What is Marubozu candle ??
In the previous session, we studied about Graph and we understood how important is Candlestick chart. Each and every candle has some meaning, and also it helps to give signals about market trends either ongoing or future trends. We will study them one by one now but will start with MARUBOZU candle.
The word marubozu means “bald head” or “shaved head” in Japanese , & this is echoed in the candlestick’s lack of shadows. Kindly check the below picture.
If you see both the candle there is no shadow, it’s just FULL BODY CANDLE.
Types of Marubozu candle
The green candle represents Bullish Marubozu and the RED candle represents Bearish Marubozu.
As there is no shadow here. As you see in the picture in Green candle OPEN is LOW of candle and HIGH is the close. And vice-versa for RED Marubozu candle.
So that Implies more volume ..which means either strong buyers or strong sellers.
Green / Bullish Marubozu candle
So, if we see Green Marubozu buying will be so high that all the duration buyers were willing to buy it at any price and very high BULLISH Sentiment. Similarly, in the case of RED Marubozu candle, selling sentiment is high and sellers are willing to sell at any price.
Let’s understand this with an example,
In the above chart marked candle is Bullish Marubozu candle …and the OHLC data is OPEN = 1500, Low is =1498, High is 1594 and Close is 1589
Now you must be curious why as per definition it’s not OPEN = LOW and HIGH =CLOSE. The reason is, in reality, there will be some variation in a candle but it has to be less compared to entire movement of the candle.
How to trade in Bullish/ Green marubozu candle?
Now, how to Trade in this candle, so after the occurrence of this candle you may enter in Reliance at buying price near high of candle 1589-1594 and your stop-loss is near low of the candle near 1500.
Now do we have to wait till closing and see if it’s Bullish Marubozu formation or not ..Answer is Yes. The closing of the market is done by Matures not immature. So u wait till 3:20-3:25 and confirm your trade.
Red / Bearish Marubozu candle
Now, let’s see the exact Opposite of this Bearish Marubozu candle.
Here in bearish Marubozu candle as you can see in picture HIGH= OPEN and CLOSE = LOW. So extreme selling pressure is built and participants sold it at all the time of duration. Even if there was Bullish rally in past you have to understand it’s sentiment now changed to bearish after the occurrence of this candle.
How to trade in Bearish/ red marubozu candle?
Now in the attached picture of Nifty50 we can see OHLC as OPEN=HIGH is 12023 and CLOSE is 11845 and LOW is 11838. now again we can see there is a small variation in the price of Low and Close but compare to the entire movement of this candle it’s very very small.
So while taking the next trade, we will see Nifty50 near low of candle i.e. near 11838-11845 and our stop loss, in this case, will be 12023.
What if Marubozu makes fail Trade?
Before we move further, we have traded as per both Bullish and Bearish Marubozu but have you wondered what will happen if stop loss hit? Also, what will happen if stop loss hit, you exit the trade and again it follows the next movement in favor of candle formation. Well, trust me if it happens you follow strict discipline as it’s part of the game.
More examples of Both Bullish and Bearish Marubozu candle
Some More examples of Bullish and Bearish Marubozu candles as follows.
Bullish Marubozu candle but see first stop loss hit and then we saw Upside here.
Now in the Daily chart of LT bearish Marubozu formed to see the downside in stock after that gave really good target here.
Now let’s look at Bullish candle in the same daily chart of LT..see below picture from 915 to 990 high and then went down to 875 still SL safe but wise thing is to keep trailing Stop loss once in profit .simply means Your stop loss keep changing as new higher target formed.
Now, See the Kotak bank one hour chart below. Not a perfect Bearish Marubozu formed but enough to convince selling pressure and also has small variation. In the next immediate candle after that is also look-alike of Bearish Marubozu with more variation. but where it opened it saved our stop loss marginally and then went on up to 1315.
Next Candlestick part
This is the first candle which we studied, I hope you have a detailed idea about it. Do let us know your feedback. The next candle which we are going to study is Doji and spinning top Candle.
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