Marubozu is one of the most common and strongest candlestick patterns. The formation of this pattern is an indication that the trade instrument or the underlying asset has been trading in one direction in the entire trading session.
How To Use the Opening White Marubozu pattern in Binary Options Trading
It is also an indication that the underlying asset closed at its highest or lowest price of the day. Here, you will learn more about a variation of the Marubozu pattern, known as the Opening White Marubozu and ways to apply it to your binary options strategy.
How to identify the Opening White Marubozu Pattern
Generally, white candlesticks are rectangular, with the top of the candlestick indicating the closing price and the bottom indicating the opening price for a specific trading period. The vertical lines that form on top of and below the rectangular body are known as wicks, tails or shadows. The tip of the upper wick indicates the high price while the lower tip of the bottom wick indicates the lowest price within a specific trading period.
The Opening White Marubozu pattern is also known as a bullish white Marubozu. It forms in a bullish market when the buyers are in control and when the price of the asset you are trading has increased. When the white candlestick forms, the open price is at the bottom side of the body and the close is at the top.
This pattern has very small or almost non-existent wicks at the bottom and top of the candlestick. When a candlestick does not have any wicks or just really small ones, it is an indication that the open price was near or on the high of the day and the close price was near or on the low of the day. When this happens, it is an indication of a very strong bullish market where buyers aggressively buying anything the sellers are offering.
How to trade with the Opening White Marubozu pattern
The formation of a long, white Marubozu pattern is an indication that the trading day closed with buyers being in control. There is also an increased likelihood that this aggressive, bullish buying trend will carry on into the next day. When these signals are conveyed, it is a strong indication to buy the underlying asset.
It is always advisable to confirm whether the signal is valid for trading. To determine that the pattern formation is a valid buy signal, the price of the underlying asset should not go below the lowest point of the candlestick, over the next couple of days. If the price the price of the asset goes below the lowest point of the candlestick, then the signal would not be valid.
It is recommended that you place a stop-loss order right below the lower point of the candlestick to ensure that you do not incur any major losses in case the buy signal is not valid.
In summary, the white Marubozu has three different variations. These include the White Marubozu that does not have any wicks on either end, the Closing White Marubozu that has a wick at the bottom and the Opening White Marubozu with a wick at the top.