What is a dragonfly doji? A dragonfly doji is a particular doji where open and closing prices
are at the top of the session.
So opening price, closing price and high are the same price.
Once again there's no need to be super rigid about these rules.
If the opening and closing prices are not exactly at the top of the session but just a few pips below
the high, we can still consider it as a dragonfly doji.
What is really important is the logic of the pattern.
As you may have noticed, the dragonfly doji has more or less the same shape of a hammer
and it also appears in a downtrend.
The only difference is the one regarding the real body of the candlestick,
but the logic is exactly the same.
Here we have pound-dollar on a four-hour chart.
Can you see the Dragon-Fly doji on the chart?
I leave you just five seconds.
Ok,
the Dragon-Fly doji is right here.
So the price is in a downtrend before our pattern. Sellers are completely in control. With the Dragon-Fly
doji,
the market sold off from the very beginning, then recovered the losses to end the session right back where
it started.
So by the end of the session the buyers took over and pushed the price up.
This means that after many sessions dominated by the sellers the price has become attractive enough
to convince the buyers to take action and buy the couple.
So the Dragon-Fly doji has exactly the same logic of the hammer, because it contains pretty much the
same action that you see in a hammer.
So we will use both of them in the same way during the course.