Everything You Need to Know About Marubozu Candlestick
Investing in stock markets involves a fair bit of risk. It requires a lot of analysis, planning, and careful execution. Different investors use different techniques to predict share movements and invest accordingly. One such method is reading candlestick charts that enable the investors to interpret rapid movements in share prices.
Each candlestick constitutes three things – body, wick, and colour. The body of a candle represents the opening and closing price of the stock during a trading period. The wicks or shadows represent the lows and highs during that period, and the colour represents whether the stock is rising or falling.
There are many different types of candlestick patterns that are used to predict market movements by investors. One such pattern is the Marubozu candlestick pattern. In this article, we will tell you what a Marubozu candlestick is and how you can use it to predict market movements. Continue reading.
What is the Marubozu Candlestick Pattern?
The Marubozu candlestick pattern is formed when a candlestick has a relatively large body with very small wicks. A perfect Marubozu candlestick has only a body and no shadows at all, although it is quite rare.
The name “Marubozu” is derived from the Japanese term, which means bald head or shaven head. A Marubozu candlestick looks like a rectangular block with no shadows. It indicates that a stock has moved strongly in one direction throughout the trading session after opening or closing at its day-high or day-low.
Different Types of Marubozu Candlesticks
<We suggest adding a few reference images for better understanding.>
For a pattern to be classified as a Marubozu candlestick pattern, either the opening or closing of the stock has to be flat. A perfect Marubozu forms when both the opening as well as closing is flat. However, it happens very rarely.
That is why either opening or closing Marubozu candlesticks are generally observed in the intraday trading charts.
- Opening Marubozu candlestick
An opening Marubozu candlestick forms when the opening price of stock matches either the day’s low or day’s high. Thereafter, it should move only in one direction. When the opening price of a stock is equal to its day-high, and then it moves downwards, a bearish Marubozu candlestick pattern is observed.
On the other hand, if the opening price of a stock is equal to its day’s low and then moves upwards, a bullish Marubozu candlestick pattern is observed.
The open Marubozu candlestick pattern signifies that as soon as the opening bell rang, the bears or bulls took charge of the market and pushed the stock in the upward or downward direction for the rest of the session.
- Closing Marubozu candlestick
The closing Marubozu candlestick denotes an even stronger movement. It forms when the closing price of a stock is equal to either the day’s low or day’s high. When the closing price of a stock equals its day-high after moving upwards for the entire trading session, a bullish Marubozu candlestick pattern is observed.
On the other hand, if the closing price of a stock equals its day-low after moving downwards for the entire trading session, a bearish Marubozu candlestick pattern is observed.
The close Marubozu candlestick pattern indicates that a stock has moved in a single direction for the entire trading session and is expected to maintain that movement when the trading session reopens the next day.
Trading With Marubozu Candlestick Pattern
The Marubozu candlestick pattern denotes that the market is moving strongly in one direction. If you notice a bullish Marubozu candle, it means that the buyers are in full control of the market, and hence, you can initiate the “Buy” call.
Similarly, when you notice a bearish Marubozu candle, it means that the sellers are in control of the market, and hence, you should exit or sell your positions.
Here is how you can trade in the Marubozu candlestick pattern –
- Watch the market carefully and wait for a bullish or bearish candlestick to form.
- When the market is bullish, take a long position once the share price breaks above.
- Place stop-loss order below the candlestick.
- When the market is bearish, take a short position once the share price falls below.
- Place stop-loss order above the candlestick.
To Sum it Up
Candlestick trading is a useful strategy that you can adopt to predict short-term price movements of shares. A Marubozu candlestick denotes that the market is moving strongly in one direction, and hence, you can make your call accordingly.
However, you should also remember that only a single signal doesn’t justify a trade. You need to confirm your predictions by looking at some other indicators before initiating a trade.
Share Market Knowledge Centre
- Demat account
- Share market
- Trading account
- Online share trading
- Intraday trading
- Futures trading
- Commodities trading
- Currency trading
Candlestick Pattern – A Quick Guide
Candlestick pattern is a commonly used technical analysis tool in intraday stock trading. The pattern offers a collective visual depiction of the size of price fluctuations. Traders use the candlestick pattern to identify price patterns and depict the near-future direction of the stock price....Read More
All You Need to Know About Penny Stocks
Investing in stocks is a great medium to generate high returns and accumulate wealth in the long run. Different investors use different investment strategies to trade in stocks. One investment tactic that works well for new investors or those looking to foray into a new market is penny stocks....Read More
Volume Weighted Average Price (VWAP) - An Overview
There is no dearth of jargon in online share trading, ranging from ones that cause new traders and investors to scratch their heads to ones that confuse even seasoned ones. Amongst the terms unique to share trading is Volume Weighted Average Price, which is commonly referred to as VWAP.
Frequently Asked Questions
Marbozu candlesticks are easy to notice due to their bright colour, bald shape, and lack of wicks. They look like rectangular blocks with very small wicks. Sometimes Marubozu candlesticks may not have wicks at all. However, such candlesticks are very rare.
The colour of the Marubozu candlestick is very crucial. If the colour of a Marubozu candle is green, blue, or white, it means that it is a bullish Marubozu, and the market is moving up. On the other hand, if the Marubozu candle is red or black, it means that it is a bearish Marubozu, and the market is going down.
The Marubozu candlestick pattern is usually very reliable. It demonstrates the current market sentiments, and there are very few chances of immediate reversal. However, it’s better to confirm your prediction with some other indicators and patterns, such as volume, resistance, support, etc., before initiating a trade.