be better to check the size of the Gravestone Doji (or the wick) and set your first profit target as the same size and the size of the candle.

The next profit target can be double the size of the candle.

You can also draw Fibonacci levels and match and find the best potential spot where the size of the candle (or double it) reach the nearest fib level or support and resistance use.

If you use other methods like Elliot wave or TD sequential, you can also combine their exit points with this method to have the best results.


Setting Stop loss on Continuing the Trade

Sometimes you see that the trade is going fast and well in your favor, and you may decide to move from a short scalp to a longer term position like a day trading position or a swing position.

In this scenario, you should recalculate you stop and spot a lower (or higher) point for your stop loss to avoid losing your profits or your capital.

If you are a new trader, we don’t recommend you to do this especially in highly volatile markets like cryptocurrency markets and other liquid markets.

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