The Complete Guide to Gravestone Doji

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Day traders and swing traders who are just starting out can examine techniques based on technical indicators. While this is not a bad strategy, some candlestick patterns can provide reliable alerts that can increase profits. The Gravestone Doji candlestick is one of these patterns, which may be seen rather frequently on the candlestick chart.

A Gravestone Doji is a bearish candlestick pattern with a large top shadow and a very short or undetectable body. The open, low, and close prices should ideally be near to each other. It typically appears near the peak of an upswing and foreshadows a trend reversal. The longer the upper shadow, the more bearish is to be expected.

The Gravestone Doji normally appears where a resistance level is formed, and it can be utilized as a future reference whenever the price returns to test the same level.

How is the Gravestone Doji Formed

The Gravestone Doji is a candlestick bar with an open, low, and close that all climax at the bar’s low.

Consider the side profile of a real gravestone, as the name suggests. As a result, the long upper wick and narrow base at the bottom resemble a gravestone from the side. The Japanese were fond of naming candlestick patterns after their real-life counterparts.

A Gravestone Doji could also represent the gravestones of bulls that perished defending their territory.

As previously stated, the Gravestone Doji is a bearish trading setup. As a result, it has a far higher success rate when the candle forms at a market peak.

The psychology behind the candle is that the bulls were in charge at first. They drive the security’s price to an unsustainable level. The bears then take control and sell the security down to its low by the end of the session.

When this occurs at the apex of an extended upswing, we view it as fatigue. When all criteria are met, we will be able to take a short position with confidence.

Gravestone Doji Charting Example

Let’s take a look at several examples of gravestone doji formations, how they occur, and how they can be used as reversal signals.

In an uptrend, this is a strong indicator.

The candlestick pattern formed precisely in the example above, and the market reversed as expected.

With the resistance level, there is a strong signal.

In the preceding example, the resistance level coincides with a validation of the chart pattern. This example shows that sellers have returned to the market and that the price was rejected at the previous resistance level, indicating two strong signs that the price may reverse.

Bollinger Band Resistance with a Strong Signal

In this case, the gravestone doji, like a resistance level, reverses the upward prices. Furthermore, the candlestick reacted to the higher Bollinger Band, indicating that the price was 2 standard deviations off the mean (red moving average), indicating that the price may rebound to the mean in the near future.

In an uptrend, a weak signal

We show a weak/continuation example in this example. As you can see, the trend remained lower after the pattern developed. These patterns do not always work. The dojis seen below appear during an uptrend but are unable to induce a reversal.

Trading the Gravestone Doji

Now that we’ve reviewed the fundamentals, let’s look at a trading example.

It should be noted that the risk management guidelines for this method will change depending on the size of the wick.

We’ll go through this in further detail later.

Entering a Gravestone Doji Trade

When you notice a Gravestone Doji in the context of a bullish upswing, it should give you pause because a trend reversal could occur at any time!

Once you’ve identified the candlestick pattern, you’ll need to develop a trigger to tell you when to make the trade.

The low of the candlestick is a simple trigger. You can open a short position if a candle closes below this level.

The trigger line in the figure above depicts the precise moment when you should short the stock after detecting the doji candle.

It is obvious why you want to wait for a closure below that line. The next candle shows a minor pause, but it is relatively small and fails to break the trigger line.

What if this trend had continued?

Let’s go back to the previous example to see when that might happen:

Take note that the initial reversal doji provides us with a misleading confirmation. We never close below the candle’s height. The second doji is the final nail in the coffin, no pun intended.

As a result, the short signal appears on the second candle following the doji, with a break and close below the trigger line.

Risk Management in the Gravestone Trading

When trading the Gravestone Doji, you must decide where to put your stop loss order.

As with any other setup or trade formation, you must always protect your capital.

A stop loss should be placed above the high of the Gravestone Doji candlestick.

The one caveat, as previously stated, is that your amount of risk will vary according on the length of the candlestick wick for each Gravestone Doji.

