Marubozu is a Japanese term, which literally translates to a head that has been shaved. What does that mean on the chart? We will find out. The fact is, Marubozu is not among the most widely applied or commonplace candlestick chart patterns. Perhaps even the savviest of forex traders are familiar with this pattern and implement it in their trading process.
But the fact is that Marubozu is one of the simplest candlestick formations on the chart. It is indeed a single candlestick pattern. But with all its simplicity, it can provide valuable information once it has been confirmed on the chart.
However, what you need to know about Marubozu candlestick patterns is that they are not formed very often. But once they do and you detect them, they can be a rather strong bullish or bearish pillar for you to rely upon. In this article, we are going to discuss the Marubozu chart pattern along with its different types.
What Exactly Is Marubozu?
There are certain distinguishing features of the Marubozu that make it stand alone just like its peculiar name. First of all, we said that it means a head that has been shaved. The reason it is named so is because this candlestick pattern has no upper or lower wicks or shadows. It is simply a long bodied candlestick pattern.
And of course, as mentioned above, it is a single candlestick pattern, which means there is only one long candle involved in the formation of this rather simple pattern.
The body of the candle can be either red or green, which makes the difference between the bullish Marubozu and the bearish Marubozu. Of course if the body is green, it means the closing price of the candle stands high above the opening price, and naturally for the red candle it is vice versa.
Where Is a Marubozu Candlestick Usually Formed?
There are a certain number of features that you need to consider in order to confirm the formation of a certain candlestick pattern. Aside from the overall shape of the pattern in addition to open, close, high, and low prices, the place where the pattern has taken form is also very important.
So much so that in fact if certain patterns are not seen in their normal place of formation then they are not confirmed to be what they are. Additionally, if the same candlestick pattern is seen in different places, it can have different interpretations.
So where should you expect the Marubozu to form? There are mainly 4 different locations that can be mentioned for this candlestick pattern. Please keep in mind that these are the general locations, and the actual place of formation could vary on the chart and also in different sources.
A bullish Marubozu is possible to be seen in two places. At any point during a bullish trend. This could be the middle of the trend or any other point. At any point during a downtrend. In the case of the downtrend, it is usually at the end of the downtrend, meaning that the downtrend has been forming for a while.
On the other hand, a bearish Marubozu is usually seen at any point during a bullish or down trend. Again this could be the middle of the trend or any other point. The bearish Marubozu is also seen during an uptrend, normally at the end of such a trend.
The Formation of a Marubozu Patterns
Similar to any other candlestick, there are a certain number of features that are also seen or rather not seen with the Marubozu candlestick.
Let’s start with what is not seen. An essential part of any candlestick is the shadow or wick of the candle. There are two possible wicks to any candlestick, an upper wick and a lower wick. The upper wick is representative of the highest price registered by the candle and the lower wick shows the lowest price. However much high or low these prices are, the longer these wicks can be.
In the case of Marubozu patterns, whether bullish or bearish, there are no wicks. This means there is basically no extra push to drive prices down or up. The price action is confined to the body of the candle.
Which brings us to what is seen in these patterns. The body of the candle.
Marubozu candles are signified with really long bodies. This means there is a noticeable difference between the opening price of the candle and the closing price.
The bullish Marubozu candlestick has a higher closing price. And of course the bearish Marubozu candlestick has a lower closing price.
Interpretation of Marubozu Candlesticks
Most of the candlestick patterns are known as reversal patterns. This means when noticed, and if strong enough, they will reverse the overarching trend in the market.
The Marubozu patterns, however, are by and large neutral patterns. This means they normally would not change or reverse the trend of the market but rather confirm that lead to its continuation. But there are exceptions.
- Bullish Marubozu: when seen at any point during an uptrend, it means the bullish trend will likely continue as it is. However, if it is seen during a downtrend, it could potentially reverse the trend into bullish.
- Bearish Marubozu: when seen at any point during a downtrend, this means the bearish trend will likely continue as it is. Similarly, if the bearish Marubozu occurs during an uptrend, it might just reverse the trend into the hands of bears.
How to Trade with Marubozu Patterns
The way you can trade with the Marubozu patterns in the forex market, or other financial markets, depends first on the type of pattern itself and second on the place of pattern formation.
For the bullish Marubozu, if the trend is also bullish, then it is a continuation pattern. Which only acts as a confirmation that the trend in the market is very likely going to continue. In this case you can keep going with the position you already had in the market, or you can even use it as a chance to begin riding the uptrend, if you haven’t already.
Naturally if you see this pattern during a downtrend, then you need to be cautious and adjust your position if it is a short position. Because the trend is highly likely going to reverse.
And of course for the bearish Marubozu, if you detect it during a downtrend, it only confirms that the downtrend is going to continue. Therefore, you can short the currency pair with more ease of mind. It also presents a chance to short your assets if you haven’t done so.
If the bearish Marubozu is seen during an uptrend, then it should be taken as a serious warning sign that the trend might reverse at any moment.
Marubozu candlestick pattern is one of the least known patterns. However, it is one of the easiest and maybe one of the most useful patterns as well. There are two bullish and bearish versions. This pattern is made from only a long body with no wicks or shadows. The Marubozu pattern is largely a continuation pattern.