Gravestone Doji – Bearish Reversal Signal

What is a Gravestone Doji?

A Gravestone Doji is a Japanese candlestick with almost no real body (open and close equal), a very long upper shadow, and little to no lower shadow. It appears after an uptrend and signals a possible bearish reversal. [diagram:gravestone-resistance]

How to Identify

• Occurs in an uptrend.
• Small body (open = close near the low).
• Long upper shadow (at least twice the body).
• Negligible lower shadow.
• Compare to standard Doji: standard Doji has upper and lower shadows roughly equal.

How to Trade

• Do not enter immediately upon seeing a Gravestone Doji. Wait for confirmation from the next candle (bearish candle).
• Place a stop loss above the upper shadow of the Gravestone Doji.
• Target: nearest support level.

Real Example

Suppose EUR/USD is in an uptrend. One day, price opens, rallies high, then declines and closes at the opening price, creating a long upper shadow. The next day, a strong bearish candle confirms the signal. A trader can enter a sell order.

Common Mistakes

• Trading on the Gravestone Doji alone without confirmation.
• Confusing it with a Shooting Star (which has a small body but is not a Doji).
• Ignoring the overall trend – the signal is valid only if it appears at the top of an uptrend.