The Powerful Bullish Marubozu candle | How to trade with examples

If a trader knows that bulls have come into the market, it is a great sign to take a long position (Or buy). In this article we will discuss Bullish Marubozu candle (It is okay if you do not remember the name but understand the concept), which indicates a strong buying pressure.  Like every candlestick pattern we will discuss

1. What is Marubozu candle?
2. How to spot this candle on chart and what it means?
3. How to take high probability trades using Marubozu candle?

No of candlestick pattern: Single candlestick pattern

Reversal or continuation pattern: You can spot in both the scenarios ( Reversal or continuation ). Depends on chart pattern

How to spot a Bullish Marubozu candle?

Bullish Marubozu candle have a very large green body with no or very little shadow/wick . Wick should not be more than 2-3% of the range (The difference between high and low of the candle) of the candle. It’s not a rule but you will get to know more as you study charts. Some question which can come to your mind

1. What does a large candle mean here?
2. How will I know whether the candle formed is large or normal?

While there is no specific range defined for large like it should be 50 points or 100 points, but when you start analyzing candlestick charts, any candle which looks bigger as compared to previous few candles and has no wicks can be classified as a Marubozu candle.

Why there should be no or very small wick in Marubozu candle? This candlestick pattern indicates that buyers are in full control from the start .If there is a big wick, it means sellers have tried to push the prices in the opposite direction which should not be the case when bullish Marubozu candle is formed. This will also get clearer later in this article.

For this candle open price = low price and close price = high price.

Stop Loss : The low of the candlestick indicates that there are buyers at that level pushing the prices up. Now suppose the prices break this level with a red candle. This means that all buyers will sell their position in loss now which will move the prices down again. So, the a level slightly lower than low of this candle should be your stop loss.

Understanding the psychology behind the Bullish Marubozu candle?

 A trader should pay great attention to this candlestick because it indicates that the market is now dominated by buyers, and that price movement is likely to keep going in that same direction.

If we go by the shape of a Marubozu candle, then from the moment price opens, the market keeps on pushing the prices up and because there is no upper or lower wick, it closes strongly at the high (sellers were never able to dominate and hence there should be small or no wick) . This means that buyers are willing to purchase it at every price point.

Any candlestick shows fight between buyer and seller in the market and when Marubozu candle forms, it shows that buyers have completely dominated sellers.

What Does a Bullish Marubozu Candle Tells You

Whenever this candlestick appears on charts it indicates that market sentiments have turned bullish and there is a high probability that bulls can come into the market to push the prices up. This can happen in a downtrend or a sideways market.

 

How to trade Bullish Marubozu candle

Now we know that the bullish Marubozu candlestick is a powerful candle as it indicates bullish market sentiment but as always there are few things which you can consider:

1.The green candle length is very large

A logical stop loss for this candle is at the low of the candle, but a large green candle will also make your stop loss larger. So it depends on the risk taking ability of the trader to trade the candle (Whether he/she is willing to take that risk)

2. How volume matters in Marubozu candle

Downtrend

If there is a downtrend and bullish Marubozu candlestick is formed with a high volume , then it signals a chances of reversal from that level as bulls have entered the market

Range breakout

If prices are in range and Marubozu candle is formed with high volume chances are high that prices will move up.

Stocksgully tip: In case of bullish channel breakout , a logical stoploss is the bottom of the range

Example:

Uptrend

Suppose there is uptrend going on and you are seeing back to back green candles with no retracement . If Marubozu candle is formed in such scenarios , you should wait for retracement rather than taking a long position because market might see consolidation or reversal from the Marubozu candle.

Breakout

This candlestick is great for breakout traders. A breakout with Bullish Marubozu candlestick can give good returns in a small time to swing traders.

 

Intraday traders

Condition:

1. There should be a strong downward movement in the prices ( 5 min time frame )
2. If bullish Marubozu is formed after downward move , then there is high probability of an upmove
3. The bottom of Marubozu should be a strong support or demand zone.

* If there is a fast downward movement and then Bullish Marubozu is formed , then its better . 

 

Note : To illustrate the concept , we take examples where the candles have worked but when you analyze the chart , you will also find places where these candles or setup has not worked . This doesn’t mean that concept is wrong but you need to practice more charts and backtest . No candle or setup works 100% in stock market but we need to understand the concept first and practice on charts. Try to create your own trading style

Key takeaways

• Marubozu candle is a single candlestick pattern where low=open and high=close.
• This candle indicates that market sentiment has turned bullish and bulls can enter the market after this candle is formed to push the prices up
• Stop loss is the low of the candle as buyers are there at that level

Recommended articles on Trading and Investing

1. How to start trading in stock markets?
2. How to trade bullish engulfing pattern?

FAQ’s

1.What is Marubozu in candlestick?

Marubozu is a single candlestick pattern where there is no or very small upper or lower wick. For bullish Marubozu candle , Open = low and close = high. Its a powerful candle which indicates that market sentiments have turned bullish now.

2.How accurate is the Marubozu candle?

Candlestick provides information about market sentiment ( Who is in control : Bulls or bears ) but the location where it is formed is also very important (And this is true for any candlestick pattern). If  Bullish Marubozu candle is formed at a support or demand zone, the probability is high that prices will move up .

 

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