Hi friends. When trading in the Forex market, we try to predict where prices will go. Technical and fundamental analysis methods help us in this. Japanese candlesticks are very popular in technical analysis. By understanding the structure of candlesticks, we can create our own strategy. Among the candlesticks, the most eye-catching is known as Marubozu. In our article today, we will talk about the meaning, structure, and how to trade Marubozu candlesticks.
Meaning
of the term Marubozu
"Marubozu" comes from the combination of the Japanese words "maru" (丸), meaning "round" or "full," and "bozu" (坊主), meaning "monk" or "bald." The name is attributed to the shape of the Marubozu candlestick, which has a full body due to the absence of upper and lower wicks. Therefore, it is natural to interpret "Marubozu" as "long body." However, in some sources, it is also referred to as "bald head" because of the absence of wicks, which resembles a bald head. In other sources, it is translated as "close-cropped" or "short-cut" and even "cut log." In conclusion, "Marubozu" can be interpreted as meaning "long body," "close-cropped," or "bald head" in Japanese, and all of these interpretations reflect the characteristics of the Marubozu candlestick.
Structure
of the Marubozu candlestick
A
"Marubozu candlestick" is a candlestick that shows a significant
price movement in one direction from the opening price to the high or low
during a specific period. During this movement, there are no upper or lower
shadows (wicks). Marubozu candlesticks represent a strong price movement,
especially within a single day. These can help us assess market trends and
predict future price movements of stocks. There are two main types of Marubozu
candlesticks:
- Green (or
White) Marubozu:
This is a long-bodied candlestick with the opening price at the lowest level
and the closing price at the highest level. It generally indicates that buyers
are strong and the bulls are in control of the market. Green Marubozu can be
interpreted as a sign that prices are likely to continue to rise.
- Red (or
Black) Marubozu: A "Red (or Black)
Marubozu" is a long-bodied candlestick where the opening price is at
its highest and the closing price is at its lowest. It typically indicates
strong selling activity and that bears are in control of the market. A Red
Marubozu can be interpreted as a sign that prices are likely to continue
falling.
Both types of Marubozu appear when there is a sharp and pronounced price movement. This indicates that there is a strong trend in the market during the time period the candlestick is formed, or that the trend is about to reverse.
Trading
with Marubozu candlesticks
Marubozu
candlesticks are simple yet effective technical analysis tools that can be used
to trade on their own. They can help us determine the direction of the trend in
the market. This means that they can give us clues about whether the trend is
likely to continue or if it is about to reverse. When trading in financial
markets, it is important to consider the formation time and body size of the
Marubozu candlestick. If the candlestick forms at the beginning or within the
trend, the larger the body, the stronger the trend.
A Green
Marubozu is a type of candlestick that indicates an upward price movement.
Opening a long position when this candlestick forms can be an opportunity to
profit from rising prices. If it appears at a support level, it suggests a possible
trend reversal or the beginning of a new trend. For example, take a look at the
daily chart of the US500 index:
 |
| A Bullish Signal with Green Marubozu |
Red
Marubozu is a candlestick that signals a price drop. During the time this
candlestick forms, it can be an opportunity to open a short position to take
advantage of the price drop. Especially, if it is seen at a resistance level,
it indicates that the current trend is about to reverse. Example: Look at the
NASDAQ daily chart:
 |
| A Bearish Signal with Red Marubozu |
Remember, it is very important to not forget risk management when trading. It is necessary to determine stop-loss and take-profit levels in trades based on Marubozu candlesticks. Stop-loss limits our losses when we need to reverse the trade. Take-profit helps us to determine our profit targets. While using Marubozu patterns, we can confirm the signals by using other technical analysis tools and indicators. For example, we can get more information about the market situation by using indicators such as moving averages, RSI, or MACD.