Module 2 Technical Analysis

Chapter 5

Single Candlestick patterns (Part 1)

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M2-Ch5-title

5.1 – Overview

As the name suggests, a single candlestick pattern is formed by just one candle. So as you can imagine, the trading signal is generated based on 1 day’s trading action. The trades based on a single candlestick pattern can be extremely profitable provided the pattern has been identified and executed correctly.

One needs to pay some attention to the length of the candle while trading based on candlestick patterns. The length signifies the range for the day. In general, the longer the candle, the more intense is the buying or selling activity. If the candles are short, it can be concluded that the trading action was subdued.

The following picture gives a perspective on the long/short – bullish, and bearish candle.

M2-ch5-D1a

The trades have to be qualified based on the length of the candle as well. One should avoid trading based on subdued short candles. We will understand this perspective as and when we learn about specific patterns.

5.2 – The Marubozu

The Marubozu is the first single candlestick pattern that we will understand. The word Marubozu means “Bald” in Japanese. We will understand the context of the terminology soon. There are two types of marubozu – the bullish marubozu and the bearish marubozu.

Before we proceed, let us lay down the three important rules pertaining to candlesticks. We looked at it in the previous chapter; I’ve reproduced the same for quick reference:

  1. Buy strength and sell weakness
  2. Be flexible with patterns (verify and quantify)
  3. Look for prior trend

Marubozu is probably the only candlestick pattern which violates rule number 3 i.e look for prior trend. A Marubozu can appear anywhere in the chart irrespective of the prior trend, the trading implication remains the same.

The text book defines Marubozu as a candlestick with no upper and lower shadow (therefore appearing bald). A Marubozu has just the real body as shown below. However there are exceptions to this. We will look into these exceptions shortly.

M2-ch5-D2a

The red candle represents the bearish marubozu and the blue represents the bullish marubozu.

bullish-marubuzo5.3 – Bullish Marubozu

The absence of the upper and lower shadow in a bullish marubozu implies that the low is equal to the open and the high is equal to the close. Hence whenever the, Open = Low and High = close, a bullish marubozu is formed.

A bullish marubozu indicates that there is so much buying interest in the stock that the market participants were willing to buy the stock at every price point during the day, so much so that the stock closed near its high point for the day. It does not matter what the prior trend has been, the action on the marubozu day suggests that the sentiment has changed and the stock in now bullish.

The expectation is that with this sudden change in sentiment there is a surge of bullishness and this bullish sentiment will continue over the next few trading sessions. Hence a trader should look at buying opportunities with the occurrence of a bullish marubozu. The buy price should be around the closing price of the marubozu.

M2-Ch5-Chart1

In the chart above (ACC Limited), the encircled candle is a bullish marubozu. Notice the bullish marubozu candle does not have a visible upper and a lower shadow. The OHLC data for the candle is: Open = 971.8, High = 1030.2, Low = 970.1, Close = 1028.4

Please notice, as per the text book definition of a marubozu Open = Low, and High = Close. However in reality there is a minor variation to this definition. The variation in price is not much when measured in percentage terms, for example the variation between high and close is 1.8 which as a percentage of high is just 0.17%. This is where the 2nd rule applies – Be flexible, Quantify and Verify.

With this occurrence of a marubozu the expectation has turned bullish and hence one would be a buyer of the stock. The trade setup for this would be as follows:

Buy Price = Around 1028.4 and Stoploss = 970.0

As it is evident, candlestick patterns do not give us a target. However, we will address the issue of setting targets at a later stage in this module.

Having decided to buy the stock, when do we actually buy the stock? The answer to this depends on your risk appetite. Let us assume there are two types of trader with different risk profiles – the risk taker and the risk averse.

The risk taker would buy the stock on the same day as the marubozu is being formed. However the trader needs to validate the occurrence of a marubozu. Validating is quite simple. Indian markets close at 3:30 PM. So, around 3:20 PM one needs to check if the current market price (CMP) is approximately equal to the high price for the day, and the opening price of the day is approximately equal to the low price the day. If this condition is satisfied, then you know the day is forming a marubozu and therefore you can buy the stock around the closing price. It is also very important to note that the risk taker is buying on a bullish/blue candle day, thereby following rule 1 i.e buy on strength and sell on weakness.

The risk averse trader would buy the stock on the next day i.e the day after the pattern has been formed. However before buying the trader needs to ensure that the day is a bullish day to comply with the rule number 1. This means the risk averse buyer can buy the stock only around the close of the day. The disadvantage of buying the next day is that the buy price is way above the suggested buy price, and therefore the stoploss is quite deep. However as a trade off the risk averse trader is buying only after doubly confirming that the bullishness is indeed established.

As per the ACC’s chart above, both the risk taker and the risk averse would have been profitable in their trades.

Here is another example (Asian Paints Ltd) where both the risk taker, and the risk averse trader would have been profitable.

M2-Ch5-Chart2

Here is an example where the risk averse trader would have benefited :

M2-Ch5-Chart3

Notice in the chart above, a bullish marubozu has been encircled. The risk taker would have initiated a trade to buy the stock on the same day around the close, only to book a loss on the next day. However the risk averse would have avoided buying the stock entirely because the next day happened to be a red candle day. Going by the rule, we should buy only on a blue candle day and sell on a red candle day.

5.4 – The Stoploss on Bullish Marubozu

What if after buying, the market reverses its direction and the trade goes wrong? Like I had mentioned earlier, candlestick patterns comes with a inbuilt risk management mechanism. In case of a bullish marubozu, the low of the stock acts as a stoploss. So after you initiate a buy trade , in case the markets moves in the opposite direction, you should exit the stock if price breaches the low of the marubozu.

Here is an example where the bullish marubozu qualified as a buy for both the risk averse and the risk taker. The OHLC is : O = 960.2, H = 988.6, L = 959.85, C = 988.5.

M2-Ch5-Chart4

But the pattern eventually failed and one would have booked a loss. The stoploss for this trade would be the low of marubozu, i.e 959.85.

Booking a loss is a part of the game. Even a seasoned trader goes through this. However the best part of following the candlestick is that the losses are not allowed to run indefinitely. There is a clear agenda as to what price one has to get out of a trade provided the trade starts to move in the opposite direction. In this particular case booking a loss would have been the most prudent thing to do as the stock continued to go down.

Of course there could be instances where the stoploss gets triggered and you pull out of the trade. But the stock could reverse direction and start going up after you pulled out of the trade. But unfortunately this is also a part of the game and one cannot really help it. No matter what happens, the trader should stick to the rules and not find excuses to deviate from it.

bearish-marubuzo5.3 – Bearish Marubozu

Bearish Marubozu indicates extreme bearishness. Here the open is equal to the high and close the is equal to low. Open = High, and Close = Low.

A bearish marubozu indicates that there is so much selling pressure in the stock that the market participants actually sold at every price point during the day, so much so that the stock closed near its low point of the day. It does not matter what the prior trend has been, the action on the marubozu day suggests that the sentiment has changed and the stock is now bearish.

The expectation is that this sudden change in sentiment will be carried forward over the next few trading sessions and hence one should look at shorting opportunities. The sell price should be around the closing price of the marubozu.

