Hello dear friends. If you are reading this article, you are
probably interested in financial markets and have heard of technical analysis.
Did you also know that Japanese candlesticks are essential in this field? Yes,
candlesticks visually reflect everything happening in the market. There are
various types of Japanese candlesticks, and today, we will talk about one of
them, the Dragonfly Doji candlestick.
- Topic: Dragonfly Doji
- Type: Bullish
- Trend direction: Reversal
- Opposite pattern: Gravestone Doji
What is a Dragonfly Doji Candlestick?
A Dragonfly Doji is a bullish reversal candlestick with a long lower wick, where the open and close prices are nearly the same. It's a candlestick that looks like a "T" with a very long tail (wick or shadow), suggesting buyers are taking control after a price drop. The Dragonfly Doji is a simple bullish reversal candle. The price opens, drops down a bunch during the session, but then climbs right back up. It closes exactly where it started, or super close to it.
The top part has no upper shadow, or it is too small to be visible, just a long tail hanging down like a dragonfly's wing, and almost no body at all. It shows up after a downtrend and indicates that buyers jumped in hard to push things back.
Why is the Dragonfly Doji Named That?
The name for the Dragonfly Doji comes directly from its visual appearance. The thin horizontal line at the top of the candlestick represents the small body of an insect. The long line dropping down from the body is the long lower wick, and this is meant to resemble the long, slender tail of a dragonfly.
This is a simple, direct visual comparison used in charting. The candlestick resembles the insect when it is hovering, with its body horizontal and its tail pointing straight down. Early traders simply named the candlestick after the familiar shape they saw on the chart.
What is the Psychology of the Dragonfly Doji?
The Dragonfly Doji tells a clear story of market conflict. The session starts, and the market has already been sliding down. Sellers are confident and push prices even lower early on, creating that long lower tail. But then buyers wake up, start grabbing everything in sight, and shove the price all the way back up to the opening level by the end. Essentially, it means the bears (sellers) tried to keep things falling but got completely shut down and defeated. This dramatic rejection shows the bulls (buyers) are now strong, flexing their muscle and demonstrating they can take charge, especially if trading volume confirms this sudden shift. The battle was fought and won by the buyers.
What are the Characteristics of a Dragonfly Doji?
The main characteristics of a Dragonfly Doji are its T-shaped form, a very small or almost invisible body, a long lower shadow, and little or no upper shadow. The open and close are at nearly the same level, showing that the price dropped but recovered by the end of the session. Dragonfly Doji, a member of the Doji family, is a candlestick pattern. This candlestick represents a formation where the opening price of a candle is above its highest price, and the closing price is near the opening price. Dragonfly Doji is typically seen as a candlestick on a price chart and appears under specific conditions. This pattern is observed in Japanese candlestick charts, a candlestick charting technique. The key characteristics of a Dragonfly Doji are:
- The open price is above the high price.
- The close price is close to or equal to the open price.
- The body length is zero or close to zero. In other words, the body is absent or very small.
- The lower shadow (wick) is very long and the upper shadow (wick) is absent.
- The shape looks like the letter T, which makes it easy to identify on the chart.
- The color (green, red, or black) does not change its main meaning, since the shape is the key factor.
- It often appears near support levels or trend reversal zones.
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| Dragonfly Doji Parts |
The image above shows the main parts of the Dragonfly Doji candlestick. Its thin body, which can be seen as the wing of a dragonfly, marks the area where the open and close prices meet. The long tail, known as the wick or shadow, reflects how far the price moved before returning to balance. Dragonfly Doji usually occurs in a downtrend or after a decline. We use these candlesticks as an indicator of price movement in financial markets. Dragonfly Dojis signify a balance between supply and demand and indicate indecision in the market.
Dragonfly Doji Candlestick Colors
A Dragonfly Doji can appear in different colors depending on the closing and opening price in relation to the previous candle. The color may look small in meaning, but it gives market participants an idea of how buyers and sellers behaved during that candle. Let's look at the most common colors and what they can show.
