Trading Strategies / Indicators

What is the Marubozu Candlestick pattern?

Marisha Bhatt · 02 May 2023 · 7 Comments
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What-is-the-Marubozu-Candlestick-pattern Candlestick patterns are the most common tools used for technical analysis by traders and analysts. We have studied single candlestick patterns (Part 1) and double candlestick patterns (Part 2) in our previous articles. Now let us study a popular Japanese candlestick pattern, the Marubozu candlestick pattern. This pattern is easy to understand and implement. Given here are a few key details of this pattern.   

What is the meaning of Marubozu Candlestick patterns?

What-is-the-meaning-of-Marubozu-Candlestick-patterns The word ‘Marubozu’ is a Japanese word that literally means bald. A Marubozu candlestick pattern is a single candlestick pattern that is formed when the opening price of a security is equal to its low price for the day (in the case of a green/white Marubozu) or when the opening price is equal to the high price for the day (in the case of a red/black Marubozu). The candlestick has no upper or lower shadow, indicating that the stock price remained in a narrow trading range for the entire day. Marubozu patterns are considered to be strong indicators of a trend because they suggest that buyers (in the case of a green/white Marubozu) or sellers (in the case of a red/black Marubozu) were in control of the market for the entire trading day. This can be helpful for traders looking to enter or exit positions, as it suggests a high degree of confidence in the direction of the trend. In simpler terms, a Marubozu candlestick pattern means that the stock opened and stayed at either its highest or lowest point for the day, with no wick or tail showing. This is a sign that the market is strongly controlled by either buyers or sellers and can help traders make decisions about buying or selling stocks.

How can traders identify Marobozu Candlestick patterns?

How-can-traders-identify-Marobozu-Candlestick-patterns To identify a Marubozu candlestick pattern, traders should look for a candlestick with no upper or lower wick, which means that the opening price for the day was equal to the highest or lowest price, respectively, that the stock traded at during the day. In other words, if the candlestick is green/white and has no upper wick, it means that the stock opened at its low price for the day and closed at its high price for the day. On the other hand, if the candlestick is red/black and has no lower wick, it means that the stock opened at its high price for the day and closed at its low price for the day. Traders can identify Marubozu candlestick patterns by looking at a candlestick chart, which shows the price action of a stock over a certain period of time, typically a day. They can also use candlestick charting software, which can automatically identify different candlestick patterns, including Marubozu patterns.

How to trade with bullish or bearish Marubozu Candlestick patterns?

Traders can use bullish and bearish Marubozu candlestick patterns to create a successful trading portfolio. The steps for the same are highlighted below.
  • Bullish Marubozu Candlestick

Bullish-Marubozu-Candlestick The steps to trade using the bullish marubozu candlestick pattern are given below.
  1. Look for a bullish Marubozu candlestick pattern on the chart. A bullish Marubozu has a long green body with little to no shadow at the top, indicating strong buying pressure.
  2. Confirm the bullish sentiment with other technical indicators, such as moving averages or trendlines.
  3. Consider entering a long position or buying the asset, as the bullish Marubozu pattern suggests that prices are likely to continue to rise.
  4. Set stop loss below the low of the Marubozu candlestick to limit the losses if the market moves against the position taken.
  5. Set the take profit level at a reasonable target level based on the market conditions and technical analysis indicators, such as support and resistance levels.
  6. Monitor the trade and adjust the stop loss and take profit levels if necessary.
  7. Consider taking profits if the market continues to rise, but be prepared to exit the trade if the market turns against the estimation.
  • Bearish Marubozu Candlestick 

Bearish-Marubozu-Candlestick The steps to trade using the bearish marubozu candlestick pattern are given below.
  1. Look for a bearish Marubozu candlestick pattern on the chart. A bearish Marubozu has a long red body with little to no shadow at the bottom, indicating strong selling pressure.
  2. Confirm the bearish sentiment with other technical indicators, such as moving averages or trendlines.
  3. Consider entering a short position or selling the asset, as the bearish Marubozu pattern suggests that prices are likely to continue to fall.
  4. Set a stop loss above the high of the Marubozu candlestick to limit the losses if the market moves against the position taken.
  5. Set the take profit level at a reasonable target level based on the market conditions and technical analysis indicators, such as support and resistance levels.
  6. Monitor the trade and adjust the stop loss and take profit levels if necessary.
  7. Consider taking profits if the market continues to fall, but be prepared to exit the trade if the market turns against the estimation.

Conclusion

Marubozu candlestick patterns are among the easy to recognise and easy-to-understand candlestick patterns. As mentioned above, these patterns can be used by traders in the bullish as well as bearish markets along with a variety of securities. This makes this pattern quite flexible and approachable for different markets like commodity markets, currency markets, etc.  This article was part of the candlestick pattern series where we have broadly discussed various single and double candlestick patterns and now are taking up those patterns in detail. Let us know what you think about this pattern and if you have any questions regarding the same.  Till the Happy Reading!
Marisha Bhatt

Marisha Bhatt is a financial content writer @TrueData.

She writes with the sole aim of simplifying complex financial concepts and jargon while attempting to clarify technical and fundamental analysis concepts of the stock markets. The ultimate goal is to spread vital knowledge and benefit the maximum audience. Her Chartered Accountant background acts as the knowledge base to help clarify crucial concepts and create a sound investment portfolio.

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