Bullish Marubozu

The bullish marubozu, also known as the white marubozu, is a Japanese candlestick pattern that makes money in the crypto, forex, and stock markets traded bullishly, according to extensive, multi-market backtests.

But what if I told you that you could significantly increase your win percentage and profit potential by going in the other direction?

Would you be interested?

If so, keep reading to learn the best bullish marubozu trading strategy and how to execute it on your favorite candlestick charts.

What Are Bullish Marubozu Candlestick Patterns?

The bullish marubozu is a frequently occurring one-bar candlestick pattern that supposedly alerts traders of a bullish candlestick continuation.

Marubozu means “close-cropped” in Japanese, which is this candle’s distinguishing feature.

And most traders are cropping their trading profits when going bullish with this single-bar pattern. But before we cover how to trade this pattern, let’s understand how to identify it.

How to Identify the Bullish Marubozu Candlestick Pattern

Bullish Marubozu Candlestick Pattern on the Tesla (TSLA) April 13th, 2021 daily chart
Bullish Marubozu Candlestick Pattern on the Tesla (TSLA) April 13th, 2021 daily chart

The following are the requirements for a valid bullish marubozu:

  • A long bullish body with tiny to no upper and lower shadows.

The trend direction doesn’t matter. The bullish marubozu appeared on Tesla’s April 13th, 2021, daily chart.

We see a bullish breakout day with a single green bar that opened almost at the low and closed near the high.

Speaking of performance, let’s learn how to trade this bullish marubozu candle.

How to Trade the Bullish Marubozu Candlestick Pattern

History tells us that the bullish marubozu is most successful when traded as a bearish continuation expecting mean reversion.

Conventional wisdom has this wrong. 

Let’s learn how most trade this pattern in the traditional matter, and then we’ll learn how data-driven, professional traders profit from this pattern.

Bullish Closing Marubozu Bullish Candlestick Continuation Trade Setup

Identifying bullish marubozu candles is straightforward. We only need a bullish bar that opens near the low and closes near the high. We don’t need to concern ourselves with the trend.

We see a long candle that opens near the low and closes near the high on Apple’s (AAPL) July 2nd, 2021, daily chart.

Most traders go long at a break of the bar’s high and set a stop loss below the candle high. And while this produces profits across all of the markets I tested and in the above Apple example, there’s a better way, according to history.

So how would a data-driven trader treat this trade signal?

Bullish Marubozu Bearish Candlestick Reversal Trade Setup

We see the daily chart for Bitcoin, where the price opens near the low and closes near the high, giving us the bullish marubozu pattern.

A data-driven trader will enter short at the break of the close, setting a stop loss above the high, expecting a more extended risk-to-reward move. 

We expect a more protracted risk-to-reward move as the wicks are short relative to the body. In other words, bullish marubozu patterns are mean reversion plays. And logically, this makes sense. 

After a sizeable one-day move, many traders will take profit off of the table.

Speaking of trading profits, how have these bullish marubozu trading strategies performed historically?

Does the Bullish Marubozu Candlestick Pattern Work? (Backtest Results)

Using the following rules, I backtested the bullish marubozu candlestick patterns on the daily timeframe in the crypto, forex, and stock markets.

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Multiple candlestick patterns are often confused with the bullish marubozu.

Bearish Marubozu vs. Bullish Marubozu

Bearish Marubozu Candlestick Pattern Illustration © Analyzing Alpha
Bearish Marubozu Candlestick Pattern Illustration

The bearish marubozu is the exact opposite of its bullish brother. The bearish marubozu has a long real body that opens near or at the high and closes near or at the low, while the bullish, as we’ve just seen, has a significant real body that opens at the low and closes at the high.

Both are traded as candlestick continuations, and history tells us that both should be traded in the opposite direction across all markets, expecting price reversion.

Bullish Closing Marubozu vs. Bullish Marubozu

Bullish Closing Marubozu Candlestick Pattern © Analyzing Alpha
Bullish Closing Marubozu Candlestick Pattern

The bullish closing marubozu candlestick pattern is almost identical to the bullish marubozu. 

The bullish closing marubozu requires little to no upper wick, while the bullish marubozu requires both the upper and lower shadows to be tiny.

Both are considered continuation patterns, and history tells us that traders should look for short-term profit-taking.

The Bottom Line

The bullish or white marubozu pattern is a one-bar pattern that most market participants trade bullishly. And while this wisdom produces profits, data-driven traders are best served by going in the other direction and expecting a short-term gain after such a significant move. Since it occurs so frequently and is commonly misclassified, it’s one of the most important candlestick patterns.

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