This is the same sketch as before. However, we have added the placement of the stop loss order this time.

Gravestone Doji Profit Targets

Please keep in mind that without a target for when to leave a trade, it will be exceedingly impossible to profit.

We established a mechanism for setting profit targets for when to exit the transaction for this specific candelstick pattern.

Ideally, our payoff should be at least double our risk. As a result, below is a simple calculation:

The first profit objective is equal to the doji candle’s size (or range). This would result in a about equal reward/risk ratio. Not ideal, but we can at least lock in some profits.

The second profit objective is twice as large as the gravestone doji. This will get us closer to a reward/risk ratio of 2:1. Much improved.

You must choose a profit target depending on the volatility of the chart and the range of the Gravestone Doji wick.

Risk Management after Reaching Target 1

When the price reaches the first target, you may either quit the trade or continue to watch to see if target two is reached.

If you wish to chase significant returns, a simple way to preserve your portfolio is to move your stop to breakeven after the first target is hit.

If you become emotional, take a little amount of your investment, such as 1/4 of your position, and profit. This way, if you reduce your stop, you’ll never be in the red on the position, giving you the patience to let it work.

Trading with the Gravestone Doji Candlestick Pattern

Now that we’ve covered all of the fundamental rules for trading the Gravestone Doji candle, let’s look at some real-world trading examples.

Example 1

A 2-minute chart of AT&T intraday is shown above.

The tendency is rising, with a final push to raise the price only to see it close lower. As a result, a Gravestone Doji reversal candlestick is formed.

Because the next candle after the doji breaks the trigger line, we enter a short position.

To protect ourselves if the trade goes against us, we should position our stop loss above the high of the gravestone doji.

For this example, we’ll set our profit target at twice the size of the Gravestone Doji.

AT&T accomplishes our primary goal eight minutes later. We may now exit the deal and take our profits. The other alternative is to wait for a further price drop before exiting the deal.

Profit targets will differ across traders. Tradingsim like to exit at the profit target. Our explanation is that the stock market moves quite quickly, and you may not be able to afford to wait for a larger move.

Furthermore, there is the psychological burden of always desiring more but never fully completing a move.

Of course, this is subject to the larger picture and how oversold the stock is across many time frames. Waiting for lower lows may be helpful in this instance.

Patience can occasionally pay off; just don’t let the trade become a headache.

In our last example, after you waited for more, AT&T reversed and surged higher, only to knock us out of the position.

Let’s look at another trade case now.

Example 2

This is Visa’s 2-minute chart. The illustration depicts another Gravestone Doji trading example, however this time the results are better than in our first trading example.

The price action is extremely similar to our previous trading example, except this time the stock does not reverse after reaching our goal, but instead continues lower.

Patience was rewarded.

Our initial aim is two times the size of the doji pattern, as indicated by the blue line. This gives us a Reward/Risk ratio of 2:1, or “2R.”

While the price achieves our initial goal on the chart after 6 minutes, we adjust our stop loss and continue to hold the position in the aim of making more profits.

Finally, we were correct, and the price continues to fall, setting new daily lows. We leave the trade when we witness two consecutive bullish candles, which is our exit signal.

Methods for Improving the GraveStone Doji Pattern

Most traders will tell you that employing the gravestone doji alone is not a recipe for profitable trading, and we agree!

To design anything that can make money in the markets, you’ll need to include several filters to eliminate false signals. Alternatively, you must ensure that you have a competitive advantage!

We’ll show you some of the filters we use for our personal trading and have had good outcomes with below.

However, no matter how good a filter is, it will not operate in all markets. As a result, you’ll have to rely on backtesting to figure out what works and what doesn’t! This is addressed thoroughly in our guide on developing a trading strategy.

1. With Volume

While price data just displays market fluctuations, volume provides access to additional information that reveals market conviction. In a nutshell, increasing volume to your analysis is equivalent to adding a new dimension. Volume gives you a sense of the confidence behind market swings, such as the gravestone doji, and allows you to make a better informed decision.