M2-Ch5-Chart5

In the chart above (BPCL Limited), the encircled candle indicates the presence of a bearish marubozu. Notice the candle does not have an upper and a lower shadow. The OHLC data for the candle is as follows:

Open = 355.4, High = 356.0, Low = 341, Close = 341.7

As we had discussed earlier a minor variation between the OHLC figures leading to small upper and lower shadows is ok as long as it is within a reasonable limit.

The trade on the bearish marubozu would be to short BPCL approximately at 341.7 with a stoploss at the high point of the candle. In this case the stoploss price is 356.0. Of course at this stage we still haven’t dealt with setting targets, and we will figure that out much later in this module.

Do remember this, once a trade is initiated you should hold on to it until either the target is hit or the stoploss is breached. If you attempt to do something else before any one of these event triggers, then most likely your trade could go bust. So staying on course of the plan is extremely crucial.

Trade can be initiated based on the risk appetite of the person. The risk taker can initiate a short trade on the same day around the closing. Of course, he has to make sure that the candle is forming a bearish marubozu. To do this at 3:20PM the trader has to confirm if the open is approximately equal to the high and the current market price is equal to the low price. If the condition is validated, then it is a bearish marubozu and hence a short position can be initiated.

If the trader is risk averse, he can wait till the next day’s closing. The short trade will go through only by 3:20PM next day after ensuring that the day is a red candle day. This is also to ensure that we comply with 1st rule – Buy strength, and Sell weakness.

In the BPCL chart above, both risk taker and risk averse would have been profitable.

Here is another chart, Cipla Limited, where the bearish marubozu has been profitable for both risk taker, and a risk averse trader. Remember these are short term trades and one needs to be quick in booking profits.

M2-Ch5-Chart6

Here is a chart which show bearish marubozu pattern which would have not worked out for the risk taker but a risk averse trader would have entirely avoided initiating the trade, thanks to rule 1.

M2-Ch5-Chart7

5.4 – The trade trap

Earlier in this chapter we did discuss about the length of the candle. One should avoid trading during an extremely small (below 1% range) or long candle (above 10% range).

A small candle indicates subdued trading activity and hence it would be difficult to identify the direction of the trade. On the other hand a long candle indicates extreme activity. The problem with lengthy candles would be the placement of stoploss. The stoploss would be deep and in case the trade goes wrong the penalty to pay would be painful. For this reason, one should avoid trading on candles that are either too short or too long.


Key takeaways from this chapter

  1. Remember the rules based on which candlesticks work
  2. Marubozu is the only pattern which violates rule number 3 i.e Look for prior trend
  3. A bullish marubozu indicates bullishness
    1. Buy around the closing price of a bullish marubozu
    2. Keep the low of the marubozu as the stoploss
  4. A bearish marubozu indicates bearishness
    1. Sell around the closing price of a bearish marubozu
    2. Keep the high of the marubozu as the stoploss
  5. An aggressive trader can place the trade on the same day as the pattern forms
  6. Risk averse traders can place the trade on the next day after ensuring that it obeys rule number 1 i.e Buy strength, and Sell weakness
  7. An abnormal candle lengths should not be traded
    1. Short candle indicates subdued activity
    2. Long candle indicates extreme activity, however placing stoploss becomes an issue.

502 comments

  1. suraj suresh says:

    How much of variation in high and low is acceptable in a marubuzo candle pattern. As per rule 2 be flexible with patterns.

    • Karthik Rangappa says:

      Usually if the shadows are within 0.2% to 0.3% of the range it should be ok.

      • Ranjeet46 says:

        How do we calculate the % can you give an example?

        • Karthik Rangappa says:

          Here is the formula –

          (High – Close)/Close.

          • sudeshnabora says:

            Is the above formula for bull trend or both?

            If not, will the formula for bear trend be :- (high-open)/open

          • Karthik Rangappa says:

            That would be (Close – low)/Close

          • sudeshnabora says:

            First of all , I want to thank you for this wonderful lessons. It is so clear and easy to understand for a complete beginner like me.

            Now, coming to my problem . I am not confident about the shorting technique. Will you please clarify my doubts.

            Say, I want to short a stock X which is currently trading in a bear market at about $100 .
            I however, don’t possess this stock . So, how do I sell something that I don’t possess?

            Then, when I am confident that this is the appropriate time to buy back (when the trading price is less than $100) , I buy it back. How do I buy back a stock which I never had?

            Moreover, the stoploss concept for shorting – does it mean that in case of reverse trade, the stoploss value is the upper limit at which I should buy back with some loss?

          • Karthik Rangappa says:

            It is a concept that you just have to get used to. In stock markets you can sell something that you dont own, provided you buy it back within appropriate time (intraday in case of stocks). This is as good as buying first and selling later, only that the order is reversed in case of shorting.

            Yes, when you short the stop loss price is always should be higher than the price at which you short.

          • Vishal Saini says:

            Thank you for answering all of my queries in Module 1 ….:)
            In Bullish Marubuzo:
            1 (high-close)/close For Upper Shadow
            2 (low-open)/open For Lower Shadow
            In Bearish Marubuzo:
            3 (low-close)/close For Lower Shadow
            4 (high-open)/open For Upper shadow
            If above percentages are in between 0.2% to 0.3% it means pattern exists.
            This is what I understood Correct me if any of above formulae is incorrect..:)

          • Karthik Rangappa says:

            You got that right!

      • SaikiranGarapati says:

        Can you confirm To day Jindal Steel has formed a Bullish Marubozu? As you said, The variation of Upper and l,ower shadows are 0.2 to 0.3 5 ok..But Here Shadows are more than that?Please let me know whether i should consider this one as a Bullish Marubozu..?

    • Syed Mumtaz says:

      Buy in strength and sell in weakness means buying in high price and selling low price. Have I misunderstood it. Kindly explain.

      • Karthik Rangappa says:

        Yes, that is correct.

        • Sanket Pandit says:

          Why one should book loss by buying high and selling low . Plz explain.

          • Karthik Rangappa says:

            Booking a loss really depends on the stoploss! So if the situation demands, then it does make sense to book a loss!

        • Aish says:

          I have a very absurd doubt. Why should i buy when the price is high and less when the price is low. How am i making a profit then. Shouldnt it be the other way sround?

          • Karthik Rangappa says:

            You buy if you feel that the price is going to go higher. You sell if you feel the prices are going lower than where they are today.

        • Vishal says:

          Hi Karthik,

          I am a beginner and these docs are worth of bullish Marubuzo.

          As many have asked same question, how does buying at high price and selling at low price makes sense, What I have understood is, you buy a stock as it is forming the Marubuzo and have a stop loss if the stock going down. Is that correct or it means something else?

          Thanks.

          • Karthik Rangappa says:

            Well, selling at low price in this context refers to the stop loss price. You only sell at stop loss if you are making a loss. Else you always aim to sell at a price higher than what you’ve bought.

        • Richie says:

          Isn’t buying at high price and selling at low price counter intuitive?

  2. DECO says:

    Just feel sitting in the auditorium of Harward university listening a great but simple lecture of renowned professor

  3. HAWWA says:

    Today (7th nov) around 105.6 Bullish Marubuzo was formed in RCOM intraday chart and from that it crossed a high of 109.7.
    Its due to your article it was easy for me to predict it. Thanks.

  4. raj says:

    Please let me know if there any system to know in an candle formation, what is total buy quantity and what is total sell quantity.

