A doji is a crucial candlestick, and the gravestone-doji is a very common example of a doji. The gravestone-doji is a crucial candlestick that gets its name because the candlestick looks very much like a gravestone. The gravestone-doji also got its name at a time when traders were not allowed to trade online and hence could only buy long. This made them wait for an uptrend to form. That in turn made it impossible for them to make money from a bear market.
Gravestone-doji, which has a longish higher shadow at the peak of a bull market, represents a robust turnaround signal. It indicates that bulls have run out of steam and they are now starting to sell. When this happens prices will stop going up. This is bad news for stock traders because they know that they will not be able to make any more money with the uptrend. This is one more reason why the doji is called a Gravestone. Stock traders fear the gravestone-doji because it buries their hopes of earning cash during an uptrend.
The Gravestone-doji candlestick normally forms in the stock market. It hardly ever forms on the Forex or currency markets because of its high volatility. Even so, sometimes it forms in the currency market but its shape is not the same as when it forms in the stock market.
A typical Gravestone-doji does not have any lower shadow. It only has an upper shadow and typically, it also does not have a body. This kind of candlestick is a reversal signal that forms during an uptrend. The Gravestone-doji indicates that there is a strong chance that the uptrend has reversed, or is at the very least, stopping from rising any further. It also indicates that the uptrend will be moving sideways for a brief period of time.
When a subsequent candlestick confirms the Gravestone it is a signal to sell or set up a short trade. The factors that make a Gravestone-doji a robust signal include the length of the upper shadow, Bollinger upper band breakout and the confirmation candlestick.