Marubozu candle is one of the most important signal candlesticks. You may encounter it very often in the Japanese candlestick chart. Marubozu candlestick pattern is considered a sign of the upcoming price trend.
In this article, How To Trade Blog will show you how to identify a Marubozu candlestick. Also, we will show you how to combine it with a number of reliable indicators to open reasonable options.
Video on how to identify and trade with the Marubozu candlestick pattern
What is Marubozu candlestick?
Marubozu candlestick is a single-colored signal candlestick. It represents a strong buying or selling force appearing on the market.
Characteristics of Marubozu candle pattern
Marubozu candle has a very long body. The closing prices and opening prices are often far apart. There is no shadow (only body with 1 single color for each). The colors are green (bullish Marubozu candlestick) and red (bearish Marubozu candlestick).
Green candlestick (Marubozu Bullish): It demonstrates a sharp increase in prices. The buyers dominate and overwhelm the sellers. The opening price coincides with the lowest price. And the closing price coincides with the highest price.
Red candlestick (Marubozu Bearish): It demonstrates a sharp decrease in prices. The opening price coincides with the highest price. And the closing price coincides with the lowest price.
Meaning of Marubozu pattern
When Marubozu appears, it is likely that the price will develop a new trend.
The length of Marubozu and the movement of the price determine the accuracy of the candlestick. For example,
(A) The price continuously increases sharply => (B) Green Marubozu => There is a high probability that prices will continue to increase in the near future.
(A’) The price rises sharply in the beginning, but then stops rising and moves sideways => (B’) Green Marubozu => The probability of the price to increase in the near future is not high.
So, in 2 cases, both are green Marubozu candlesticks. However, the price movements are different => The accuracy of the Marubozu candle is also different.
To understand more about the significance of Japanese candlestick patterns, you can refer to this article: What is Japanese candlestick? The Truth And Importance Of The Japanese Candlestick Chart
How to trade options with Marubozu
Marubozu is a candlestick signaling an upcoming trend. However, to open high-precision options, you need to use it with a number of trend indicators. For example, SMA30, MACE or Support/Resistance, etc.
How to open options using the Marubozu candlestick pattern combined with the SMA30 indicator
Conditions: A 5-minute candlestick chart + SMA30 indicator.
The SMA30 is a trend indicator. When the price is above the SMA30, the market is trending up. Conversely, when the price is below the SMA30, the market tends to fall.
How to open an option:
Open an UP option: The price surpasses the SMA30 from below with a green Marubozu.
Explanation: When the price surpasses the SMA30 from below, the market is likely to reverse from down to up. The green Marubozu candle is an important confirmation signal for an uptrend.
Open a DOWN option: The price crosses the SMA30 from above with a red Marubozu candlestick.
How to trade options with Marubozu and Support/Resistance
Conditions: A 5-minute candlestick chart
How to open an option:
Open an UP option: The price breaks out of the resistance with a green Marubozu candle.
Explanation: When the price breaks out of the resistance, the market tends to enter an uptrend. The green Marubozu candle is a reliable confirmation signal for an uptrend.
Open a DOWN option: The price breaks out of the support with a red Marubozu.
Notes when trading options with Marubozu candlestick
The longer the expiration time of the candlestick chart is, the more reliable the Marubozu candlestick becomes. For example, A 5-minute candlestick chart is more accurate than a 1-minute candlestick chart.
The longer the Marubozu candle is, the higher the probability becomes.
If you are trading options on-trend, the expiration time must be long enough.
I hope this article has answered the following question. What is Marubozu candle? And it also shows you how to open reasonable options with this candlestick pattern.