# Gravestone Doji: Bearish Reversal Pattern Explained With Trading Tips

## What Is a Gravestone Doji?

A gravestone doji is a bearish reversal candlestick pattern that signals potential market downturns. This pattern forms when the open, low, and closing prices align closely, with a long upper shadow indicating a strong shift from bullish to bearish momentum. Traders use it, along with other indicators, to confirm trends before making investment decisions.

### Key Takeaways

*   A gravestone doji is a bearish reversal candlestick pattern often signaling a potential downtrend in price action.
*   The pattern resembles an inverted T and is most effective when confirmed with high volume and a subsequent bearish candle.
*   Traders use the gravestone doji to identify potential exits from long positions or to enter short positions.
*   It's crucial to combine the gravestone doji with other technical analysis tools for improved accuracy in predictions.
*   The opposite pattern of a gravestone doji is the dragonfly doji, which can indicate a bullish reversal.

## Understanding the Gravestone Doji Pattern

As noted above, a gravestone doji is used in [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp). It is a strategy that some investors use to make trades. They rely on statistical trends, such as past performance, price history, and [trading volume](https://www.investopedia.com/terms/v/volumeoftrade.asp) to make their trading decisions. They often employ charts and other tools to identify opportunities in the market. One of these is the gravestone doji.

The gravestone doji pattern implies that a bearish [reversal](https://www.investopedia.com/terms/r/reversal.asp) is coming. It looks like an inverted T with a high, upper shadow. The open, low, and closing prices can be equal or almost equal for the pattern to be valid. There should also be a relatively small tail or else the pattern could be classified as an inverted [hammer](https://www.investopedia.com/terms/h/hammer.asp), [shooting star](https://www.investopedia.com/terms/s/shootingstar.asp), or a [spinning top](https://www.investopedia.com/terms/s/spinning-top.asp).

The market narrative is that the [bulls](https://www.investopedia.com/terms/b/bull.asp) attempt to push to new highs over the session but the [bears](https://www.investopedia.com/terms/b/bear.asp) push the price action to near the open by the session close. So the long upper shadow represents the bulls losing [momentum](https://www.investopedia.com/terms/m/momentum.asp).

Although a gravestone doji can mark the end of a [downtrend](https://www.investopedia.com/terms/d/downtrend.asp), it's more often seen at the end of an uptrend. Although the gravestone doji is popular, it suffers from the same reliability issues as many visual patterns. Traders usually wait for the next candle to confirm a reversal before acting on a gravestone doji.

> **Tip**
>
> The first and best way to get a grip on how technical analysis works is to learn about it—read books, take courses both on and offline, talk to other traders, and visit websites that can help teach you some tricks of the trade. Once you've mastered the basics, you'll be able to develop your own style.

## Trading the Gravestone Doji

Traders will often exit [long positions](https://www.investopedia.com/terms/l/long.asp) or initiate short positions after identifying a gravestone doji pattern, although it's important to use this [candlestick pattern](https://www.investopedia.com/articles/active-trading/092315/5-most-powerful-candlestick-patterns.asp) in conjunction with other forms of technical analysis as a confirmation.

Investors often look at the volume associated with the session, as well as activity from the previous session, as potential indicators of the reliability of the pattern. The following chart shows a gravestone doji in Cyanotech's stock following a significantly high volume uptrend, which could indicate a bearish reversal over the near term following the [breakout](https://www.investopedia.com/terms/b/breakout.asp).

![Image 1](https://www.investopedia.com/thmb/Hzao50kFYd8Vm96w8CEf3kCTVH8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Gravestone_Doji_Definition_Feb_2020-01-1e3a766ebacf4f8e98cc0bde9f47d4ff.jpg)

**

In this example, the gravestone doji could predict a further breakdown from the current levels to close the gap near the 50- or 200-day moving averages at $4.16 and $4.08, respectively.

