A marubozu candlestick is a full body either bullish or bearish candlestick. They are larger candlesticks and don’t have any upper wicks or lower shadows. They are typically green or white on stock charts when bullish and red or black on charts when they are bearish.
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What are Marubozu Candlesticks?
Marubozu candlesticks indicate that a stock traded strongly in one direction throughout the day. It either closed at its low price of the day or highest price of the day. Typically their candlesticks have a long real body and no wicks or shadows. Although we know that charts are not always picture perfect.
A bullish marubozu has a long green real body. The bulls were in full control that day. The stock closed higher than it opened AND did not have a higher or lower price that formed wicks. These candlesticks are often perceived as very confident, and technical traders look for follow through.
The bearish marubozu candle has a long red real body. The bears had control and drove price down. It closed lower than it opened. No high or lows formed wicks.
Marubozu candlesticks are found on all stock charts and all time frames. The marubozu candlestick can be bullish or bearish depending on who controlled the day.
The marubozu is apart of Japanese candlestick patterns and are used with technical analysis to indicate how a stock traded for the day. The stock market is a war between buyers and sellers.
There are some days one side wins hence the formation of the marubozu candlestick. Greed and fear move markets when trading. Traders take advantage of the movement of price. In reality, simply trading the emotions of other people.
The invention of candlestick charts allows us to gauge how people from around the world view the market. When traders have a handle on what other traders are feeling, they can use that to their advantage.
One may look at marubozu candlesticks by themselves; however when looking at the overall pattern it is apart of is important. Together the candlesticks paint a bigger picture. These candlesticks tell who controlled the day; like a bullish or bearish marubozu.
A bullish marubozu indicates that buyers controlled the price from open to close and is considered extremely bullish.
Bearish marubozu candles indicate that sellers had control of price from start to finish and is a very bearish sign. But again, what pattern is it apart of?
Candlesticks group together to form patterns. These include but are not limited to inverted hammer candlesticks, dragonfly doji candlesticks, and hanging man candlesticks.
Learning Technical analysis basics is super important with marubozu candlesticks. Just because a bullish marubozu candle forms does not always mean the stock will continue in an upward trend. Sometimes the next the day the bears will come in and form a marubozu of their own. This is why it is important to need to know trend lines, risk management, volume, and other confirming indicators to make the trade.
Candlesticks are so important along with learning support and resistance. The real bodies and wicks form these levels.
Using RSI (relative strength index) along with candlestick moves can tell whether a stock is overbought or oversold. No matter which end of the spectrum a stock is on, it is going to correct.
If a stock is overextended from the moving average lines, such as the simple moving average, it is going to want to return to the equilibrium the moving average supplies.
The RSI along with moving averages give signals about the moves that are coming. When paired with candlesticks, helps the trader “see” what the chart is trying to tell the trader.
TrendSpider will actually identify the candlesticks for you. You can select patterns, and then pick the candlesticks you would like to display. Once you have done that, all the candles that you selected will be highlighted and you can easily spot marubozu candlesticks.
How to Trade Marubozu Candlesticks
- Watch for bullish or bearish candlestick to form.
- If bullish, take a long when price breaks above.
- Place stop below candlestick.
- If bearish, take a short when price falls below.
- Place stop above candlestick.
Marubuzo candlesticks are found on all time frames. It is important to see what the technical indicators are signaling, as well as, the patterns they are apart of. As always be sure to wait for confirmation before taking a trade. Trading is not gambling if the trader sticks to their education and game plan.