  5. Abby says:

    Umm The pic for the Bearish Marubuzo has blue ears.. that got me off guard ..
    Otherwise Great content

  6. Thiyagu says:

    Hi,

    Is it good to use the Single candle pattern for Intraday trading? I see Bull and bear candles in 1 minutes, if I chose 5-15 minutes, the picture varies. So is that ok if I use 1 minute candle for Intraday and catch the bull and bear candle to execute my trade?

    • Karthik Rangappa says:

      Yes, you can use single candlestick patter for intra day, however I would advice you to stick to 5 or 15 minute candles. Remember the higher the candle frequency, the better is the reliability.

      • Rishi says:

        Please explain more about the meaning of your sentence”Reliability vs Timeframe vs Frequency” in a bit more details.

        • Karthik Rangappa says:

          I’ve tried to summarize the time frame and the reliability. The idea is that the shorter the time frame, the higher is the noise level. Given this, I tend to rely more on a 10 mins chart as opposed to a 5 mins chart.

  7. Deepesh says:

    Hi KARTHIK,
    It was a great learning for me as i am beginner.
    Can you please give an idea about approximate %accuracy in prediction by Marubuzo candlestick pattern in your own trading career?
    Thank you so much,

    • Karthik Rangappa says:

      Glad to know you liked it 🙂

      I’ve personally found marubuzo’s quite interesting. Remember not all candlestock patterns work on all stocks. For example marubuzo may work extremely well on HDFC bank but may fail when it comes to ICICI. You as a trader need to identify this and develop a list mapping candlestick vs stocks. This is obviously time consuming and will come to you by experience.

  8. prakashbabu says:

    What is a blue candle day or red candle day. In intraday trading can I enter position (buying or selling)as soon as I see a bullish or bearish Marbuzo.

    • Karthik Rangappa says:

      A blue candle day represents bullishness and a red candle day represents bearishness. Yes, you can enter a position based on Marubuzo on a intra day basis.

  9. AastroGuru says:

    Great start Karthik!
    I haven’t been using candlesticks so far, but reading this article, I feel I have missed so much in this past 2 months of trading.
    Hats off!

    • Karthik Rangappa says:

      Thanks Aastroguru…market is an ocean of opportunities, old ones cease and new ones are created everyday, we just need the insights to spot them..so don’t worry about it 🙂

  10. Nimesh says:

    Great material karthik
    If i am an averse trader and if i am trading some stock based on 2nd day bullish marubuzo candlestick than which value i should select as a stoploss value , 1st day marubuzo candlestick low value or 2nd day low value?

    • Karthik Rangappa says:

      It is always good to keep the pattern day low as the stoploss. However be flexible with this, if the price has run up quite a bit on 2nd day then no point keeping pattern day low as the SL as it would be too deep. This also explains why we have the risk to reward ratio as one the checklist items while qualifying a trade.

      • kunal says:

        what is the thought behind keeping stoploss at the pattern day low and no where above?

        • Karthik Rangappa says:

          The low and high points is when there was a change in sentiment. Traders use this point hoping the sentiment prevails over the next few trading session. I personally prefer when the SL coincides with the support / resistance along with the day’s high low.

  11. PRADEEP K says:

    Sir, |Can we use marubuzo candlesticks in commodity intra day trading. which commodity is most suited? which candle should i use. 5/15/30 .

    • Karthik Rangappa says:

      Yes, you can use Marubuzo on commodities. In fact you can use candlestick patterns on any asset class as long as the asset has time series data. As a thumb rule, longer the time frame, the better it is.

  12. GURU says:

    Hey,
    Great initiative. Thanks a lot.

    I have a doubt.

    In the example given in “5.4 – The Stoploss on Bullish Marubuzo” you have given that “But the pattern eventually failed and one would have booked a loss. The stoploss for this trade would be the low of marubuzo, i.e 959.85″….
    I can’t understand this point. The candle is bullish and even the next day is bullish. But how do you say the pattern failed.?

  13. N S Rana says:

    in case of Bullish Marubuzo, how the risk averse trader will benefit. As written above that he will buy only after confirming the rule 1 ie buy on bullish day, at the end of second day then how he is going to be in profit— shown in ACC chart.

    • Karthik Rangappa says:

      He will buy the stock with a stop loss of the previous day low. He will hold on to it till the target is hit of the SL is triggered.

  14. gurumoorthy says:

    Hi
    Bearish Marubozu indicates a sell call. So Why is there a stoploss for a bearish marubozu?

    • Karthik Rangappa says:

      When a sell call is indicated you can initiate a short trade. However, what is the Sell Call is a wrong signal? Hence a SL is required. In fact for all signals we need a SL.

  15. chella70 says:

    U r great

  16. venkatreddymr says:

    Dear Karthik , how much of relaxation can be allowed for difference in high &Close, open&low in a bullish Marubozu.?
    Ex:1 rupee for a 1000/- stock

    • Karthik Rangappa says:

      I usually have a 1% of the days range as relaxation on the shadows.So if its a 1000 stock if the length of the shadow is about 10 or less its ok.

  17. Adapa Srinivasa Rao says:

    First of all, I sincerely thank you for your Varsity initiative.

    I just have a small doubt. Most of the candle stick patterns (both single and multiple) you explained here talk about their utility for trades spread over multiple days.

    Do they work well even in intra day trading?

    For example, will the Marubozu, Bullish Engulfing Pattern, paper umbrella, and Spinning tops work well for intra day trading?

    If they do work for intra day trading then what interval should we be studying (five minutes, fifteen minutes, etc).?

    • Karthik Rangappa says:

      Thank you, and I’m glad you liked Varsity. We are putting in our best efforts to ensure you get the best content, so please stay tuned 🙂

      Yes, concepts of TA can be applied across all time frames and asset classes. So the same patterns holds true for intraday as well. However if you are starting out fresh, I would advice you to swing trade for sometime before you can attempt intraday.

      • Ranjeet46 says:

        U refered to swimg trading. Is it the same as positional trading? If yes then what time frames to look in that sort of trading i.e the lookback period and if no then what is positional trading?

  18. Vasanth says:

    For clarification: Marubuzo is getting confirmed after the day closure or before 3:20PM & the trading decision will be for the next day.
    Will Marubuzo can be applied for the same day?

    • Karthik Rangappa says:

      The confirmation of a Marubuzo is only towards the close of the day – ard 3:20 PM. If you are a risk taker you can initiate the trade same day, else you can take it the next day after getting a confirmation.

      • Rishi says:

        In case its a bearish Marubozu, We can not initiate the trade on Cash segment after 3:20 as zerodha does not allow us to carry MIS/Shortsell trades overnight, any alternatives beside F&O being offered by zerodha?

  19. Vasanth says:

    which is the best platform to identify the candlestick patterns clearly? can i go for Z5 candlestick chart or something like amibroker?

  20. Vasanth says:

    Thank you for your immediate response. If i place AMO for any script in the evening when it will be placed?Before 9:15?

  21. Devaki says:

    for intra day trading which time frame is ideal to be used 5 min or 15 min or 60 min?

  22. Ravi says:

    It would be quite helpful, if alongwith the sample charts the date range is also mentioned so that we can also try to find such patterns on moneycontrol or rediff etc.

  23. THELEGEND says:

    Hi Karthik,

    Thanks for the nice piece!

    Extract from section 5.4 “Earlier in this chapter we did discuss about the length of the candle. One should avoid trading during an extremely small (below 1% range) or long candle (above 10% range).”

