Gravestone Doji Pattern: Meaning, Types, & Trading Mistakes
















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Every candlestick in the stock market says something, but there are some patterns that indicate a change in trend without any noise. Gravestone doji candlestick pattern is also one such signal, which often indicates exhaustion or reversal after the boom. Whenever a gravestone doji candle is formed in an uptrend, it should not be taken lightly. In today's time, many professional traders consider this pattern as an important warning. In this blog, we will understand in detail the gravestone doji meaning, its types and the right way to trade it - in easy language and with full depth.
What is Gravestone Doji?
Gravestone Doji is a special type of candlestick pattern that signals a possible trend reversal in the stock market. When this candle forms on a chart, it means that sellers have put pressure on buyers in the market. The structure of this candle is such that it has no or very small real body and a long upper wick, while there is no shadow on the downside. This pattern usually forms when buyers push the price up in the beginning, but by the end sellers push them back completely and the price closes at the same point from where it opened.
Market Psychology of Gravestone Doji Candlestick Pattern
The real power behind this pattern lies in market psychology. When the market opens, buyers are active and push the price up. But as time passes, sellers come in strength and pull the price back down. The result is that the candle closes near or at its opening price, creating a long upper shadow and a very thin or absent body. This indicates that buyers are now weakening and the market is ready to reverse.
What does Gravestone Doji mean?
Gravestone Doji simply means that the buying effort in the market has failed. This pattern is seen as a warning signal in trading, especially when it forms around a major uptrend or resistance zone. It indicates that the price is unable to hold up and now a decline is likely. However, this signal is confirmed only by the next candle - that is, when the next candle appears bearish, then this pattern is considered more effective.
Gravestone Doji vs Dragonfly Doji - Understanding the Opposites
Gravestone Doji - A bullish Signal
Gravestone Doji is formed when the market is likely to reverse after an uptrend. This pattern shows that the price initially moved upwards, but eventually selling pressure pulled it back. This means that there was no real force to increase the price and the pressure of sellers increased on the market. Therefore, if this pattern appears near the resistance zone, it may be a signal for the next decline.
Dragonfly Doji - A Signal of Reversal
Dragonfly Doji is a more positive pattern, usually seen at the end of a downtrend. It means that sellers held on, but buyers eventually took over and pulled the price upwards. This pattern shows a strong reversal in prices, often found in support zones. It is a sign of a bullish reversal, when the market may regain momentum.
Characteristic | Gravestone Doji | Dragonfly Doji |
Trend Context | Typically forms at the end of an uptrend | Typically forms at the end of a downtrend |
Wick Position | Long upper wick, no lower wick | Long lower wick, no upper wick |
Body Location | Small or no body at the bottom, indicating weakness | Small or no body at the top, indicating strength |
Market Sentiment | Sellers take control after early bullish attempt | Buyers regain control after early bearish pressure |
Signal Type | Indicates a potential bearish reversal | Indicates a potential bullish reversal |
Best Confirmation Zone | Near resistance, followed by a bearish confirmation | Near support, followed by a bullish confirmation |
Types of Gravestone Doj
The Gravestone Doji is a candlestick pattern that can signal a market reversal after an uptrend. But this is just one type. There are many other forms of Doji candles, which give different signals in different market conditions.
Bearish Gravestone Doji
The Bearish Gravestone Doji is a candle with open, low and close at approximately the same level, with a long upper wick. This pattern usually forms at the close of an uptrend and indicates that the recent uptrend is fading. As soon as bearish confirmation appears after this candle, it becomes a strong signal of a potential bearish reversal.
Bullish Gravestone Doji
Although Gravestone Doji mostly signals a bearish reversal, it can sometimes form at the end of a downtrend and signal a bullish reversal.In such a case, its open is identified only when it forms in an important support zone or oversold situation. The signal alone is weak, so it is most effective when backed up by a bullish confirmation candle.
Red Gravestone Doji
The Red Gravestone Doji is a pattern in which the close price is slightly below the open, indicating more bearish sentiment. It shows that the initial bullish effort did not last long and sellers eventually took over.
Green Gravestone Doji
The close price in a Green Gravestone Doji is slightly above the open price, but the structure shows the same apparent weakness. This means that buyers tried to gain a little bit, but ended up closing in the same place indicating that there is no sustainability in the momentum. It is often confusing when viewed because the color looks bullish but the psychology is bearish.
Gravestone Doji in Uptrend
Gravestone Doji assumes even greater importance when it is accompanied by signals such as a major resistance, Fibonacci retracement zone, or overbought RSI. When this pattern occurs after a major uptrend, especially on the weekly or daily time frame, it can be an early signal of a trend reversal.
Gravestone Doji in Uptrend – How to Trade?
Trading Gravestone Doji correctly is the most important part. One should never take a position based on this candle alone. The correct process is explained below:
Wait for the Confirmation Candle : The next candle after Gravestone Doji should be bearish such as a bearish engulfing or a strong red candle. Taking a trade without confirmation can lead to a false signal.
