Introduction

Traders often get caught in complex trading strategies and patterns when all they should be doing is just sticking to the basics.

Marubozu candles are one of those simple candlestick patterns which are very easy to spot. These appear in both bearish (red) and bullish (green) forms. 

Let’s look at how Marubozu candles form, why they form, and what they can tell about the price movement in an asset. 

What are Marubozu Candles?

Marubozu is a Japanese candlestick pattern that indicates a stock has strongly moved in one direction throughout the day. It either closes at day’s high or day’s low. 

A Marubozu candle has a long body without any wicks on top or the bottom.

Marubozu candles can be of two types:

Black Marubozu: It is a bearish candle where the opening price is high for the day and the closing price is low for the day. The bears are in control of the price throughout the day.

White Marubozu: It is a bullish candle where the opening price is low for the day and the closing price is high for the day. The bulls are in control of the price throughout the day.

Let us study “Black Marubozu” in more detail.

What is Black Marubozu?

It is a long black or red candle that indicates the strength of sellers during a trading session. It is a simple candlestick pattern.

The longer the candle, the bigger the slump in price. The stock price opens at a day’s high and closes at a day’s low.

If a black marubozu appears at the end of a downtrend, it means the trend is likely to continue downwards. It signals that bears are aggressively selling and the momentum will continue downwards.

If it appears at the end of an uptrend, it means a bearish trend reversal is expected. It is a signal that sentiment has changed and now sellers are trying to push the prices downwards.

How to identify the “Black Marubozu” pattern?

This pattern is relatively easy to spot compared to other candlestick patterns. The color of the candle is always red for a black marubozu.

The opening price will be equal to the day’s high and the closing price will be equal to the day’s low.

The candle will have a large body and there will be a huge gap between the opening and closing price. There is no wick on the upper and lower part of the body. 

The longer the body, the more bearish the signal because it indicates that the sellers are placing sell orders aggressively.

Trading Strategy for “Black Marubozu” pattern

Looking at only a marubozu candle alone is not enough. It is important to look at the overall pattern formed on the chart to get a better understanding.

The formation of a black marubozu candle does not necessarily mean that the stock will continue to fall. The bulls may take over the market the next day.

Therefore, it is always best to confirm the suspicion by waiting for the candles that appear after the marubozu. 

Other technical indicators such as volume, trend lines, etc should be combined with this pattern to confirm the trade. 

Conclusion 

Marubozu candlestick patterns are definitely a very useful trading signal due to their simplicity. 

However, like every other trading tool, it has its own flaws. The ability to predict price movement is not completely accurate owing to different charts and time frames.

Even an amateur trader can identify a candlestick pattern on a chart but what matters is how effectively it is used in the trading strategy.