    What is the range you are referring to here. How do i calculate that range ? Can you elaborate on this pls.

    Thanks in advance!

    Rgds,

    • Karthik Rangappa says:

      This is mainly from the SL perspective. If the candle is too small (below 1%) then a there is a good chance of getting stopped out in case the volatility increases through the day. Likewise in case of a long candle (above 10%) the stop loss will be too deep, and in case you are proved wrong then you will pay a huge price for the trade. Also with long candles the risk and reward gets highly skewed. Best to avoid trades on such candles.

      • THELEGEND says:

        Thanks I got the SL point you said.

        But you are expressing percentage points 1% and 10% here. From which number are you deriving this %?

        For a stock of value Rs 1000, on one day if it’s trades in a range ( range= day high – day low) of Rs 10 ( ie 1% of Rs 1000) it forms a short candle?

        Thanks for your patience!

      • Partha says:

        Hi Karthik,

        I am referring to the nifty 1 hr candle of 7/14. There it has gone up to 8554 from 8515. So the rise is not 1% even. So it is not satisfying the buy case then?

        • Karthik Rangappa says:

          Yes, it would. You need to set the SL accordingly based on hourly charts. Also, I personally feel EOD charts contain quality information when compared to an hourly chart in particular.

  24. Manu says:

    Hi, I am more comfortable shorting stocks. But we can do that intraday only. Is there any way by which I can short stocks for more than one day (except options…..I dont do options).

  25. bbhalaji says:

    Dear Karthik, A great set of notes for beginners like me. Thanks for the work, I have very basic doubt. Here is the scenario. I see a bullish candle pattern and indicators/volumes also confirm a bullish trend. So I get into a long position by buying the shares and holding for a time upto which I feel the trend is bullish and sell them for a profit. On the other hand if I happen to see a bearish trend , how can I hold the short position for the long time, meaning how can I sell the shares , hold the short position till the trend is bearish and cover them once there is a change in trend and realize profit ? Because we can go for a short sell only in intraday. Please explain.

    • Karthik Rangappa says:

      Thanks, and I’m glad you are finding Varsity useful. In order to do this, as in short positions and carry it forward you will have to employ futures. We have started the module on Futures, its half way tru, please do have a look at it as well. Thanks.

  26. Mohd Nizamuddin says:

    Hi karthik, I want to ask you àbout shorting please explain it. Can we hold the stock for days in sell call ?

    • Karthik Rangappa says:

      In fact the 8th chapter in the Futures module will discuss shorting in detail. It will be uploaded sometime during this (or maybe next) week. Thanks.

  27. SaikiranGarapati says:

    Hi Karthik,

    To day Suven Life Sciences Open = 249, Low= 243, High = 298 and Close = 294.85, So with this data, Can i expect it as formed a Bullish Marubozu and Can i buy tomorrow?

    • Devaki Nandan says:

      Hi Saikiran, In my view its not a Marubozu as lower shadow is close to 3%. its a bullish engulfing candle. though on good volumes, resistance levels cant be seen due to all time high. in my view trade should not be taken on this as very deep stop loss i.e, 44 Rs. on a scrip of 290.

      • Karthik Rangappa says:

        Wow! You just echoed my thoughts Devaki 🙂

        • SaikiranGarapati says:

          Hi Devaki Nandan

          Thanks for your Views and thanks to Karthik also.

          • SaikiranGarapati says:

            Hi,
            Yesterday and to day also Diamond power has hit 20% hit Circuit Breaker with good Volumes and formed a Bullish Marubozu, So can we expect this trend will continue for few days as for Technicals?

          • Karthik Rangappa says:

            Please be aware if the stock has rallied 40% in two days then there has to be some fundamental reason or maybe some insider news. Applying TA on such stocks can be bit tricky.

          • Karthik Rangappa says:

            Most Welcome !

    • Karthik Rangappa says:

      Couple of things –

      1) The closing and high data seems ok

      2) The Opening and low data are not really equal (even after accommodating for the be flexible, quantify, and verify rule)

      3) But from the general description of the candle, it seems that the stock is bullish, hence conducive for a long trade

      4) However my worry would be on the SL placement. Since the range is large, keeping a meaningful SL would be very difficult.

      Good luck.

  28. Kirti says:

    Sir the content is very simple to understand..Good mix of examples as well for making the whole stuff pretty clear for beginners like me..I have one query..After reading article on Maribozu i tried to spot few in real time EOD charts..I found that if i take a position as a risk averse trader mostly i am in loss as either my initial SL is hit or even if i try to trail SL it is hit which leads to small losses or for that matter hardly some profit…How to make the trade really profitable ? When to exit after initiation of trade i.e how to calculate the targets??

    • Karthik Rangappa says:

      Glad to know you liked the content Kirti 🙂

      Have you completed reading through the TA module, towards the end of the module we have introduced a checklist based on which you should identify trade. Suggest you read through it and follow the checklist, I’m certain you will have better trading success. Good luck.

  29. SaikiranGarapati says:

    Hi Karthik,

    Is PNB formed a Hammer on 27-03-2015?

    Regards,
    SaikiranGarapati

  30. SaikiranGarapati says:

    Hi Kathik Sir,

    TVS Motor has formed Bullish Engulfing Pattern? As you said, Risk averse trade can initiate a trade now onwards?

    Regards,
    SaikiranGarapati.

    • Karthik Rangappa says:

      Yes, it looks like TVS has formed a bullish engulfing pattern. However the risk averse should have initiated the trade on the last day day…I’m afraid it could be bit late to initiate the trade now (especially if there is a gap up on Monday morning).Also please do check for other credentials on the check list.

  31. Pearl says:

    Suppose day 1 is a bullish/bearish marubujo day. So, will the risk averse trader buy /sell stocks at the day 2’s closing price ? And will risk taker trader buy/sell stocks at closing price of day1?

  32. Vikas.ghode says:

    Best Chapter. But plz.make a chapter for, if someone has two trading a/c, then how he can earn more money using some tips & tricks like this. I thing they must exist & there are people who use more than one a/c. Broker people i think get advantage using this.

    • Karthik Rangappa says:

      No in fact I have nearly 5 or 6 trading accounts with different brokers and I see not advantage having so many 🙂

      • Vikas Ghode says:

        Suppose I invested in share XYZ if its up or at resistant level & I dont know if it will go more up or down. Then I buoght in on a/c & Sell in other a/c. Will it profit ? I know one will happen out of these two, either it will go up or down. In one a/c i will lost money & in other a/c I will earn. In this case, how should I minimize my loss ? that’s my question. Since even for me there no extra advantage I had taken so far using 2 a/c.s. thnks for responce !!!

        • Karthik Rangappa says:

          Well, instead of buying in 1 account and selling in the other why dont you try buying both the Call and Put option simultaneously?

  33. Krishna says:

    In which type of chart Marubozu occur like day chart,weekly charts,monthly charts?
    If anyone want to see example chart of Marubozu later then what we do,mean to say like today 15-04-15 and Marubozu formed in any stock on 10-02-15,so how can we see?

  34. chetan says:

    friday’s closing the nifty seems to have formed a bearish marobuzo…can you confirm

  35. anirudha kale says:

    how to find difference between high low and open close for each candle.pleas provide easy method.

  36. Ajay Kumar Bhagat says:

    Sir! is this a bearish marubuzo? Can we initiate a short position here?
    If so what should be the target keeping. however it has its result on 22nd .

