Gravestone Doji Candlestick Trading Strategy

Do you wan to master Gravestone doji candlestick trading strategy to level up your trading skills?

In this article we will teach you everything about gravestone doji from its formation to its use in trading with real market examples.

Lets start with defining the gravestone doji candlestick.

What is Gravestone Doji Candlestick?

Doji means a candlestick whose opening and closing prices are almost same.

While a gravestone doji is a candlestick whose opening, low and closing prices are almost same so it has a small or no real body with a long wick on the upside and a really small or no wick on the downside.

The long wick on the upside shows, at first bulls were strong enough to move price higher while at the end bears took control leading the price to the downside and closing candlestick near its low.

So it is a bearish reversal candlestick forms at the end of bullish trend indicating the trend reversal.

Traders use the gravestone doji to book their profits in the bullish trend or to look for bearish trades after formation of gravestone doji.

Confirmation of Gravestone Doji Candlestick

For the confirmation of gravestone doji you should wait for the closing of next candlestick below the low of gravestone doji.

It will confirm the reversal of prices and you can look for sell trade setup.

How to Use Gravestone Doji?

To trade using gravestone doji you have to look for bullish market trend approaching a strong resistance zone.

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

When you see a gravestone doji candlestick forming at resistance zone wait for the next candlestick to close below the low of gravestone doji, it will confirm the reversal of price from resistance zone.

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

When price approaches the gravestone doji candlestick you can execute a sell trade.

Stop Loss & Take Profit

When you sell at the resistance using gravestone doji your stop loss will be 10/20 pips above the high of gravestone doji.

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

What does Gravestone Doji Tell Us?

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

So you can book your profits if you bought earlier or you can look for sell after formation of gravestone doji.

Limitations of Gravestone Doji

Gravestone doji sometime may fail as an indicator of reversal in price and price may go up above the high of gravestone doji candlestick.

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

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

Gravestone Doji vs Inverted Hammer Candlestick

Both gravestone doji and inverted hammer are bearish reversal candlesticks formed at the end of up trend.

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

Gravestone Doji vs Dragonfly 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 is a bullish reversal candlestick formed at support indicates higher prices in future.

Can We Use Gravestone Doji for Scalping?

Yes gravestone 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.

Other Bearish Reversal Candlesticks

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

(I) Evening Star Candlestick Pattern

(II) Bearish Engulfing Candlestick Pattern

(III) Inverted Hammer Candlestick.