During your online trading studies, you will learn about different types of technical charts. These charts come in different colors and patterns, which act as indicators and help you identify different trading trends such as bullish, bearish, uptrend, etc. Along with fundamental analysis of stocks, you should also study these charts and patterns while studying your technical analysis.
Candlestick patterns are particularly popular and experienced traders know them like a second language. This article will help you understand one of the most popular types of candlestick patterns, the Marubozu candlestick pattern. read ahead.
Marubozu Candlestick — Meaning and Interpretation
Derived from the Japanese word ‘Marubozu’ and literally translated as ‘bald’, the Marubozu pattern is formed with a single, single candle. According to traders, a true Marubozu is a candle that, unlike most candle patterns, has no shadow — neither an upper nor a lower candle.
This candlestick pattern is generally considered to have a ‘real body’ and is classified into two types — bullish Marubozu candles and bearish Marubozu candles. These candlestick patterns effectively signal the reversal or continuation of a trend based on their appearance on the trading chart.
What is Bearish Marubozu?
Bearish Marubozu is a long red (or black) candlestick with no upper or lower shadow.
This pattern shows that bears were in control of the market throughout the trading session, which led to a decline in prices and the market closed near the day’s low.
Although this pattern consists of a red candle without a wick or shadow, there can be some exceptions to this, such as a very small or negligible wick on the side of the high or low can be considered as I mentioned in the previous example.
Looking at a bearish marubozu candle shows that all the traders are very negative and bearish about a stock and they are trying to sell it at any price.
That is why the price of this stock is continuously going downwards and finally at the end of the day it closes at low level.
Now here is the bookish meaning of bearish marubozu candle-
Open = High
Close = Low
But there may be some slight variation or change here.
One more thing is that it does not follow the previous pattern, that means if a day ago the sentiment of the stock was positive i.e. bullish candle but today it has become a bearish marubozu, then it means that now the sentiment of this stock has changed to bearish i.e. bearish. .
Now that a bearish pattern has formed in the stock, it may continue for the next few trading sessions.
So overall, Bearish Marubozu is a continuation pattern that can continue further.
How should you take a trade on a Bearish Marubozu candle?
Like some day Bearish Marubozu is formed, you have to short sell i.e. sell and not buy.
You can place your trades from 3:15 to 3:25, just before the market closes.
But this trade is only for those who can take the risk. If you want confirmation then sell only on the next day’s red candle to confirm that the recession is going to continue the next day.
Now you sell around the closing of the day and place stoploss at the high or open of marubozu.
One thing to keep in mind here is that you should not take trades on the day when the marubozu candle is small, meaning the difference between high and low is less than 1%.
Apart from this, if the difference between high and low is more than 10% then you should not take the trade.
A Practical Example from Chart