    • Karthik Rangappa says:

      It does look like one, target should be based on the immediate support. However I would be a bit hesitant to initiate a trade based on TA when results are around the corner. Good luck.

  37. Anand says:

    Hi,

    How can one identify if trade should be lon or short if there are too many marubuzo candle(bullish & bearish both)

  38. tramadevi says:

    Dear Sir, In your first query the variations of shadows in Marabozu for high/low are to be within o.2% to 0.3%. where as in an another query by Mr. VenkatReddy you have stated 1% relaxation is allowed. pl. clarify. thanks /regards

  39. […] it is the extreme of the classical candlestick patterns. For more details, please go through this link. Karthik sir has explained them beautifully in these articles.  Most of the time, this LWP is our […]

  40. Jyoti Prakash says:

    Article is very good and descriptive. Like it.
    There is a spelling mistake, its “Marubozu”

  41. vikas ahlawat says:

    karthik ji

    how do we know the target if we initiate any trade as if we are swing trader is the target is next resistance or trend resistance.
    in the both the case , some time stock touch trend resistance and some time resistance how we set the target.
    thanks

    • Karthik Rangappa says:

      S&R makes a good case for setting targets and stop loss. We can even use the volatility of the stock to set targets and stop loss, we will talk about in the next few chapters (15, 16) in Options Theory.

  42. Neeraj says:

    Great Initiative Karthik !! The practical example from Indian market was awesome.

    I really appreciate your dedication towards the each queries of your users. Please keep doing this , this clears a lot of doubts of a beginner.

  43. Ady says:

    Hi Karthik
    Can you give some probability numbers for these candlestick patterns based on personal experience. Like Marubozu has 60% of predicting right in your trades. That can give a intuitive feel to the bets one can place using Kelly’s criterion .

    • Karthik Rangappa says:

      Ady…interesting question, but honestly I dont have a direct answer for you. The thing with TA is that not all patterns works on all stocks. So for example if marubozu works well on Stock A, then the same pattern may not work on Stock B. So you as a trader need to evaluate which pattern works well on which stock. For example you could try this –

      1) Pick a stock – say RIL
      2) Load the last 3 years OHLC data
      3) Visually establish all the marubuzo dates
      4) Identify how many have hit SL and how many have hit the target. You can have a simple 5% target rule..where you consider a success if you can book a 5% profit
      5) Tabulate of all the trades how many were successful and how many were SL trigerred

      So for example if out of 10 trades 6 were successful, then roughly marubuzo works 60% of the times on RIL.

      You can do this for all the stocks, across all patterns.

  44. Alex says:

    Sir, what does the chart pattern of Techmahindra, tell us. There was a sharp fall today, is this bearish engulfing?

  45. RU0271 says:

    A bullish morobuzo does not always mean that the trade shall be bullish tomorrow.

  46. sudeshnabora says:

    SUDESHNABORA

    September 8, 2015 at 7:56 am
    First of all , I want to thank you for this wonderful lessons. It is so clear and easy to understand for a complete beginner like me.
    Now, coming to my problem . I am not confident about the shorting technique. Will you please clarify my doubts.
    Say, I want to short a stock X which is currently trading in a bear market at about $100 .
    I however, don’t possess this stock . So, how do I sell something that I don’t possess?
    Then, when I am confident that this is the appropriate time to buy back (when the trading price is less than $100) , I buy it back. How do I buy back a stock which I never had?
    Moreover, the stoploss concept for shorting – does it mean that in case of reverse trade, the stoploss value is the upper limit at which I should buy back with some loss?

  47. Yogi says:

    Bullish Marubozu in GM Brewries on 23rd September 2015. Let’s see where it takes the stock.

  48. Alok says:

    Hi, My question is that bulish marbouzo /hammer/bulish engulfing pattern will only be considered for buy if it comes after down trend or we can consider it on going upwards too.

  49. Rajeev says:

    Mahindra holiday was in uptrend for last 3 months.on 15 it formed bullish marabuzo but on 16 it was bearish.it fell about 5.5%.how to enter in a trend.after how many days of trend START we should enter the trend.

    • Karthik Rangappa says:

      Rajeev TA patterns only enhances the probability, no guarantee they will always work. In fact nothing is a guarantee in markets. Coming to your query, one good way to enter the trend after the trend getting established is to buy/sell when it reaches a moving average – say a 100 or 200 EMA.

  50. Rajeev says:

    Sir
    Can you elaborate time frame under consideration.like if I am a swing trader then what should be the look back period,prior trend for candlestick study should be of what duration and wat should be the time frame for candle stick(EOD or weekly)

    • Karthik Rangappa says:

      I would suggest you use 6 month / 3 months data for swing trading. Use these to develop a general sense of direction and you could use the daily candles for further calibrating your trades. Of course, EOD data should be good.

  51. Karthik says:

    Hi Sir,
    I am a bit confused on the point “Buy strength and sell weakness”

    How can we make profit when we buy the stocks in bullish time and sell in bearish time.
    Would you please elaborate on this point please?

    • Karthik Rangappa says:

      Well, you need to read the entire module for that 🙂

      • Karthik says:

        Hi Karthik,

        I have been going through the Technical analysis module and the point “Buy Strength and sell weakness” is referred in many of the places. I still have no clue on how this point valid on achieving profits.
        But it makes sense when we consider the risk factor of a stock.

        Would you please help me here in understanding the point well, so that i can go through TA module once again.

        • Karthik Rangappa says:

          Buy strength means to buy on a day when there is bullishness in the market. Sell strength means to say that you sell on a day when there is bearishness in the market..meaning on a red candle day.

          • Karthik says:

            Yep.. I got the point now. buy the share on bullish time, expecting the share price would increase in coming days.. and sell weakness means, shorting the share, expecting its value to deprecate in coming days. Right?

  52. Hari says:

    Karthik bro,
    Please help me…
    I cant figure out a proper calculation for Marubuzo shadow. You taught us that shadow can be < 1% for the pattern to be a buzo.
    Lets consider Bullish buzo,
    For Upper Shadow calculation, which one of the following is correct?
    [(high-close)/(close-open)] must be < 1? i.e shadow with respect to body range
    [(high-close)/high] must be < 1? i.e shadow with respect to close price.

    For lower Shadow calculation, which one of the following is correct?
    [(open-low)/(close-open)] must be < 1? i.e shadow with respect to body range
    [(open-low)/high] must be < 1? i.e shadow with respect to close price.

    Much thanks from a budding trader 🙂

    • Hari says:

      Sorry for Lower:
      For lower Shadow calculation, which one of the following is correct?
      [(open-low)/(open-close)] must be < 1? i.e shadow with respect to body range
      [(open-low)/high] must be < 1? i.e shadow with respect to high price.

    • Karthik Rangappa says:

      Can send you an excel with the calculations.

  53. Hari says:

    Karthik bro,

    Excel link : https://drive.google.com/file/d/0B4YbuL88T8AMY0p6azMxZGlxMzg/view?usp=sharing

    Just so you know this is my first time writing formula’s in excel
    If something is weird I can explain my question in more detail 🙂

    Thank You

  54. SaikiranGarapati says:

    Hi karthik,

    Can i expect last candle is Hammer or Is it Doji in Techm 6 months Chart?

