Two candlestick patterns which have a lot in common with pin bars both in terms of their construction and what they show in the market are the dragonfly and gravestone doji.
Both dragonfly and gravestone doji candlesticks contain most of the features found on pin bars but for some reason candlestick books and websites cite them as being different, why they consider them to be different to pin bars is due to a very small occurrence in the open and the close of the candlestick.
When a pin bar forms the point where the candle opened and where it closed are always different, you see this as the body of the pin. When dragonfly or gravestone doji candlestick forms there is almost no difference or a really tiny difference between the open and close price meaning there is no body found on the candlestick.
The lack of a body on the candle is the reason why the books say pin bars have a higher chance of causing a reversal than dragonfly and gravestone doji candlesticks.
What I want to explain in today’s article is why dragonfly and gravestone doji candlestick should be treated the same as pin bars and why just because there is a tiny difference between the open and close prices does not mean dragonfly and gravestone doji candles have a lower chance of causing a reversal than bullish and bearish pin bars.
What Do Dragonfly And Gravestone Doji Candlesticks Look Like ?
Dragonfly and gravestone doji candlesticks look incredibly similar to pin bars, you may have seen one before and assumed what you were seeing was a pin bar due to how much they look-alike.
Here’s what a Dragonfly Doji looks like…….
……. and here is a Gravestone Doji
You can see how both of these patterns are extremely similar to bullish and bearish pin bars.
The only difference between the two is when a pin bar forms there is always a larger difference between where the candle opens and closes, with the dragonfly doji and gravestone doji the open and close of the candle are almost exactly the same as you can see in both images.
Here’s a typical bullish pin bar with the open and close of the candle marked with two blue lines. You can see how there is an obvious difference between where the pin bar opened and where it closed.
And here we have two dragonfly doji, notice how the open and the close are very close together ?
The fact the open and the close are so close together is the sole reason candlestick pattern books state pin bars have a higher probability of causing a reversal.
They say if the body of the candle closes into the previous candle it means the sellers or buyers depending on the pin were able to push the market further against the direction to which the rejection was taking place therefore the chance of the market moving in the direction of the rejection is higher.
The problem with dragonfly and gravestone doji candles is there is no candle body, which makes it impossible for the candle to actually close into the body of the previous candle.
Why Dragonfly And Gravestone Doji’s Are The Same As Pin Bars
As far as I’m concerned the dragonfly and gravestone doji candlesticks are exactly the same as pin bars, the books say they are different because of the open and close being close together but to me I treat and trade them same as bullish and bearish pin bars.
The reason why is because of the wick….
Any candle which has a wick at the end tells us the banks took some kind of action during the time the candle was forming.
Either they were placing trades – taking profits – closing trades, whether or not the candle closed near its open makes no difference, one of these actions still took place to create the wick on the candle.
The only reason the candle closed near the open was because one of the banks actions could not push the price any further in the direction of the wick, if a dragonfly doji formed due to profit taking the banks may have only been able to take profits to the point where the candle closed near its open, there may not have been enough buy orders left for them to take the rest of their profits so the price stopped moving near the open of the candle.
Another reason I think gravestone and dragonfly doji’s should be treated the same as bullish and bearish pin bars is because traders get trapped in losing trades on the wick of the candle.
When the banks undertake one of their actions the traders who were placing trades on the candle when it was forming get trapped in losing trades because the banks actions push the market in the opposite direction to which these trades have placed their trades.
Here’s a gravestone doji which formed at the top of an up-move on EUR/USD
When the price moves up the bank traders place sell trades and a wick forms, the same as what we would see if we were trading a bearish pin bar.
The traders who placed buy trades when the gravestone doji was forming are now trapped in losing trades and will close if the price begins to fall, exactly the same as what would happen in a bearish pin bar scenario.
So since everything which happens on a bearish pin bar is happening on a gravestone doji it means they are one and the same, it’s just that the books on candlestick pattern have determined it to be different to pin bars because of a slight difference in the open and close of the candle which has virtually no effect on why the gravestone doji has formed or what occurs when it appears in the market.
The gravestone and dragonfly doji candlesticks are a pattern you will see appear very often, I hope when you see them from now on you’ll treat them the same as bullish and bearish pin bars because essentially that is what they are. They both clearly show an action taking place the same way pin bars do and they both have the same effect upon the traders in the market when they form.
Thanks for reading, please leave any questions in the comment section below.