Gravestone Doji
Categories: Marketing
The name of the hero of a series of 1970s private eye novels.
Also, the name of a candlestick chart pattern in technical trading.
A few basics to get out of the way first. Technical trading involves looking at chart patterns (that is, looking at the way prices of an asset move around over time). Traders use these patterns to predict what will happen next.
Candlestick charts are a particular kind of graphic representation of these price movements. They take a distinct time period (usually a day, but it could be month or a quarter or whatever) and boil down the price movement into a little picture that resembles a candle.
The graphic consists of a tiny rectangle indicating the open and closing prices for the period. A big distance between the open and close (meaning that the asset gained or lost a lot on the day), will have a long rectangle. Little movement from open to close will have a very squat rectangle.
Through this rectangle, the candlestick features a vertical line through the middle. It indicates the distance from the high point and the low point for the time frame.
All right...basic stuff out of the way.
A gravestone doji involves a pattern where the open, the close, and the low are all clumped near to each other. Meanwhile, the high for the day is relatively high compared to the cluster formed by the other measures.
The pattern looks like a candle, where there's no wax left (just a melted clump at the bottom). However, it still has a long wick at the top. Or, you could say it looks like a gravestone...hence the name "gravestone doji."
The "gravestone" part plays double-duty (metaphorical, as well as graphic), as the pattern indicates potential downward momentum for the asset's price. The gravestone doji usually signals a bearish reversal, meaning that a recent advance might have played out, and the asset price could be headed for a downturn.
The opposite of a gravestone doji is a dragonfly doji, which features the open, close, and high for the day all clustered together, with a low relatively far away...like a dragonfly's long tail.