Entry Strategy : As soon as the confirmation bearish candle closes, a short selling entry can be taken at the level below it the next day. In intraday it is a breakdown entry, and in swing trading you can take a positional short.
Set Stop Loss : The stop loss should always be above the high of the Gravestone Doji. Because if the price crosses that high again, the possibility of reversal is considered to be over.
Set the target : The target should be decided according to the risk-to-reward ratio. Usually the first target is recent support or moving average (such as 20 EMA). Advanced traders can also add Fibonacci levels or trendline analysis.
Analyze the volume : If the volume is high on the day of formation of Gravestone Doji or on the day of confirmation candle, then this signal will be considered even stronger. Patterns formed on low volume should be avoided as they can also be a trap.
Always Combine with Indicators : Gravestone Doji should be seen in combination with indicators like RSI, MACD divergence, or Bollinger Bands. This helps to avoid false signals and increases confidence.
Gravestone Doji in Downtrend
Gravestone Doji can be considered as a potential trend reversal signal when it appears in oversold zones, a strong support level, or momentum divergence. However, in most cases it is only a temporary pause and the downtrend continues. Therefore, it may be risky to consider it as a standalone reversal signal.
Key Factors to Analyze Gravestone Doji in Downtrend
Support & Oversold Levels : If this pattern forms at a major support zone (such as a 200-DMA, price cluster, or Fibonacci level) and at the same time the RSI is 30 or below, the chances of a reversal increase.
Volume Behavior : A Gravestone Doji formed with low volume is considered only a technical pause. But if the volume increases with the candle and a bullish candle is formed in the next session, it may confirm a possible reversal.
Confirmation is Critical : Trading a Gravestone Doji without a confirmation candle can be a wrong decision. A strong bullish candle, preferably closing above the high of the doji, makes it a reliable signal for a reversal.
How to Approach Trading?
Gravestone Doji in downtrend always requires a well-structured plan to view it as a trend reversal opportunity:
Entry: After reversal confirmation, a long entry can be made above the closing of the bullish candle.
Stop Loss: Placed slightly below the low of Gravestone Doji.
Target: The first target can be immediate resistance or moving average level.
If confirmation is not found and the next candle is bearish, it will be considered as just a continuation setup and no long position should be taken.
Common Mistakes Traders Make with Gravestone Doji
Gravestone Doji is a powerful candlestick pattern, but many times traders misinterpret it and end up taking losses. Let's know some common mistakes that traders often make.
Trading Without a Confirmation Candle
The most common but dangerous mistake is to take a trade immediately after seeing a Gravestone Doji. Unless the next candle gives a bearish confirmation – i.e. closes low – it is premature to believe in a reversal.
Considering Every Gravestone Doji as Bearish
Not all Gravestone Doji patterns are reversals. Sometimes they are just a signal of price rejection or temporary pause. Therefore, blindly trusting this pattern can be harmful.
Ignoring Market Context
If this pattern is not formed at a key resistance level or overbought zone, then its reliability decreases. Without context, a candlestick pattern is incomplete.
Trading in Low Volume and Sideways Markets
Formation of Gravestone Doji in a low volume or range-bound market is a big reason for false signals. This situation is often a part of fake breakouts.
Conclusion
The Gravestone Doji candlestick pattern is a visual warning that gives us an opportunity to understand the psychology of the market. But it would be wrong to follow it blindly. Good trading happens only when you analyze this pattern along with the broader trend, confirmation candle and volume. Whether it is a reversal or continuation, reading the Gravestone Doji intelligently is the key to long-term success. Technical signals work only when there is discipline and understanding of context behind them – and this is the true mark of a smart trader.
FAQs
Q1. What is a Gravestone Doji and what does it indicate?
This is a candlestick pattern that indicates that buyers tried hard during the day, but in the end sellers dominated. That is, there can be a sign of a reversal.
Q2. Is Gravestone Doji bullish or bearish?
Mostly it is considered a bearish signal, especially when this pattern appears after a bullish trend.
Q3. Can Gravestone Doji appear in a downtrend?
Yes, but then it gives a slight indication of the downtrend stopping – not of a reversal.
Q4. Should I trade only on the Gravestone Doji pattern?
No, do not believe it alone. Unless there is confirmation and the context is not right, trading can be risky.
Q5. How reliable is the Gravestone Doji pattern?
If it is formed at the right resistance or zone and volume also supports it, then it can prove to be very effective.
The content on this blog is for educational purposes only and should not be considered investment advice. While we strive for accuracy, some information may contain errors or delays in updates.
Mentions of stocks or investment products are solely for informational purposes and do not constitute recommendations. Investors should conduct their own research before making any decisions.
Investing in financial markets are subject to market risks, and past performance does not guarantee future results. It is advisable to consult a qualified financial professional, review official documents, and verify information independently before making investment decisions.
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