Dragonfly Doji Candlestick – Bullish Reversal Pattern

Do you want to master Dragonfly doji candlestick to catch reversal trades?

In this article we will teach you all about dragonfly doji Candlestick pattern from its formation to its use along with visual examples.

Lets start with the definition of dragonfly doji.

What is Dragonfly Doji?

Doji candlestick is one which has a small body range almost 5% to 10% of its wick.

While a dragonfly doji candlestick has open, high and close price are same with long wick at bottom.

It signals potential reversal of price to the upside. As the candlestick opens initially price goes down but when buyers enter the market they push the price up resulting the close of candlestick near its open price.

It is named because its shape resembles to the dragonfly having long tail and a small body at top.

Mostly traders wait for follow up candlestick to close above the high of dragonfly candlestick as a confirmation of dragonfly doji.

How to Use Dragonfly Doji?

To trade using dragonfly doji you have to look for a bearish market trend approaching strong support area.

When price approaches the support zone it gets strong rejection as buyers enter the market. Now wait for candlestick closing.

When you see a dragonfly doji candlestick forming at support zone wait for the next candlestick to close above the high of dragonfly doji, it will confirm the reversal of price from support zone.

After the confirmation of dragonfly doji wait for price to retrace back and test dragonfly doji candlestick’s body or wick.

When price approaches the dragonfly doji candlestick you can execute a buy trade.

Stop Loss & Take Profit

When you buy at the support using dragonfly doji your stop loss will be 10/20 pips below the low of dragonfly doji.

While for profit target you can set your take profit at next resistance level keeping in view your risk reward ratio.

What does Dragonfly Doji Tell Us?

Dragonfly doji informs about the losing control of sellers and entrance of buyers in the market which indicates the potential reversal of price.

Limitations of Dragonfly Doji

Dragonfly doji sometime may fail as an indicator of reversal in price and price may go down below the low of dragonfly doji.

Sometime the follow up candlestick may close much higher and price may not retrace back so traders may not get in to buy position because of the larger stop loss disturbing risk reward ratio.

Dragonfly doji candlestick does not define the profit target so you have to use other strategies to find a safe exit.

Dragonfly Doji vs Hammer Candlestick

Both dragonfly doji and hammer are bullish reversal candlesticks formed at the end of down trend.

But dragonfly doji has no real body as its open, high and close price are almost same. While hammer candlestick has a small real body either bullish or bearish.

Can We Use Dragonfly Doji for Scalping?

Yes dragonfly doji can be used for scalping on lower timeframes like 15 minutes or 5 minutes.

But keep in mind that lower timeframes has less reliability as compared to higher timeframes and it offers low risk to reward as well.

Dragonfly Doji vs Gravestone Doji

Both are doji candlesticks with almost no real bodies and both candlesticks indicate reversal of price.

But the main difference between dragonfly doji and gravestone doji is the direction of price.

Gravestone doji has a long upper wick and its formation at resistance level indicates the lower prices in future while dragonfly doji as we discussed earlier indicates bullish reversal.

Other Bullish Reversal Candlesticks

There are so many other candlesticks which indicate the bullish reversal of price if formed at the support during a bearish trend.

(I) Morning Star Candlestick Pattern

(II) Bullish Engulfing Candlestick Pattern

(III) Hammer Candlestick.