What Is the Marubozu Candlestick Pattern?

FXOpen

Have you been looking at your Bitcoin or forex chart for hours, wondering when to buy or sell? In one moment, the chart is green, screaming “buy.” Next, it’s all red, and the price is falling. Buying or selling becomes a tough decision if you resonate with this. However, candlesticks on your chart can help you.

These tools show price movement during a time frame like the four-hour (H4) or daily (D1) session. Some examples are the doji, morning star, and spinning top. It would take a lot more than a single article to cover candlesticks fully. This FXOpen article will help cover one of them – the Marubozu candle pattern. Tag along to learn about this candlestick, its types, and how to trade using it.  

What Is a Marubozu Candlestick

A Marubozu is a candlestick with no wicks that has a long body. It signals a strong price action as buyers or sellers dominate the session. “Marubozu” is a Japanese term meaning “bald” or “close-cropped.”  

It may be bearish (if the open price is above the close) or bullish (if the open price is below the close). When this occurs, traders prepare for a significant price movement. But first, how can you identify it?

How to Identify the Marubozu Candlestick

In a range, the price moves within horizontal support and resistance. It indicates that the buyers and sellers are in a serious battle, and neither dominates. It also shows that traders have their hands folded with little activity.

A Marubozu might break the range, indicating that momentum is starting to build up. Aside from range, the Marubozu candlestick pattern occurs in a trend. This might be at its beginning, middle, or end.

Marubozu Starts a Trend

A new trend starting with a solid price movement may contain a Marubozu. It might pop up due to news or market sentiment. Traders who come on board early might have more room to capture profit.

Marubozu in Mid-Trend

Whether it’s a bull run or a bear market, trends often slow down for some time. This causes people to also slow their activities during up or downtrends. Afterwards, they pick up the pace and continue in the same direction.

A Marubozu candlestick pattern may signal that traders’ momentum is back, and they can position themselves for market opportunities. This may occur mid-trend or after the trend halts for some sessions.

Marubozu Ends a Trend

The end of a trend is a spot where investors position themselves for new opportunities. Why? A new trend will likely begin, and catching it allows one to place a successful trade. This is a reversal, and the Marubozu candlestick pattern indicator can show when it occurs.  

You can use the TickTrader platform to examine this pattern.

Marubozu Candlestick Patterns

There are two main types of Marubozu pattern in forex, commodity, stocks, crypto*, and other markets. Let’s dive right into them.

Bearish Marubozu Candlestick

Do you seek selling opportunities? A Marubozu candlestick might indicate when they are available. The bearish Marubozu (usually a red or black candle) opens at a high and closes at a low price, and its long body also indicates the selling pressure.

So, how can you trade it? You may consider these steps in trading the bearish Marubozu pattern:

  • Identify the bearish Maruboz
  • Consider opening a short trade at the opening of the next candle
  • Place the stop loss (SL) above the nearest swing high
  • Take profit at the next swing low, support level, or considering other technical analysis tools

Check this live chart for a vivid illustration:

Bullish Marubozu Candlestick

The bullish candlestick is the opposite of the bearish version. It catches the eyes of long traders seeking buying opportunities at low-risk price points. It opens at a low price and closes at a high, so it has no wicks. The significant length of the candle also indicates buying pressure.

Here’s the theory for trading the bullish Marubozu candlestick pattern:

  • Identify the bearish Marubozu during an uptrend near a swing low
  • Consider going long at the opening of the next candle
  • Place your stop loss (SL) below the swing low
  • Take profit at the next swing high, when the price begins to range, or when other technical analysis tools signal a price reversal.

Here’s an image of a live chart providing more details:

Marubozu vs Engulfing Pattern

We’ve established that a Marubozu is a single candle that has no wick and shows strong buying or selling pressure. An engulfing pattern involves two candles, with the body of one completely overlapping the other.  

Let’s consider a bullish engulfing formation. The first candle is bearish, with wicks and a body. A second bullish candlestick forms, having its body overshadowing or engulfing the body of the first. This might indicate a reversal, whereas Marubozu signals trend continuation and reversal.

For a bearish engulfing formation, the first candle is bullish, and the second is bearish. The bearish candle completely overlaps the bullish one, signalling a potential for a further price drop.

Conclusion

The Marubozu is a significant pattern that indicates either bullish or bearish pressure. It could be effective to pair it with other strategies such as support and resistance, moving averages, or a pivot point to enhance confluence. You can consider opening an FXOpen account in order to trade with the Marubozu.

FAQ

What does Marubozu predict?

It’s a technical indicator that can help to predict a price direction. It may show buying or selling pressure depending on its close and open prices. The pattern can appear within a strong trend and before its reversal, therefore, traders confirm its signals with other tools.

How does Marubozu work?

The tool shows that an asset’s price did not trade beyond the opening and closing points. It lacks wicks, and its long body indicates an aggressive price direction.

Is Marubozu a bullish or bearish pattern?

It may be bullish or bearish, depending on the positions of open and close prices. It is bullish when it opens at its low and closes at its high. It is bearish when it opens at its high and closes at its low.

*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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