    Please confirm me whether it is in Support Zone or not as i can able to see support on 25-08-2015 and touching the same point of low to da also?

  55. rohan says:

    this candle has small tail, so will it qualify for bearish maribuzo?

  56. rohan says:

    want to know this is a good shorting opportunity according to checklist or not-
    1. Bearish maubuzo pattern is formed
    2. Its formed near support and is about to break it ,if price falls further.
    3. Volume is higher than previous days.
    4. MACD is confirming. RSI is 34, according to RSI stock is reaching over sold region, so chances of reversal are there?
    5. DOW theory- not sure ( my only observation is stock is moving in bracket)
    6. RRR – reward=2188-2339= 151, risk(sl)= 2390-2339=51, RRR= 3

    sir,
    plz tell my calculations are correct or not and should i go for shorting opportunity tomorrow or not?

    • Karthik Rangappa says:

      This sounds good. However please be aware that the support could hold and the stock could bounce. Best way to play this would be via an option set up rather than a naked futures position.

  57. RK kumar says:

    hi karthik,you are suggesting the trade at 3.20 , which means delivery based or btst,stbt ? by that strategy you may lose intraday trade right? how a range is calculated high-low or open- close?

  58. Vivek says:

    Karthik during this time of market sell-off should we use TA as analysis tool? But as evident I see almost all the stocks falling so I think I’m better trading on Options with CNX Nifty. Please suggest.

    • Karthik Rangappa says:

      TA should help even in this markets. I guess many TA traders have made a killing in this market. Options is a good way to trade these markets.

  59. saranyaa says:

    HI Sir – Your explanation of the concepts are very easy to understand in the first glance. Thanks for such a wonderful article.

    I have a following 2 doubts –

    1) I find that a company “A” qualifies for the trade as per my analysis, is it possible to buy the share of company “A” today and sell tomorrow (T + 1). I am asking about trading in equities.
    If so, How does the settlement happen.
    Should I buy the share only in cash? or does Zerodha offers margin to trade?
    Also is it possible to sell the share after 2 days? I am asking this as the settlement of a trade takes after T + 3 days..

    2) Suppose I Buy 500 shares of company “A” for Rs.100. And I am setting the stop loss as “90”.
    My target is not reached today and even stop loss is not triggered. So I want to continue holding this position.
    On second day, do I need to specify the stop loss again and target again?
    If thats the case, assume the company “A” opens the next day at Rs”85″ which is below my stop loss. can I control this?

  60. Vysakh says:

    Hi karthik.
    Excellent content. Hats off..
    Just one query. I want to start investing long term. Is a comprehensive knowledge of TA necessary for long term investing?

    • Karthik Rangappa says:

      Glad you liked the content here Vysakh 🙂

      For long term investment you need to understand the business Fundamentals. I’d suggest you read through the Fundamental Analysis module.

  61. Shafeeq says:

    What should be the allowable limit for the shadows in Marubuzu ?

    Regards.

  62. Shafeeq says:

    Thank You Sir !!

  63. bal says:

    is there any books availible on zerodha varsity ?
    reading long time in computer finding it difficult
    any pdf format availible ?

  64. sidharth says:

    is this technique is reliable in both high volume stocks like Vedanta , suzlon and low volume stocks like kwality, manappuram

  65. Deepesh says:

    Is it necessary to understand candlestick pattern? I find it difficult, instead I find line chart very easy

    • Karthik Rangappa says:

      Line charts are great to get an overview of whats happening in the market. But if you want to identify specific trading opportunities then you got to use Candlesticks or bar charts. I’d suggest candlesticks.

  66. VINOD says:

    hi kartik.kindly update the correct spelling of marubozu.i find different spelling in heading and different in other places.kindly verify the same and update.cheers

  67. vinod says:

    thanks karthik for prompt response. you are an asset to zerodha and to beginers like us.

  68. ROUSHAN KUMAR says:

    Hi
    This is terrific session and awesome for the beginner. I have a query in this When a Bearish Murabozu is form then its confirmed at 3:20 PM the shorting option can be initiated , I believe this is not valid for the intraday trading. Whats your take on this /

    • Karthik Rangappa says:

      True, at 3:20 PM there is no point initiating an intraday trade as the markets is open for another 10 mins only.

  69. Sudeep Karan says:

    what basis should a target be set?

  70. Asu says:

    Hai KARTHIK Ji,
    I am a intraday trader using 5minits chart. If opening candle is Mouribouzu in 5Minits how to read that pattern

  71. Asu says:

    Hai KARTHIK RANGAPPA,
    Thank u

  72. pprabhu59 says:

    Hello, do we have any calculation to check if a candle is small or long. i.e how its plotted in candle stick graph

    • Karthik Rangappa says:

      Nope, you just have to take the range of the day to get an estimate.

      • pprabhu59 says:

        Thanks for the response karthik. Sorry if i posted the question at wrong place. My question is not in terms of Marubozu. In general what range constitutes a small candle stick and a large one. Is there any pre defined way to arrive at the same.

        • Karthik Rangappa says:

          Well, a price movement of less than 0.5% constitutes a small candles, anything higher that 0.5% contributes to a large candle.

          • pprabhu59 says:

            Thanks Karthik

          • Karthik Rangappa says:

            Welcome!

          • pprabhu59 says:

            I did write some programs to evaluate the same, Ex: for 1000 rupee stock, if open-close variation of 2 second chart is 5 rupee. Range comes as 5%. But for 500 Rupee stock it comes as 1%. So the candle looks different for 2 charts. I think for every price band of a stock, different metrics is used to calculate Short and Long Canlde.

          • Karthik Rangappa says:

            Yes, in fact thinking about it in terms of % will bring in a great deal of uniformity.

          • jyotshna says:

            Please consider my suggestion :
            In Kite and also in PI, one option can be given for the sizeof the candle ( Body of the candle ), Now 2 types ( color ) of candles is displaying, you can ask technical team to provide 3 types of candle ( color ) first one for bullish candle, second one for bearish candle and third one for the candle whose body size is less than 50% size can be dynamic ( color can be Red, Green and blue i.e. RGB color ). It may help to decide different TA concepts.

          • Karthik Rangappa says:

            Thanks for the feedback, will pass this to the team.

  73. Asu says:

    Hai Karthik Ji,
    wand to learn /develop opening brake out strategy. Let us give Good idea .

  74. Sudhish says:

    Is there any easy which scan through all scrips at endd of the day to identify if there is any scrip which satisfies this condition ?

  75. anuradha says:

    I have started reading the TA thoroughly and find it very informative. Indeed I checked this on ICICIBANK for the last two months. I think 4th july and 12th july qualified as bullish candles. If that is correct, please let me know three answers:
    1) Would there be a loss on 8th july if i took position on 4th (risk taker profile)? Or I could have come out on 5th July with a small profit?
    2) 13th July is bearish candle but still it has not hit the SL. So if I took position on 12th July, when should I have exited because the price is more than the entry price till 29th July.
    3) If the candle is bullish but the intraday trend is bearish through out, will there be a change in the rule? If the Opening price is 100 rupees and it reaches 110 in the next fifteen minutes and consistently falls and closes at 103 or 104 rupees, then the intraday trend is clearly bearish. Can we still take position?
    Hope I am not asking questions which are answered in the subsequent chapters that I have not read.

