Dragonfly Doji Candlestick: What Does It Mean?

The Dragonfly Doji candle supposedly indicates bullish sentiment and a potential trend reversal, but our testing proves this theory false. A Dragonfly Doji represents a battle for dominance between bulls and bears during the trading day. The bears initially had control and pushed prices down, but the bears fought back to drive prices higher. The day ends with similar open, high, and low prices, suggesting an impending trend reversal. Dragonfly Doji is a candle pattern with no real body and a long downward shadow, which is typical to it.

  1. We will help to challenge your ideas, skills, and perceptions of the stock market.
  2. Support and resistance levels are great places to find price reversals.
  3. Its accuracy is far from perfect and should not be relied upon as the sole indicator for making trades.
  4. Everyone is equally matched, so the price goes nowhere; buyers and sellers are in a standoff.
  5. Depending on past price action, this reversal could be to the downside or the upside.

You can then use this valuable information to refine your dragonfly doji trading strategy. Assuming it happens at the bottom of a downtrend, traders will likely react by opening a long position. dragonfly doji meaning Meanwhile, those with active short positions will likely close them in preparation for a reversal. The Dragonfly Doji is considered a robust and reliable signal in these situations.


The Dragonfly Doji chart pattern is characterised by a T-shaped candlestick formed when the open, high, and closing prices are very close. Although uncommon, the Dragonfly can appear when all of these prices are the same. Therefore, the extended lower shadow is the most crucial aspect of this pattern. A doji dragonfly is a neutral pattern that does not show a clear trend. It’s also one of the best ways to spot a trend reversal or correction. In other words, if you see a doji dragonfly on your chart after the stock has been trending up for an extended period of time, it could be time to consider selling your shares.

Understanding the Dragonfly Doji Candlestick

This means that you may want to wait for confirmation before entering into an opposite trade. This can signal a bearish reversal after an uptrend when found at resistance. Again, candlesticks and moving averages are vital to support and resistance. Let’s take an example where a bullish Dragonfly Doji follows a medium-term downtrend. Long positions can be taken after a subsequent bullish closing period serves as proof for the trigger signal.

The main difference between the dragonfly and the spinning top is that there is little/no upper shadow in the former. A dragonfly indicates a stronger bullish signal than a spinning top, as it suggests a potential trend reversal. Traders should remember that a spinning top may provide both bearish and bullish signals. Traders often pay close attention to them when making trading decisions.

What is the difference between a Dragonfly Doji and a Hammer?

We provide our members with courses of all different trading levels and topics. Dragonfly Dojis are said to be red or green depending on the direction of their next candle. Dragonflies that appear during uptrends will often show as a green Dragonfly and vice versa for downtrends. Depending on the strength of the trend, different levels are more likely to work better with the Dragonfly Doji pattern. Here you can learn more about the different Fibonacci retracement levels. To find a bullish RSI Divergence we want to see the price on a downtrend first, making lower lows and lower highs.

Dragonfly Doji Candlestick Pattern – What Is And How To Trade

The Sharpe ratio, a measure of risk, is -0.01; a good investment should be higher than 1.0; thus, the Dragonfly Doji is considered an incredibly risky trade. The Sortino ratio of 0.27 is also poor as the target should be 2, so again, it is a risky trade. Our research will go against popular opinion and discover the facts. This article represents the opinion of the Companies operating under the FXOpen brand only.

See how they compare in our best pattern recognition software comparison review. Although the Dragonfly Doji may be profitable for long trades lasting over ten days, it is not recommended for trading due to the narrow margins. Additionally, slippage and fees could potentially wipe out any profits gained. In conclusion, the Dragonfly Doji is an unreliable and risky trade. It has a low accuracy rate of just 55%, resulting in a small profit per trade of 0.46%. To discover the facts, I tested Dragonfly Dojis on 565 years of trading data spanning bull and bear markets.

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Most traders enter the market during the formation of the second candle or shortly after its completion. The size of the dragonfly coupled with the size of the confirmation candle can sometimes mean the entry point for a trade is a long way from the stop loss location. This means traders will need to find another location for the stop loss, or they may need to forgo the trade since too large of a stop loss may not justify the potential reward of the trade. Such a candle pattern with a higher volume is typically more trustworthy than one with a lower volume. For example, if you’re looking at a dragonfly doji and also see higher highs and higher lows on shorter time frames, then you may want to enter into an opposite trade.

It’s created when the open and close are at or near the same level. The Bearish Dragonfly Doji signifies that sellers are becoming more aggressive, causing prices to trend downward. Typically this pattern will occur after an uptrend and before a downtrend https://g-markets.net/ takes place. A Bearish Dragonfly Doji in conjunction with a Shooting Star indicates that sellers are aggressively pushing down prices. The Bullish Dragonfly Doji signifies that the sellers are exhausted and the buyers are taking control of the market.

The dragonfly doji candle is a bullish trend reversal price formation that is part of the doji family. Most methods of this chart require the pattern to form at the bottom of a bearish swing. When this primary criterion is met, traders will look for the best time to enter a long position in anticipation of a trend reversal.

What Does a Dragonfly Doji Mean?

The occurrence of a green Doji during an uptrend indicates that the stock is about to break out. The Dragonfly Doji candle is formed by any standard Doji candle with a very small body and a large shadow only on the lower side. The opening and closing prices are quite the same or similar because the body is small. The lower shadows are significantly longer than the candle’s body, which comprises the opening and closing prices. As a result, the low price is proportionately distant from the open, high, and close prices whereas the open, high, and close prices are comparable.

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. Our trade rooms are a great place to get live group mentoring and training. Our chat rooms will provide you with an opportunity to learn how to trade stocks, options, and futures.

TrendSpider is the best software for trading all candlestick patterns due to its integrated candle backtesting and pattern recognition. If you value a large community of traders sharing ideas and strategies, then TradingView is a great alternative. Ultimately, for every long trade you make after a Dragonfly Doji appears on a daily stock chart, on average, you should make 0.46% after holding for ten days. This is a positive result but lower than the average of all candlestick pattern trades, which is 0.5%. However, the best candlestick for trading is the Inverted Hammer, with a win rate of 0.97%. The Dragonfly Doji is a candlestick chart pattern that indicates an equilibrium between buyers and sellers after a day of trading volatility.

The dragonfly doji is used to identify possible reversals and occurs when the open and closing print of a stock’s day range is nearly identical. The doji dragonfly is an uncommon pattern with a very clear meaning. Because of that, you’re unlikely to see one on any stock charts that you look at every day. This video, combined with our blog, gives you a well-rounded understanding of this candlestick pattern. Get ready to make smarter trading decisions as you dive into the world of finance.

Arjun is an active stock market investor with his in-depth stock market analysis knowledge. Arjun is also an certified stock market researcher from Indiacharts, mentored by Rohit Srivastava. The formation of a green Doji can signal that the market may pivot from this point, in case it has been in a continuous downtrend during the previous trading periods.