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A powerful bullish reversal signal with the open, high, and close at the same level - the long lower shadow shows complete rejection of lower prices.
The Dragonfly Doji is a single-candle bullish reversal pattern where the open, high, and close are at or very near the same level, with a long lower shadow extending downward. It forms a distinctive "T" shape.
This pattern is essentially a hammer taken to the extreme - instead of a small body, there's virtually no body at all. The long lower shadow shows that sellers pushed price down significantly during the session, but buyers completely reclaimed all lost ground by the close.
The Dragonfly Doji tells a powerful story of complete rejection. During the session, sellers mounted a significant attack - they pushed price down substantially, testing the conviction of any remaining bulls.
But here's what makes this pattern special: buyers didn't just step in - they completely dominated. By the close, every single tick of decline had been erased. The session ended exactly where it began, with sellers having nothing to show for their efforts.
This total rejection of lower prices sends a strong psychological message: the selling pressure has been exhausted, and buyers are willing to defend this level with full conviction.
Conservative: Enter on a close above the dragonfly doji's horizontal line, confirmed by bullish follow-through.
Aggressive: Enter at the close of the doji if at strong support with additional confluence.
Place stop below the low of the lower shadow. The complete rejection of that level is the pattern's strength - if price returns there, the signal is invalidated.
T1: Previous swing high or nearest resistance level. T2: Measured move equal to the shadow length projected upward. T3: Use trailing stop on 50% position for extended moves.
Minimum 1:2 R:R required. Dragonfly Dojis with longer shadows offer better R:R potential.
A Dragonfly Doji is only as good as the context it appears in. The same candle shape can be a high-probability reversal signal or noise - the difference is where it forms and what surrounds it.
At support, this is bullish. At resistance, this is just trapped longs getting liquidated. Always check the location first.
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