Understanding the White Marubozu Candlestick

The White Marubozu is a single, typically bullish candlestick pattern that appears on a trading chart, indicating a strong buying momentum. It indicates that buyers or bulls are in control over sellers or bears.

Among more than 40 recognised candlestick patterns in trading, this one helps traders to identify a trade reversal with other indicators. As a trader, if you find it hard to locate a reversal or continuation, read about it here.

How to Identify the White Marubozu Candlestick Pattern?

As a trader, if you are closely monitoring stock price movements, a White Marubozu may appear during downtrends, indicating a potential reversal or strong bullish momentum. However, to properly detect it, you must look at the following characteristics of it:

1. Body of the Candlestick and Wicks

   As its name suggests, you can locate a white marubozu candlestick pattern, as it appears as a white candlestick. It is a long candlestick with no or minimal upper or lower shadows or wicks. It represents that bulls or buyers are dominating, leaving less room for sellers or bears to push prices down.

2. Location of a White Marubozu

   This candlestick appears typically during a downtrend. It signals the potential upward reversal. It shows the session opened at its low and closed at its high. For example, any stock falls to INR 180, opens there and closes at INR 200 without shadows, indicating buying pressure.

3. Trade Volumes

   When this candlestick appears on charts, you must wait for other indicators to confirm an upward reversal, and trade volume is one of them. A higher trade volume when it appears strengthens the potential of the reversal. Suppose the trade volume is 2 times that of the previous session, and when this candle appears at INR 200, it indicates a potential bullish trend.

4. Market Context

   The pattern gains further significance based on its position across the asset’s broader market trend. Being a bullish signal, it typically indicates the continuation of a price uptrend. Going on with the example, the stock hits INR 200 and forms a White Marubozu. It continues rising to INR 220, confirming strong buying momentum and a sustained uptrend.

Types of the White Marubozu Candlestick Pattern

After having an idea about a White Marubozu candlestick pattern, you must learn some of its types. It is because different market dynamics typically provide different and key trade-related insights. Here are 3 types of White Marubozu, you must know about:

1. White Marubozu (Full)

   This type of Marubozu typically appears with no upper or lower shadows. It depicts maximum overall control of buyers over sellers. It often appears before the sustained continuation of an uptrend. As in the example, the session closed at INR 200, without shadows. It shows buyers’ dominance and a potential upward reversal and continuation.

2. Closing White Marubozu

   If a white Marubozu appears with a shadow at its bottom, it indicates pressure from sellers. It also often indicates a bullish conviction. Suppose in the example, the stock price dips to INR 175 in between and closes at INR 200, indicating buyers have regained control.

3. Opening White Marubozu

Strategies to Trade With the White Marubozu Candlestick Pattern

Understanding the working and types of a White Marubozu is not enough if you want to trade with it in real time. Therefore, take a look at a detailed outlined strategy to trade when it appears on a trading chart:

1. Timing of Appearance

   The timing of the appearance of this candlestick on a chart is crucial, as it might properly indicate a bullish reversal. This Marubozu must appear at the end of a price downtrend, meaning the market has shown bearish movements through multiple sessions and projects this candle:

2. Entry Point Selection

   Before entering, you must be patient. Let a Marubozu finish its formation and wait for a bullish pattern to appear next, breaking its high. Suppose a stock forms a Marubozu by opening at INR 180 and closing at INR 200. You might enter a long position near INR 200 or wait for another candle above INR 200, say to INR 205, for bullish confirmation.

3. Place Your Stop Loss

   Like trades with every other candlestick, there always lies a risk of the price moving unexpectedly and resulting in losses. Thus, you must set a stop loss to limit your potential losses. For example, if the low of an asset is at INR 180, you could place a stop-loss at INR 175.

4. Set Your Profit Target

   Setting a profit target in trading matters as it lets you determine a price level at which you book your potential profit and exit the market. Thus, set your exit point or define a profit target using any earlier resistance level, moving averages, chart patterns, etc. For the risk-reward ratio, traders follow a ratio of 1:2 or 1:3 to maintain a potential for profitability.

With PL Capital Group – Prabhudas Lilladher, you can trade in stocks, invest in mutual funds and more. Download the PL Capital app today, fulfil an e-KYC and start investing!

Key Differences Between a White Marubozu and a Black Marubozu

While trading, you might encounter a Black Marubozu and wonder how it differs from a white Marubozu. Here are 4 key differences between these two in detail so that you can make trade decisions without a mistake:

Limitations of the White Marubozu

Although a White Marubozu has multiple benefits like trend reversal forecast, potential entry and exit points, etc, you must be aware of its following limitations:

1. Lack in Market Context

   One of the key disadvantages of this Marubozu is that it does not provide enough insight into an asset’s broader market concept. For example, it might indicate a potential uptrend, but not enough indication about how long this momentum might last.

2. False Signals

   If the market starts moving sideways or consolidating, it might generate a false reversal signal. Also, due to negative economic events, market volatility, news, etc, might lead to a price reversal downwards even after a White Marubozu forms.

Conclusion

A White Marubozu forms when a stock or an asset opens at the low of its earlier session and closes at the high of a trading day. It appears with no or minimal shadows, indicating an increasing buyer control, which makes it a bullish candlestick pattern.

Trade in stocks, invest in mutual funds, buy gold bonds and more, all from one place, the PL Capital app. Download it today and start investing!

FAQs on White Marubozu Candlestick Pattern

1. What is the success rate of the Marubozu pattern?

The typical success rate of a Marubazu pattern is between 65% and 70%. However, you must confirm it with other indicators like volume, moving average, etc.

2. What happens after a Marubozu candlestick?

Depending on the type of Marubozu candlestick, the price starts moving upwards (for bullish Marubozu) or goes downwards (bearish Marubozu).

4, What is the perfect Marubozu candlestick?

Most traders consider a Marubozu as a perfect one if it appears without a lower or upper shadow.

5. How do you trade a Marubozu candle?

When this candlestick appears, you must consider opening a long position for a bullish Marubozu or opening a short position for a bearish Marubozu. You must also consider factors like entry and exit points, stop loss, risk-to-reward ratio, etc.