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Dragonfly Doji Candle Pattern

The dragonfly doji is an interesting name for a candle that is supposed to act as a bullish reversal. It is a reversal candle, but only half the time. Random, in other words. If you see a dragonfly doji in the bush, do not be frightened. The 10-day performance after the breakout ranks it 98th out of 103 candles, where 1 is best. In other words, ignore it. Its bite is usually not fatal. Usually.

Based on how the dragonfly doji works in the marketplace, it acts as a reversal 50% of the time. Thus, it is neither a reversal nor a continuation candle. It represent indecision. Because the lower shadow is so long and the closing price is pegged at the top of the candlestick, upward breakouts predominate. A frequency rank of 44 means it is more plentiful than many other candles, so you should see it often in a historical price series. The performance rank, at 98, is near the bottom of the list. Do not expect price to trend for long after a dragonfly doji.

Dragonfly Doji: Important Results

Theoretical performance: bullish reversal during a decline, otherwise indecision

Tested performance: Reversal 50% of the time

Frequency rank: 44

Overall performance rank: 98

Best percentage meeting price target: 80% (bear market, down breakout)

Best average move in 10 days: -5.02% (bear market, down breakout)

Best 10-day performance rank: 17 (bull market, down breakout)

All ranks are out of 103 candlestick patterns with the top performer ranking 1. “Best” means the highest rated of the four combinations of bull/bear market, up/down breakouts.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Dragonfly Doji

Dragonfly Doji: Discussion

The 80% meeting the measure rule target is a good score. In a bear market after a downward breakout (which is rare), the decline is quite respectable: 5.02%, but the best 10-day performance rank (17) occurs after a downward breakout in a bull market. I would have expected that a bear market would score higher, but other candlesticks seem to disagree.

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

Dragonfly Doji: Identification Guidelines

Characteristic	Discussion
Number of candle lines	One.
Price trend leading to the pattern	None required.
Configuration	Look for a long lower shadow with a small body (open and close are within pennies of each other).

Dragonfly Doji: Three Trading Tidbits

Dragonfly doji that appear within a third of the yearly low perform best — page 205.
Dragonfly doji break out upward most often — page 207.
For those Dragonfly doji in which the opening and closing prices are different, white bodies perform best after upward breakouts, and those with black bodies outperform after downward breakouts — page 207.

Dragonfly Doji: Example

In this example, price breaks out downward and when that happens, the move can be a decent one. Price retraces about half of the prior up move before resuming the rise at a more leisurely pace.