    • Karthik Rangappa says:

      4th July may not qualify but 5th and 12 does. Considering you took the trade on 5th July, you would have stopped out of 6th itself. 12th July could have been a profitable trade had you booked profits at the higher levels. Of course this would also depend on your target levels.

      No change in the rule….you just need to keep track on the SL and target levels. As long as the levels are not breached, you are still in the trade.

  76. John says:

    Thankyou for teaching beginners like me, amazing lessons. however i have few questions and before asking any questions sorry for silly questions like
    If it is Bearish Marubuzo then this means the stock is going down which means that if a stock is trading at 350 then it will come down and the value will reduce then if you trade in this then how can it be profitable to anyone, if you own it at 350 and if the value is reducing and if you are selling it at a lesser price how one will be in profit.
    and my 2nd question in bearish marubuzo stoploss is always high why? because as the term says and as far as i have understood stop loss means that if the stock is 350 and you put a stoploss say at 320 then this means that if it comes down to 320 then you will sell it, because you cannot bear further loss. and in bearish marubuzo the stoploss is always high like if it is 350 stoploss is at 375, but if the price rises to 375 it is good for anyone because before the price was 350 now it is 375 then why?

  77. Neeti says:

    Hi Karthik, it is being absolutely enjoyable & interesting learning about trading on Varsity!
    I have a doubt regarding Bearish Marubuzo. In case of a risk averse investor, who waits till the market closes to verify if indeed it was a Marubuzo- why should he wait till the end of the next day for the short trade. Why not take the short position, the very next morning?
    What do we mean by- The short trade will only go through by 3:20 pm the next day after ensuring that the day is a red candle day.
    Please guide. Thanks!

    • Karthik Rangappa says:

      Thanks Neeti 🙂

      The day bearish marubuzo occurs a short signal is generated…but you will act upon it only the next day after…provided the next day happens to be a red candle. Remember the 3 rules we set out initially? We short only on days which show weakness…(manifested by a red candle).

  78. Muthukumar Subramaniam says:

    Hello Karthik, I have a question in section 5.3 – Bullish Marubuzo .

    As I understand, the risk averse trader will buy the stock on end of the second day, of bullish marubuzo.

    We have a statement in section 5.3 as “As per the ACC’s chart above, both the risk taker and the risk averse would have been profitable in their trades.”

    From the graph of ACC, I could see that on the third day after bullish marubuzo formed, it is a red candle. If risk averse trader buys the stock on end of second day of bullish marubuzo, I think he would make a loss if he expects the stock to be bullish on the third day too (as the third day is a red candle.) Given this, how are we saying the risk averse trader would have been profitable? Please clarify. Thanks!

    • Karthik Rangappa says:

      In both the cases, the SL has not been breached…so there is no question of loss. Remember you hold the until one of the events occur – SL breaches, or tgt is achieved.

  79. Amit says:

    Can I do intraday on the basis of single candle only????

  80. Amit says:

    So tell me other studies which I can add to go to intraday

  81. Rajiv says:

    Hi Sir, on the topic of “Be flexible, Quantify and Verify”. should we always compare the Shadow length against the high value? or should we compare the shadow length with the length of the candle (High-low)? Please clarify. Thank you. also can we say anything below 0.25 is acceptable.

  82. arun says:

    sir in which site i can see daily candle stick chart……… wich site is best to know about stocks

  83. Amit says:

    Hi Karthik,
    Do we need to consider volume in this marubuzo candle formation ?

  84. Iyers says:

    Hi Karthik,
    Amazing stuff, love reading your tutorial. I am a bit old trader but would like to jump in to this exciting game of trading.
    I did see that there are trend reversal after a bullish Marubuzo and vice versa, what causes the same. At times the pattern reverses though it confirms a Bullish or Bearish trend. What is the reason for the same, do we need to use other technical analysis techniques along with marubuzo to take a call on buy/sell.
    Thanks

    • Karthik Rangappa says:

      Happy to know you liked the content here 🙂

      Marubuzo pattern is a manifestation of a powerful price action that tends to cause a trend reversal. So in a sense you can take the liberty to say – the trend has reversed because of a marubuzo. To further confirm this and feel more confident to put in a trade you may want to check things like volume, S&R, indicators , Risk reward etc.

  85. Raghu Jadhav says:

    Hi Karthik,
    Thank you for the notes…
    1. If I want to go ahead with intraday- The charts I have to look for is 15 minute candle stick, MACD- Will these 2 be enough or ….?
    2. If the day end with bullish signal- The next day the market starts at 9.15 AM, by what time should I enter and what other analysis I should
    look at.

    • Karthik Rangappa says:

      Yes, that should be good. You can wait for the market to open, and take a call based on the movement. No hurry as such 🙂

  86. rh0164 says:

    Hi Karthik,
    Thank you very much for your wonderful lesions. There are very clear and simple to understand to beginners like me.
    yesterday I observed bullish Marubozu for “Bhageria Indu ” with O-615.15, L-613.45, H-645.9,C-644.55 and upper shadow-.20%, lower shadow-.27%. when I observed today it is opened with 676.75 with 5% increase and only buyers are there and no sellers. Could you please explain me what it indicates. Is it indicates very bullish where no one is interested to buy? or any other technical reasons are there?
    Thank you again for your lesions.
    Hemanth

    • Karthik Rangappa says:

      It just means that the traders are very bullish and are willing to buy the stock at any given price, hence the upper circuit.

  87. rh0164 says:

    sorry.. typo error.. is it indicates very bullish where no one interested to sell?

  88. praveshbajaj says:

    how many types of candle sticks patterns in the world of technical analysis?
    should i know all patterns?

  89. Anand says:

    Dear Karthik and Zerodha team, Excellent work with these educational material. I have long stayed away from the markets for lack of such knowledge, but this gives me confidence to take the plunge.. 🙂 Thanks.

    One small correction in this Chapter: Marubuzo –> Marubozu in most places?

  90. FalconZex says:

    Please tell me whether the following fall into marubuzo category?

    O= 623

    H= 623

    L= 621.6

    C= 622.05

    And

    O= 625.55

    H= 625.8

    L= 624

    C= 624.15

    Here, both of these candles doesnt look like marubuzo much visually but on calculating their upper and lower shadows they are within 0.2%-0.3% range(actually even lower than 0.1). So, will they be counted as marubuzo?

    Both are intraday 15 min candles of sun pharma.

    Actually most of the candles that I was looking in sun pharma as 15 min intraday are falling into marubuzo suggested ranges of shadow. Are all MARUBUZOO? Please elaborate.(20/12 or 21/12 to b precise)

    • Karthik Rangappa says:

      Yes, this, certainly is a bearish marubuzo.

      • FalconZex says:

        But how can all the candelsticks of 15min fall into marubuzo category? Please be detailed as I didn’t get the answer. My question was related to something else.

        • Karthik Rangappa says:

          This can occur when liquidity is low. Also, if your query is something else, please ask the same clearly.

          • FalconZex says:

            So, is sun pharma a low liquidity stock ? And all appearing candles to be marubuzo sticks occurs only when the liquidity is low or it depends on something else as well ?

          • Karthik Rangappa says:

            Sun Pharma is not really a low liquidity stock. But maybe the futures on that particular day may not have been very liquid. Yes, usually low liquidity translates to Marubuzo.

          • FalconZex says:

            I checked a few more days 15 minute candles in sun pharma and still when I’m calculating its HLOP most of them are coming out to be under marubuzo range of .2-.3. What am I doing wrong ?

