What is the Marubozu Candlestick Pattern?

Technical Analysis aids traders to analyze and predict the movement of the stocks. Candlestick charts are among the most commonly used tools to study the market. There are distinct candlestick patterns with varied differences like three black crows, engulfing pattern, the morning star, Marubozu, and many more. The candlestick pattern represents the ups and downs in the stock at a specific moment in time. This article highlights the Marubozu candlestick pattern, how to spot one, and the way you can handle risk with this pattern.

Marubozu Candlestick Pattern

The word Marubozu is a candlestick pattern derived from the Japanese. By the appearance of the candle, there are no wicks and shadows present at the extreme ends. The meaning of the Marubozu candlestick pattern is “close-cropped” or “bald head”. The pattern has only one long body and no highs and lows at the open or close, hence the name. The candlestick pattern is divided into three distinct types – Marubozu open, close and full. All these versions exhibit bullish and bearish impressions to the traders.

To consider the candlestick pattern as the Marubozu version, the candle should appear flat at either end. The stock starts at one end and closes at the same end. In other words, traders won’t witness any drastic movements on the chart. The opening price of the asset or the stock is similar to that day’s low and the closing price of the asset or stock is the same as that day’s high.

If the price of the stock takes an upswing, it signals a bull trend and vice-versa for the bear trend. As there are no shadows or wicks, the opening or closing price of the stock is going to be the highest price of the candle on that particular day. Additionally, the Marubozu candlestick pattern signals that the opening was low and closing was high at the end of the trading day or vice-versa.

In the Marubozu open candlestick pattern, the opening starts flat and closes with a high or low wick at the end of the trading day in the market.

The Marubozu close candlestick pattern is just the opposite of the Marubozu open. The higher days state that the demand for the asset is beyond the supply count, whereas, on the lower days, the supply is more but the demand is less.

How To Identify The Marubozu Candlestick Pattern?

Identifying this pattern is not extremely difficult as it opens with a real body and the absence of shadows. If the market turns bearish, the traders see the white or green candle on the candlestick charts. If the market turns bullish, the traders see a red or black candle on the charts.

These are the following clues you need to look out for – a long real body, no shadows at the extreme ends of the candle, and finally, the colour of the candle. However, an absolute Marubozu candlestick pattern can only happen once in a blue moon. At times, they’ll be a slight up and down in the range and the price of the candle at the time of opening and closing.

What does the Marubozu pattern tell traders?

The manifestation of the Marubozu candlestick pattern tells you that the market trading closed with no minor pullbacks or major changes in the financial instrument or the underlying asset class. The bullish and bearish trends depicted by the Marubozu candlestick pattern rely on who had control on any trading day. This single candlestick will exhibit the market sentiments and how the trade happens at a particular point in time.

How To Handle Risk With Marubozu Pattern?

In candlestick patterns, the colour of the candle is one of the major factors that tell you about the open and close followed by which set of traders (bullish or bearish) have the upper hand in the market.

Proceeding with the trade without forethought would cost you more than usual. Hence, you must pause until you witness the confirmation candle. If the Marubozu candlestick pattern is bearish, the candles tell you that the high price is the same as the opening price whereas the low price is the same as the closing price. The bearish appearance exhibits that the seller side is leading the market with more traders wanting to sell the financial asset in the trading hour.

You can say that the trend continues strongly if the bearish pattern portrays a downward trend. On the contrary, if the bearish candlestick pattern exhibits an uptrend, it signals a trend reversal. The anticipation here is that the bearish trend will carry on for a few trading sessions. Hence, if the trader is willing to sell the stock, they have to take a circumspect look at the market and then grab the chance accordingly.

Frequently Asked Questions

How To Avoid False Marubozu Signals and Setting Stop Loss?

Ans: Stop loss eliminates huge heart-breaking losses for the traders. This option is used to keep the trade in control of the trader. If the stop loss is used on the Marubozu candlestick pattern, it’s advisable to keep the price above or below the candle.

Moreover, small candles explain that there’s not much trading going on, and as a result, it can be a wrong indication. However, long candles give you insights into the continuous trading push in the market. Avoid trading if the candle is very short or extremely long. Furthermore, go for the confirmation candle along with the technical analysis if you are in the trade.