Marubozu candlestick pattern definition, formation and trade setup

 

What is Marubozu Candlesticks pattern?

The marubozu is one of the candlestick patterns which we will understand. The word marubozu means “bald” (close-cropped head) in Japanese.

Marubozu is both types of candlestick pattern

1. Bullish candlestick pattern.
2. Bearish candlestick pattern.

 The marubozu probably has only one candlestick pattern that can be formed anywhere in the chart irrespective of the previous trend. You can trade in marubozu before checking the previous trend it can be formed anywhere.

Marubozu candlestick pattern defines Us with no upper and lower shadow. A Marubozu has only a real body as shown in the image. In the marubozu candlestick pattern, the red candle represents bearish marubozu and the green candle represents bullish marubozu.

Key Points

• What are the types of Marubozu Candlestick patterns?
• What is Bullish Marubozu candlestick pattern & How to trade in this setup?
• What is a risk management system?
• What is Bearish Marubozu candlestick pattern & its trade setup

What are the types of Marubozu?

As we have discussed previously there are two types of marubozu Bullish Marubozu and Bearish Marubozu. Now we will discuss it in detail.

What is bullish Marubozu?

The absence of upper and lower shadow in bullish marubozu. It has only a green body (or green candle) The bullish marubozu is formed when a candle opens with low and closes with high (it should be no shadow) then it forms a bullish marubozu. As long the body of the candle indicates a stronger bullishness in the candle.

A bullish Marubozu indicates there is very much buying interest in stock so the market participants will buy the stock at every price. It does not matter what the previous trend, the marubozu only indicates that the sentiment of the market was now changed to bullish.

In this candlestick pattern, we can expect there is bullishness in the stock for the next few trading sessions. Hence Traders were searching for the buying opportunity with the appearance of marubozu. The buying price in the marubozu candlestick pattern in the closing of the marubozu candle and the stop-loss is the opening of the marubozu candle.

In my opinion, we should wait for the next candle after the marubozu candle is formed because in some cases candlestick patterns also fail and it will hit your stop-loss.

Why will we put stop loss in bullish Marubozu?

Every trader should study Risk management systems. If the candlestick pattern will fail, then you will lose only that much amount which you are capable of losing. If you are not putting stop loss in your trade, then you will lose more capital because of your emotion which will not allow you to take the loss in trade, and in this case you will lose more money.

What is Risk Management System? (Click here)

Now Let’s Discuss the Bearish Marubozu Candlestick pattern.

What is a bearish Marubozu candlestick pattern?

Bearish marubozu shows the extreme bearishness in stock. It is like bullish marubozu only the difference is it is formed in a red candle, the bearish marubozu open in high and close in low and formed a red candle with no shadow.

A bearish marubozu indicates that there is so much selling pressure in the stock that every person is trying to sell the stock at every price point. It does not matter about the previous trend after the formation of marubozu the high probability is that stock should go downtrend.

Now let’s talk about how to trade in bearish marubozu candlestick pattern, in this pattern as we have explained you early that the opening is high, and the closing is low of the red candle (or bearish candle) so we should sell the stock in low of the bearish marubozu candle.

But in my opinion, we should sell the stock after confirmation of marubozu candle because sometimes candlestick pattern also fails and hit the stoploss.

Now let’s know what should be the stop loss in bearish marubozu candlestick pattern, the stop loss should be high or opening of marubozu candle.