The Gravestone Doji candlestick is a key formation in price action analysis that suggests a potential reversal in market direction, typically from bullish to bearish.
In ICT (Inner Circle Trader) methodology, this candlestick pattern can play a critical role in identifying key market turning points, especially when aligned with other smart money concepts such as liquidity, order blocks, and market structure shifts.
1. What is a Gravestone Doji Candlestick?
A Gravestone Doji forms when the opening, closing, and low prices are all the same (or very close), and the high forms a long wick.
This pattern looks like an inverted “T” and indicates that bullish momentum has been rejected by strong selling pressure.
It’s a bearish reversal signal, as the long upper wick shows that buyers tried to push the price up, but sellers were strong enough to bring it back to the open.
2. Key Features of the Gravestone Doji:
- Long Upper Wick: Signifies rejection of higher prices.
- No Lower Wick (or very small): Shows that the open, close, and low prices are almost identical.
- Bearish Reversal: Generally seen at the end of an uptrend, signaling a potential downward movement.
3. Gravestone Doji in ICT Trading
In ICT, the Gravestone Doji is significant when it appears at key levels such as:
- Liquidity Pools: Places where stop losses are triggered or significant market activity happens.
- Order Blocks: Areas where institutions accumulate or distribute positions.
- Fair Value Gaps (FVGs): Price imbalances that need to be filled.
By understanding these contexts, you can use the Gravestone Doji to confirm potential market reversals or entry points for high-probability trades.
4. ICT Concepts to Enhance Gravestone Doji Trades:
1. Market Structure and Liquidity
Look for a Gravestone Doji near major liquidity zones, such as swing highs, which may indicate that the market is about to reverse after a liquidity grab.
For example, if price breaks above a previous high, creating a liquidity pool, and then prints a Gravestone Doji, this signals a potential bullish exhaustion and a reversal to the downside.
2. Order Block Confirmation
When a Gravestone Doji appears in or near an order block, it further strengthens the bearish bias.
Institutions may be accumulating short positions in this area, using the Gravestone Doji as a final confirmation of exhaustion in bullish momentum.
3. Break of Structure (BOS)
Combine the Gravestone Doji with a Break of Structure (BOS) to enhance your strategy.
If the market structure shifts from higher highs and higher lows (bullish) to lower lows and lower highs (bearish), and the Gravestone Doji occurs near a key level, it suggests that the uptrend is likely over.
4. Fair Value Gap (FVG)
If the Gravestone Doji forms after a sharp move upward, leaving behind a Fair Value Gap, the gap will often act as a resistance zone.
When the price retests this area and prints a Gravestone Doji, it increases the probability of a reversal.
Example 1: Using the Gravestone Doji in an Uptrend
Let’s consider that EUR/USD has been trending upward, making higher highs.
You identify a Gravestone Doji forming at a swing high (1.2000), near an area where liquidity (buy stops) is likely.
- The Gravestone Doji signals that although buyers pushed the price higher during the session, they were ultimately overpowered by sellers, driving the price back down to the opening level.
- In ICT terms, this is a sign that smart money is likely distributing their positions, and retail traders who bought the breakout might soon be trapped in losing trades.
To confirm the reversal:
- Look for a Break of Structure (price making lower lows).
- Watch for price to revisit an order block or FVG as a confirmation of smart money involvement.
Once these conditions are met, you can enter a short trade with the expectation that the price will continue to fall, especially if it aligns with other ICT concepts.
Example 2: Gravestone Doji at a Key Liquidity Zone
Imagine the S&P 500 is approaching a previous swing high at 4500, where a large number of stop-loss orders from short sellers are likely located.
As price reaches this level, it spikes above the swing high (grabbing liquidity) and forms a Gravestone Doji candlestick.
- The Gravestone Doji here indicates that buyers are running out of steam, and sellers are stepping in aggressively.
- From an ICT perspective, this is a classic liquidity grab where smart money has used the opportunity to push the price higher, trigger retail stops, and then take the opposite (short) side of the market.
After the Gravestone Doji forms, you might expect the price to fall, as the liquidity above the swing high has been consumed, and institutions begin to drive the market lower.
5. Steps for Trading the Gravestone Doji in ICT
1. Identify the Context
Make sure the Gravestone Doji is forming at a key level: near an order block, liquidity zone, or after a fair value gap.
2. Confirm with Market Structure
Check if the market structure is shifting from bullish to bearish (i.e., lower lows forming). This confirmation helps reduce false signals.
3. Entry Point
After the Gravestone Doji forms, wait for a retracement to an order block or a fair value gap to enter the trade. The retracement provides a better risk-to-reward ratio.
4. Stop-Loss Placement
Place your stop loss above the high of the Gravestone Doji or above the key resistance level that aligns with the ICT framework.
5. Target Zones
Set your target at the next support level, an area of liquidity, or a fair value gap below the entry point.
Example 3: Gravestone Doji in an Institutional Order Block
Let’s say you are watching GBP/USD in a downtrend, and you notice a Gravestone Doji forming at a resistance zone, which happens to coincide with a previous order block.
This adds further credibility to the Gravestone Doji signal, as it shows that smart money might be entering short positions at this level.
- The Gravestone Doji is your entry signal, but you wait for a slight pullback to the order block for a better entry point.
- You place your stop-loss above the high of the Gravestone Doji and set your target at the next liquidity pool below the current price action.
This strategy allows you to align with institutional order flow and increase the probability of success.
6. Conclusion
The Gravestone Doji candlestick is a powerful bearish reversal signal in ICT trading, especially when combined with key smart money concepts like liquidity grabs, order blocks, and market structure shifts.
By using the Gravestone Doji in combination with these concepts, traders can gain insights into institutional activity and position themselves more effectively in the market.
The Gravestone Doji becomes a valuable tool for identifying smart money’s intentions and acting on potential market reversals.
When used in conjunction with ICT concepts, it provides a high-probability setup for profitable trades.
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