What is a Dragonfly Doji Candlestick?
Dragonfly Doji is a type of candlestick where the open close and high price are same or very very close to each other. There is always a long tail associated with Dragonfly Doji candle and hence the name.
Underlying Psychology of the Dragonfly Doji
This means that, there were many market participants ready to sell the underlying stock at any price during the session and due to this high supply the price kept on decreasing, however towards the end of session buyers emerged and they bought the stock so much that price closed at the days high/near day’s high.
If you think about it,Dragonfly Doji is bullish in nature because initially sellers were in control and they pushed the price down. Towards the end of the session, the buyers emerged and they did heavy buying and bought the price towards the days high.
Example of How to Use a Dragonfly Doji
How to Trade Dragonfly Doji
Decision: In case of Dragonfly Doji,traders should start looking for buying opportunities, buy price should be around the closing price of Dragonfly Doji.
Stop loss: What if the market reverse its direction after printing the Dragonfly Doji ? The low of the candle will act as stop-loss in case that happen.
Points to Consider
- If Dragonfly Doji appears after a downtrend,at support or after a Long Black Maburozu candle, odd moves in your favor.
- Dragonfly Doji with large tail and with big volume provide better performance overtime.
Beginner in Candlestick? Checkout below articles
- How to identify Hanging Man Candlestick pattern and trade it.
- How to identify Hammer Candlestick pattern and trade it.
- How to identify Bearish Marubozu and trade it.
“You never know what kind of setup market will present to you, your objective should be to find an opportunity where risk-reward ratio is best.”Jaymin Shah