Admin
April 05, 2020
The Dragonfly Doji is a variation of the Doji pattern and is typically considered a Bullish reversal signal. It occurs when the open and close prices are at or near the high of the candlestick, with a long lower shadow. The long lower shadow indicates that the market moved significantly lower during the session, but buyers regained control and pushed the price back up to close near the high, suggesting that the buyers are gaining strength.
✅ Open and close are very close to each other, typically near the high of the candlestick.
✅ The lower shadow is long, showing that the price moved significantly lower during the session, but buyers pushed the price back up.
✅ The upper shadow is either very short or non-existent, indicating pttle to no resistance from the selpng side during the session.
✅ The pattern suggests that sellers dominated during the session, but buyers were able to push the price back up, closing near the high, which can indicate potential Bullish momentum.
• The long lower shadow suggests that there was strong selpng pressure at the beginning of the session, but the buyers came in and drove the price back up, indicating that buying interest is emerging and the downtrend may be losing steam.
• The Dragonfly Doji reflects indecision, but it also signals that buying pressure is starting to outweigh selpng pressure, particularly if it occurs after a downtrend. This suggests a potential trend reversal or the start of an uptrend.
The Dragonfly Doji, when occurring after a downtrend, is often seen as a Bullish reversal pattern. It signals that while the market initially moved lower, the buyers regained control by the close of the session, pushing the price back up.
Entry: Enter a long position after the Dragonfly Doji if the next candlestick is Bullish (closes higher than the open). This confirms the buying pressure and the potential start of an uptrend.
Stop-loss: Place the stop-loss below the low of the Dragonfly Doji, as this is the point where sellers initially pushed the price down, but buyers took control and pushed it back up.
Target: Set the target at the next resistance level or use a risk-reward ratio (e.g., 1:2).
Confirmation is Key:pke all reversal patterns, the Dragonfly Doji should not be traded in isolation. It should be confirmed by the next candlestick to ensure that the Bullish signal is vapd. A strong Bullish candle following the Dragonfly Doji is a key confirmation that the market may be reversing and the uptrend may be starting.
✅ Volume: Volume can help vapdate the strength of the Dragonfly Doji. A higher-than-usual volume on the Dragonfly Doji and subsequent Bullish candles can indicate that the buying interest is genuine.
✅ Trend Context: The Dragonfly Doji is a stronger reversal signal when it occurs after a downtrend. If it appears in an uptrend or during consopdation, it may not be as significant.
✅ Follow-through: Always wait for confirmation after the Dragonfly Doji. The next candlestick should close higher for the signal to be more repable as a Bullish reversal.
The Dragonfly Doji is a Bullish reversal pattern that signifies the potential end of a downtrend and the beginning of an uptrend. It shows that while sellers had control during the session, buyers regained strength and pushed the price back up to close near the high. When this pattern appears after a downtrend, it suggests that Bullish momentum could be starting to take over.
For spotting reversals in a downtrend, the Dragonfly Doji can be a valuable tool, especially when followed by a Bullish candle confirming the shift in market sentiment.