Traders would also take a look at other technical indicators to confirm a potential breakdown, such as the [relative strength index (RSI)](https://www.investopedia.com/terms/r/rsi.asp) or the [moving average convergence divergence (MACD)](https://www.investopedia.com/terms/m/macd.asp). Day traders may also put a [stop-loss](https://www.investopedia.com/terms/s/stop-lossorder.asp) just above the upper shadow at around $5.10, although intermediate-term traders may place a higher stop-loss to avoid being stopped out.

## Comparing Gravestone Doji and Dragonfly Doji Patterns

The opposite pattern of a gravestone doji is a bullish [dragonfly doji](https://www.investopedia.com/terms/d/dragonfly-doji.asp). The dragonfly doji, which isn't a very frequent pattern, looks like a "T" and it is formed when the high, open, and close of the session are all equal or nearly the same. Unlike the gravestone doji, the dragonfly doji pattern has a long lower shadow. This implies aggressive selling during the period of the candle.

Although these two formations are talked about as separate entities, they are essentially the same phenomenon. When confirmed, one can be called bullish and the other bearish. Sometimes they can appear in the opposite scenario.

For example, a gravestone doji can be followed by an uptrend or a bullish dragonfly may appear before a downtrend. Both patterns need volume and the following candle for confirmation. It is perhaps more useful to think of both patterns as visual representations of uncertainty rather than pure bearish or bullish signals.

> **Important**
>
> A doji is a trading session where the security's opening and closing levels (or prices) are either equal or virtually equal. The doji is represented on the chart as a candlestick.

## Understanding Limitations of the Gravestone Doji Pattern

The gravestone doji helps in placing a stop loss and planning profits during a downtrend, but it's less precise than other [technical indicators](https://www.investopedia.com/terms/t/technicalindicator.asp). Although reliability increases with volume and a confirming candle, the gravestone doji is best accompanied by other technical tools to guide trading.

## What Does Gravestone Doji Mean?

A gravestone doji is a trading pattern that occurs in technical analysis. Traders use it to identify trading opportunities. It represents a bearish pattern during a reversal that will be followed by a downtrend in price. Traders can use the pattern to determine when to take profits—either through a bearish trade or on a bullish position.

## How Do You Trade on a Gravestone Doji?

The gravestone doji shows up in a series of candlestick patterns. The opening, closing, and high prices may be equal or nearly the same. When this happens, the possibility of a trend reversal is likely with a new bearish trend on the horizon. In order to take advantage of the trade, make sure you confirm there's a trend reversal on the way after you identify the pattern. Then, enter your position once the next candle closes below the closing price of the candlestone doji. Set your stop-loss at the highest point of the candle and be prepared to take your profit. You can also enter the trade above the closing price. Just be sure you set your stop-loss at the lowest point of the gravestone candle before you take your profit.

## What Does a Gravestone Doji Indicate?

A gravestone doji is a trading pattern that occurs in technical analysis. It looks like an inverted T with a long upper shadow. It is a bearish trend that indicates a reversal is on the horizon. Traders can assume that the reversal will be accompanied by a downtrend in the security's price. When a trader identifies a gravestone doji, they may be able to profit on a bullish position or by taking a position on a bearish trade.

## What's the Opposite of a Gravestone Doji?

The opposite of a gravestone doji is a dragonfly doji. Where the gravestone doji is an inverted T with a long upper shadow, the dragonfly doji is a T with a longer lower shadow. In an uptrend, it means that the bearish pattern may be getting stronger while a dragonfly doji that appears in a downtrend indicates the opposite trend. Keep in mind that this pattern isn't one that occurs very frequently.

## The Bottom Line

Traders use technical analysis, including tools like the gravestone doji, to exploit market trends. The gravestone doji pattern, which looks like an inverted T with a long upper shadow, signals a potential bearish reversal and downtrend. To use this pattern effectively, traders should confirm the trend with subsequent candlesticks and volume analysis. Employing the gravestone doji alongside other technical indicators, such as RSI or MACD, can strengthen trade decisions and help manage risk for potential profits.