Green Dragonfly Doji Candlestick: A green Dragonfly Doji forms when the closing price is slightly above the opening price. This color shows that buyers managed to lift the price a little before the candle closed. The long lower shadow still shows that sellers pushed the price down earlier, but buyers were able to bring it back up. Many traders read this as a sign that buying interest is starting to return after a drop.
Red Dragonfly Doji Candlestick: A red Dragonfly Doji appears when the closing price is a bit lower than the opening price. It still has the same long lower wick, showing that sellers were active during the candle. However, the red color adds a small note that the price could not finish higher. Candlestick analysts may see it as a pause during a downtrend or as a sign that the market is not ready to rise yet.
Black Dragonfly Doji Candlestick: The black Dragonfly Doji forms when the opening and closing prices are at the same level, or nearly the same. This means the price dropped sharply during the candle but recovered fully by the end, closing right where it opened. It shows that both buyers and sellers were active, but the market ended in balance. The black color is often just a visual choice on some charts, not a change in meaning. This type of Dragonfly Doji is rare and often seen as a sign of indecision after strong price movement.
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| Different Colors of the Dragonfly Doji |
Dragonfly Doji candles, no matter their color, share one key feature. They have a long lower shadow and a flat top where the open and close are close together. The color (green, red, or black) only shows small differences in how the candle closed within that range. Green may show slight buying strength, red may point to a pause in selling, and black often reflects a perfect balance between both sides. Candlestick readers usually pay more attention to the candle's shape and place on the chart than to its color alone.
Is a Dragonfly Doji Bullish or Bearish?
A Dragonfly Doji can be both bullish or bearish, depending on where it shows up on the chart. When it forms after a drop, many traders see it as a sign that selling is slowing down and buyers are starting to step in. In that case, it can be viewed as a bullish sign. But if it appears after a strong rise, it may mean that buyers are getting tired and sellers are pushing back. So, the meaning of the Dragonfly Doji mostly depends on the price action before it, not just the candle itself. The trading community often ask, "Is the Dragonfly Doji candlestick bullish or bearish?" The truth is that the answer changes with the market trend. In a falling market, the Dragonfly Doji candlestick bullish or bearish question usually leans toward bullish, since it can show that selling is losing strength. In an uptrend, the same candle may look bearish, as it can signal that buyers are starting to step back. Understanding where it appears on the chart is the key to reading this candlestick correctly.
Those watching the candlestick often believe that a green Dragonfly Doji is bullish and a red Dragonfly Doji is bearish. However, the color of the Dragonfly Doji, such as green or red, does not change its main meaning. The shape of the pattern matters much more than the color. A green Dragonfly Doji can be seen as slightly bullish, while a red Dragonfly Doji can be viewed as slightly bearish, but the overall message stays the same. What truly matters is where this candle appears, whether at the end of a trend, in the middle, or near a support zone.
How Often Do Dragonfly Dojis Appear?
Dragonfly Dojis are not very common. They form only when the open, close, and high prices are almost the same, while the low price drops much lower during the same period. Because these conditions don't happen often, you won't see this candle in every chart. When it does appear, active buyers and sellers usually take note of it, especially if it forms near key support or resistance levels.
How to Trade the Dragonfly Doji Candlestick
Let me tell you something every experienced chart reader learns over time: the Dragonfly Doji is not just another candle. It’s a quiet mark left by a short battle between buyers and sellers. When this candle appears, it means the market has tested one side deeply, found no strength there, and then returned to balance. This shape has been watched for centuries because it often shows that the crowd is standing at a turning point.
Dragonfly Doji candlesticks can indicate situations where market participants are emotionally unbalanced in the market and buyers are starting to take control. The fact that the opening price is at a high level may indicate that sellers are reluctant to push the price down further. If this candlestick occurs after a downtrend, it can be interpreted as a sign that the downtrend is ending or weakening. In addition, Dragonfly dojis can occur in both uptrends and downtrends. If it occurs in an uptrend, it indicates a possible top. If it occurs in a downtrend, it indicates a possible bottom. Dragonfly Doji also occurs when there is indecision in the market. This usually means that a trend is nearing its end or that a trend is about to begin.
