What is a Doji on a Gravestone?
• A tombstone doji is a bearish pattern that indicates a price reversal followed by a downward trend.
• A gravestone pattern can be used to signal the end of a bullish transaction or the beginning of a negative trade.
A dragonfly doji is the polar opposite of a gravestone doji.
What Does a Doji on a Gravestone Mean?
A gravestone doji pattern signals a negative reversal is on the way. The open, low, and closing prices do not have to be equal for the pattern to be acceptable, but there should be a small tail; otherwise, the pattern could be categorised as an inverted hammer, shooting star, or spinning top.. The bulls attempt to push to new highs during the session, but the bears force the price action back to near the open by the end of the session. As a result, the bulls are losing momentum, as evidenced by the lengthy upper shadow.
Trading the Gravestone Doji
Traders frequently exit long positions or enter short ones after spotting a gravestone doji pattern, though this candlestick pattern should be used in conjunction with other forms of technical analysis as a confirmation. Traders will frequently examine the volume linked with the session, as well as the activity of previous sessions, as potential indicators of the reliability of the pattern.
Gravestone Doji’s Limitations
On a downtrend, the tombstone doji can be used to advise a stop loss and eyeball a profit taking strategy, although these are less exact approaches than those provided by other technical indicators. Although volume and a confirming candle boost dependability, the tombstone doji is best used in conjunction with other technical tools to aid trade.
What Causes a Gravestone Doji to Form?
When the Open, Low, and Close prices of a candle are the same or nearly the same, a Gravestone Doji candle forms.
As previously said, it is a bearish candle because bears grabbed power from bulls and were able to hold it (pushing the price down) until the end of the session, with the potential to lower the price even further.
Here’s how a Gravestone Doji comes into being:
On the EUR/Dollar chart in a 12-hour time period, you can observe a tombstone doji that leads to a big sell-off..
We focus in on the 45-minute candles to examine what transpired from the beginning to the finish of the 12-hour candlestick, which might create a gravestone doji.
The session price increases up after opening, as you can see in the figure below. As the session progresses, the price fails to rise, is rejected, and eventually returns to near the session’s opening price, forming a gravestone doji in the upper image.
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.
Uptrending Gravestone Doji (or at Top)
Gravestone Doji, as previously said, is most likely to appear at the top of an upswing.
It’s a terrible sign for bulls in uptrends, especially in higher time frames like 4 hours or daily candles, but the notion applies to all time frames.
It indicates that the bulls are losing power and that the bears are gaining control of the price and pushing it lower.
The appearance of a Gravestone Doji at the top of an uptrend signals the conclusion of the upswing, and the uptrend is most likely over.
It’s a good idea to get out of the trade before the price drops and the bears entirely seize control of the market.
If bulls try harder in the next candle, there’s a chance of getting out on highs, but this isn’t always the case, and if you’re long, it’s better to leave sooner rather than later. The Gravestone Doji is a candlestick that serves as a solid proof that the market
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