Marubozu Candles in Crypto Trading

by | Sep 3, 2021 | Blog

In this article, we are going to discuss one of the most basic candlestick patterns in all of crypto trading. The marubozu candle can be either bullish or bearish, depending on the direction of the move which creates it. To fully understand what to do with the appearance of a marubozu candle, it’s necessary that you first know how to read a candlestick chart.

What is a Marubozu Candle?

The term “Marubozu” in Japanese means “Close-cut head” or “Shaved head”. The formation is a single-candle pattern and is defined by a long candle with little to no wicks, hence the name. The candlestick chart is believed to have originated in 18th century Japan, so the Japanese terminology makes sense. A green marubozu candle is a bullish sign and a red marubozu candle is a bearish sign. However, the pattern by itself isn’t considered as reliable as the context in which it appears. For example, if a bearish marubozu candle was to appear on the resistance line of an ascending channel, traders would be forgiven for jumping into a short position. If the same pattern occurred within the lower half of a descending channel, it may be advisable to do some more research using some other technical tools.

Marubozu Candles in Crypto Trading

Why is a Single Candle Important?

A marubozu candle is significant because it represents a very clear move on the chart. A green marubozu candle shows that the price throughout the day never dipped any lower than the open price and never spiked above the close price. There was simply a steady upward move which lasted the entire session. Usually, when buyers and sellers are aggressively battling one another, we end up with long wicks to show the volatility of the asset’s value fluctuating.

Such a steady movement in crypto markets suggests that one side only was in control for the whole day. This can attract new traders and investors to further push the price in the same direction the next day.

 

 

How should traders approach a Marubozu Candle?

Any single-candle pattern should be approached with caution. The nature of crypto markets is that they are volatile and aren’t easily predicted. With that said, the infrequency with which a candle is painted with no wicks in this space only adds weight to the signal they give. If a marubozu candle appears as a bounce from support or resistance levels, it’s definitely worth studying further to see if a trade is to be placed. If the move can be further confirmed by looking at market momentum using technical tools such as the MACD or RSI, large profits could be made.

In Summary

Marubozu candles are easy to spot but difficult to read. The idea that a single candle can give a reliable signal is not one that many traders agree with. Therefore, it’s recommended to build up your trading expertise before placing large chunks of capital on trades based on one. Paper trading is a good way to start if you are new to the space but remember that trading for real is completely different from simulating trades. It is, however, a good idea to spend the time doing your own research and not relying on another trader’s signals as the chances are, they will have a different flow and approach to you.

 

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