In our personal trading, we use volume to improve several techniques, and we sometimes use volume as the foundation of a strategy.

However, these are the most common constraints we place on our techniques, which you may test using the gravestone doji pattern.

  1. The volume of this bar is two times that of the previous bar.
  2. The volume moving average is growing or declining.
  3. The volume exceeds the volume moving average.

Which of the above works best for you is entirely dependent on your market and timing. However, these are the ones we use the most, so you should absolutely give them a shot!

2. Improving the Gravestone Doji with Range

Another effective strategy for improving the pattern is to measure range. Because they are frequently associated, range and volume convey some of the same information. High volume usually means large range candles, and vice versa.

Our preferred techniques to include range into our trading strategies are as follows.

  1. Require that the range be greater or less than the average real range (ATR)
  2. The range must be greater than the range of the preceding candle.
  3. The inverse of the preceding condition

The traditional interpretation of the gravestone doji is that the greater the range, the better. However, we encourage that you experiment and see what works best for you! Sometimes the exact opposite of what people perceive to be the better decision!

3. Using Seasonality

Seasonality is a great approach that we frequently employ in our efforts. We want to capitalize on the fact that the character of a market might change dramatically over time.

For example, some days of the week or month may be more bullish or bearish. And if we find a gravestone doji produced on a generally extremely bullish day, we should take that signal more seriously because generating a negative pattern on a bullish day indicates that sellers are in control.

When looking at intraday data, you may also discover what hours a pattern performs best. We recommend splitting the day into two or three half and observing how the pattern performs on each. If you see any major variations, you may choose not to trade during the worst-performing time range.

Constraints of a Gravestone Doji

Even though the Gravestone Doji is considered a negative indication, you should not enter positions based solely on this pattern. You should be aware of the following constraints:

  • Ideal gravestones with the open, low, and close on the same level are extremely unusual. Traders usually notice defective Gravestones with a visible body or a visible lower shadow.
  • Gravestones are most effective following uptrends. They should not be regarded as trustworthy signs after downtrends, despite the fact that they generally indicate the continuation of the downward trend.
  • Gravestones with lower-than-usual bulk are untrustworthy.

Overall, you should employ additional indicators to obtain more accurate buy and sell recommendations.

The Patterns Similar to Gravestone Doji

The Gravestone is a Doji candlestick pattern, and its shape is comparable to other patterns such as the Inverted Hammer and Shooting Star.

It would be great if you avoided conflating this design with the inverted hammer. It has a similar appearance but a somewhat larger body and forms towards the bottom of a downtrend, indicating an impending bullish move.

Gravestone Doji vs. Shooting Star vs. Inverted Hammer

Assume you see a candlestick at the bottom of a downtrend with a long upper shadow. In that situation, you should be aware of the distinction between the Gravestone Doji and the Inverted Hammer. This is due to the fact that they anticipate opposing moves. The Gravestone predicts that the downturn will continue, whilst the Inverted Hammer predicts a trend reversal. The latter has a discernible body, and the lower shadow is noticeably larger.

Furthermore, the Gravestone Doji design is quite similar to the Shooting Star pattern. Because both reversal candlesticks come at the top of uptrends and have larger upper shadows, they are used to identify reversals. The primary distinction is that Shooting Star has a visible body whose close price should ideally be lower than the open.


Finally, the Gravestone Doji is a fantastic pattern. Especially when it can produce decent negative indications, which usually appear at the top of uptrends. Traders are still recommended to utilize it in conjunction with technical indicators.

Gravestone is the polar opposite of the Dragonfly Doji, which has the same features but is inverted. As a result, Dragonfly would anticipate a downtrend reversal. The Dragonfly’s open, high, and close must be around the same level, making a T-shaped candle. Because it is difficult to obtain ideal Dragonfly patterns, small variances are permitted.

The Gravestone and the Dragonfly are virtually mirror images of each other. You can trade both of them using additional technical indicators to gain a better understanding of the price action’s nature.

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