Like other Japanese candlesticks, Dragonfly Dojis are also an important tool in technical analysis. By using these candlesticks correctly, it may be possible to predict market trends and possible reversal points. Dragonfly Doji is typically known as a bullish candlestick, and when it appears on charts, it is thought that prices will rise. In some rare cases, Dragonfly Doji can also be seen as a bearish candlestick. Let's now examine some examples of this.
Dragonfly Doji in Downtrend
The appearance of a Dragonfly Doji pattern is often seen at the end of a downtrend. In a situation where Dragonfly Doji appears in a downtrend or at the end of a downward movement, we can consider it as a bullish signal. As an entry point, we wait for the next candle to close with an upward move after the appearance of Dragonfly Doji. Then, we can set an entry level just above the highest point of the Dragonfly Doji. It is generally preferred to place a Stop loss a little below the lowest point the price reached (the tip of the wick) and close to a support level. When determining the take profit level, each trader can use a risk-reward ratio that suits their strategy. The example of this is given in the following graph:
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| Dragonfly Doji Trading Strategy |
When the market has been falling for several sessions and a Dragonfly Doji appears near an old support zone, that is when attention is needed. The long lower shadow tells you that sellers tried again to push prices down, but their effort was absorbed, and the market closed right back near its starting level. In my years of trading, I've seen this candle mark the end of many deep drops. Still, patience is key. If the next candle opens steady and closes higher than the Doji's high, that often confirms that buyers are stepping back in. Some traders prefer to wait for volume to rise slightly or for a retest of the low before acting, but the message is clear — selling energy is fading.
Dragonfly Doji in Uptrend
Sometimes Dragonfly Doji can also appear in an uptrend, and in this case, it can be considered as a bearish signal at the end of the uptrend. If Dragonfly Doji forms in an uptrend, we expect the next candlestick to move downward. If this candlestick confirms that the Dragonfly Doji is a selling signal, a short position can be opened. A Stop loss is placed just slightly above the highest point the price reached (resistance level). The take-profit level is determined according to the risk-reward ratio. See the US Dollar/Japanese Yen 4-hour chart as an example:
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| Dragonfly Doji in Uptrend. USD/JPY chart |
Now picture a market that has been climbing for days, each candle closing higher than the last. Then suddenly, a Dragonfly Doji forms at the top. The lower shadow shows that sellers entered strongly during the session, yet the price managed to recover by the close. This is a quiet sign that the rise is losing direction. In these situations, I usually watch the next candle closely. If it opens flat and begins to trade below the Doji's low, that often marks the start of a pullback. Sometimes the price drifts sideways for a few sessions before turning down, but the candlestick serves as an early signal that the easy part of the rally is ending.
Every Dragonfly Doji carries the same lesson: watch where it forms and what happens next. Shape tells the story, but location writes the ending.
What Timeframe Is Best for a Dragonfly Doji?
The Dragonfly Doji can appear on any chart, from one-minute to monthly timeframes, but its meaning becomes clearer as the timeframe grows. On shorter charts, like one or five minutes, this candle may show up often because of quick price changes and noise. These short-term patterns can be interesting but are not always reliable. On higher timeframes such as four-hour, daily, or weekly charts, a Dragonfly Doji carries more weight. The longer the candle takes to form, the more trading activity it represents, and the clearer its message becomes. For example, a Dragonfly Doji on a daily chart can mark a key turning point that smaller charts might completely miss.
Most experienced traders prefer to watch for this pattern on the daily chart first, then check lower timeframes to fine-tune their entry or exit. Still, the right timeframe depends on your trading style. Short-term traders may find it useful on intraday charts, while long-term traders trust it most on daily or weekly views.
❗ A Dragonfly Doji is more likely to be a valid trend reversal signal if it occurs at the end of a long trend. Additionally, a Dragonfly Doji is more likely to be a reliable trend reversal signal if it occurs near a significant support or resistance level. Remember that every trade involves risk, and like any trading strategy, Dragonfly Dojis are also risky. Confirm this pattern with other technical indicators and analysis tools. Therefore, it is always important to apply risk management strategies and trade with small amounts.