Gravestone doji

A gravestone doji is one of the types of doji candle. Its body is a thin line at the very bottom of the candle and its upper wick is long, so the candle looks like an upside-down T. The name comes from that shape.

The reading follows from what happened inside the period. Buyers moved price up, often to a new high of the trend. Sellers then took the whole gain back before the close. The higher the wick reached and the closer the close is to the low, the stronger the rejection.

• Open and close – equal or a few ticks apart, at the low of the candle.
• Upper wick – long. It makes up almost the whole range of the candle.
• Lower wick – none or very small.
• Location – after an advance, at a new high or at resistance.
• Size – the range of the candle is not smaller than that of the candles before it. A tiny gravestone on a quiet chart says little.

This is the classic case. The market made a new high and could not hold any of it. Buyers who entered near the top of the wick are at a loss, and the high of the candle becomes a level that price has rejected.

Traders treat the gravestone as a warning and wait for the next candle. A close below the doji's low shows that sellers have followed through. A close above the doji's high cancels the signal.

When the wick takes out a previous high before price falls back, the candle is also a liquidity sweep of that high.

A gravestone doji can also appear after a decline. There its shape matches an inverted hammer: buyers tried to lift price and failed to hold it. Some traders read this as an early sign of a bottom, but the signal is weaker than at a top and needs a strong rising candle after it.

In a range the candle matters at the upper boundary, where it shows that resistance held. In the middle of a range it carries little information.

The gravestone doji is traded as a short signal after an uptrend, and only with confirmation. Replay mode on Charts lets you step through history candle by candle and see what followed past gravestones on your market.

• Entry – after a candle closes below the low of the doji. A more aggressive entry is a break of the low itself.
• Stop – above the high of the doji. A very long wick means a wide stop and a smaller position.
• Target – the nearest support level, or the start of the last leg up.
• Filter – the signal carries more weight at a known resistance level, on a higher timeframe and with rising volume.

The two candles are close relatives. A shooting star has a small visible body at the bottom of the candle. A gravestone doji has no body at all – open and close are the same price. Both appear after an advance and both are read as bearish.

The opposite candle is the dragonfly doji: open and close at the high and a long lower wick. It is read as bullish after a decline.

• Selling the candle itself – without a lower close after it, the uptrend is still intact.
• Ignoring the higher timeframe – one gravestone against a strong trend often leads only to a short pullback.
• Reading it without an advance before it – with nothing to reverse, the pattern has no meaning.
• Placing the stop inside the wick – a retest of part of the wick is common before price moves down.
• Trusting gravestones on thin markets or very low timeframes, where a single order can draw a long wick.