What it is
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 psychology
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.
Identification
- 01Prior downtrend - Pattern must appear after a meaningful decline
- 02Open = High = Close - Little to no body at the top of the range
- 03Long lower shadow - The defining feature; should be significant
- 04No upper shadow - Upper wick should be absent or nearly absent
- 01Very long shadow - Longer shadows indicate stronger rejection
- 02Volume spike - Higher than average volume confirms participation
- 03Support confluence - Pattern at known support level, trendline, or Fibonacci
- 04Bullish confirmation - Following candle closes higher
- 01No prior downtrend - In an uptrend, may signal continuation not reversal
- 02Upper shadow present - Any significant upper shadow invalidates pattern
- 03Short lower shadow - Without significant shadow, it's just a doji
- 04Bearish follow-through - Next candle closing below the low negates signal
Execution framework
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.
Context matters
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.
- 01At major horizontal support that has held multiple times
- 02Touching a rising trendline from higher timeframe
- 03At Fibonacci 61.8% or 78.6% retracement level
- 04After a steep, overextended decline (capitulation)
- 05With bullish divergence on RSI or MACD
- 06With very long lower shadow (strong rejection)
- 01In the middle of a range with no clear support
- 02During low-volume, choppy consolidation
- 03Against the dominant higher-timeframe trend
- 04With short lower shadow (weak rejection)
- 05Below a major resistance that just rejected price
- 06In news-driven, erratic price action
At support, this is bullish. At resistance, this is just trapped longs getting liquidated. Always check the location first.
Compare the full pattern set
Use the library to compare similar structures before deciding what the chart is actually building.