          • Karthik Rangappa says:

            Nothing. Its the nature of that stock. Try doing this on Nifty futures to see how it can vary.

  91. sachinkochhar says:

    Based on the logic that there was intense buying or selling activity when there is a Marubuzo signalling upmove or downmove. Isn’t it is the same case when there is a candle similar to bullish Marubuzo but with a tail or a candle similar to bearish Marubuzo but with a wick? We can argue that bears and bulls respectively initially had upper hand but were later taken out completely.

    Let me provide examples to be clear
    Candle similar to bullish Marubuzo with a tail O:100 H:105 L:98 C:105

    Candle similar to bearishMarubuzo with a wick O:100 H:102 L:95 C:95

  92. sunil ujawane says:

    please explain what is cover order and bracket order and how come it is use for fno trading (specially option).

  93. Dheeraj says:

    Hi,

    You told the person who takes risk averse method should be buying on the next day and should buy near the end of the day.

    If he buys on the next day at the end what profit does he make finally. I don’t think he makes any profit.

    Please explain this line in the risk averse “This means the risk averse buyer can buy the stock only around the close of the day. “

    • Karthik Rangappa says:

      A risk averse guy takes calculated risk, after ensuring the trade qualifies in every aspect including the reward to risk assessment. If it does not quality, then there is no point initiating the trade.

  94. Vignesh says:

    Karthick,

    In bullish: Stoploss is the price at which we should stop BUYING.
    In bearish: Stoploss is the price at which we should stop SELLNG.

    Please correct me if am wrong 🙂

  95. AMIT KUMAR PANDEY says:

    Is it good to consider candlestick pattern formed on EOD charts for intraday trading? OR should i stick to candlestick forming on intraday charts? bcz finding pattern on EOD charts is quiet easy as compared to intraday charts?
    SECONDLY, how should i select scrips for intradat trading?

    • Karthik Rangappa says:

      Stick to Nifty 50 stocks, they offer the best liquidity for intraday trading.

      I personally prefer looking at EOD charts to develop a plan for intraday. I’ve had reasonable success with it. But having said that, I do know many many traders who use intraday carts to base their trades. So, I’m afraid I cannot give you a straightforward answer, it really depends upon your trading temperament 🙂

  96. Hima Pallela says:

    Hi,

    Thank you for the detailed explanation & it’s easy to understand for the beginners like me. I have a question regarding Marubuzo. After reading the article i went to Money Control(Currently Zerodha a/c opening is in process) and opened a Candle Stick chart and my understanding is in a day it will form only one Candle Stick (Either Bullish or Bearish). Is it correct?
    Please clarify.

    Regards,
    Hima Pallela.

  97. Sandeep says:

    I would like to know what should be the % difference between open and close price for meruboza ? I mean to ask how much range of candle stick body to be considered ?

  98. shrikantjagtap says:

    Thanks for detailed explanation with real examples. What will be the average time period to long or short position with this approach?
    I think you misspelled Marubozu term as Marubuzo.

  99. yadhukar says:

    Hi Karthik,
    Thank you for excellent lesson.
    Is it possible to place bracket orders programmatically if there is Bullish Marubuzo or Bearish Marubuzo with respective stoploss and trigger using KITE CONNECT? There should be one bracket order at a time, once already placed BO completes program should look for another Bullish Marubuzo or Bearish Marubuzo.
    Regards,
    Yadhukar

  100. Eddy says:

    Instead of saying “In the chart above” or “Here is another chart”, can we number the charts? Let’s say “In the chart 5.3.1” or “Here is another chart 5.3.2”. This way the reader can be sure of which chart you are referring to.

    Its pretty confusing while reading on to which chart to refer.

  101. Ajmal says:

    Excellent article on how to interpret the candles. I would like to add a few points to the discussion hoping someone would benefit if it makes sense else I would learn something if somebody corrects me. Each day is a learning opportunity. While anticipating trades on a bearish marubuzo the ideal case would be to short on the closing price expecting the trend to continue and the price to go down. An important point to consider is that if you dont have a stop loss then your risk is unlimited. Price of the stock can go to any number overnight and you might end up in a very bad position . Risk taking definitely pays off but you should definitely have a plan and have a stop loss. While on a Bullish Marubuzo the worst situation you can be is when the stock value reaches 0. It’s OK to make a loss but the best trader knows to minimize his loss.

  102. Ayush says:

    Does the colour of candle only varies in blue and red?

  103. Yash says:

    Which is the best place to look up for stocks and other data’s other than Zerodha Kite

  104. RV2180 says:

    Hi Karhitk,

    Thank you for such a wonderful lesson… Can you elaborate a bit more on BUY Strength Sell weakness. with an example.

    • Karthik Rangappa says:

      Buy strength means you buy on a day when the stock has gone up (green candle) and sell strength means you sell a stock when the stock has gone down (red candle day).

  105. Ananth says:

    Hello Karthik,
    Excellent job with regards to varsity and the simplicity of modules. I have to appreciate your patience for clarifying so many queries. I have come across many brokers who take advantage in making money for just to make us understand the basics of trading. You guys rock. I would say this is one of the best social responsibility taken from Zerodha towards young and unemployed for sustainability. Appreciated. Now I have couple of questions to be clarified.
    1. If I am a risk trader and there is bullish or bearish Morubozu and I execute my trade before market closes with stop-loss. Say next trading day there is huge gap up or gap down what happens to my stop loss. Will it get triggered or will I to take huge loss.
    2. I hope the derivatives are extract of equity. Which means the changes that happens in equity will reflect in future and options. So to trade in future or options, I have consider TA from equity charts. If I find a bearish Morubozu in equity chart (let’s say ICICI Bank) can I short in futures.
    Please clarify. Thank you in advance.

    • Karthik Rangappa says:

      Thanks for all the good words, Ananth.

      1) Gap openings can be notorious dangerous for SL orders as it tends widen the P&L. Under such circumstances, you need to ensure the orders are executed.
      2) Futures yes, but not necessarily in options. Yes, you can trade in ICIC Fut based on TA derived from ICICI Eq spot.

      • Ananth says:

        Like always thank you for the reply. Now based on the reply No. 1 “you need to ensure the orders are executed”, is that the stop loss that we are talking about or close the order at the opening of gap up or gap down. Because I am sure when market opens gap up or gap down the stop loss will not get executed as the price wouldn’t have touched the stop loss. Please correct me if I am wrong. I would appreciate if you would give me a link where I can have complete tutorial on Zerodha.com PI.

        • Karthik Rangappa says:

          Yes, its the SL we are talking about and gaps are not good for SL orders. However, you need to note that orders placed today (which includes SL orders) cannot be carried forwarded for the next day. So you are required to place them fresh next day. We conduct daily demo of our daily trading platform. Check this – https://zerodha.com/educate/

  106. shubham says:

    During bearish trade pattern, we generally sell the shares that we bought so Why there is a need of Stoploss in case of Bearish candlestick patterns

    • Karthik Rangappa says:

      What if the stock goes higher after you short? You will lose money right? Thats why you need a SL.

      • Sambit says:

        Suppose the stock goes high and reached the stoploss point in bearish marubuzo then what would happen.? will the stock be sold at stop loss point if we have kept the stop loss at high of the marubuzo?

        • Karthik Rangappa says:

          Yes, it would. However, you need to double check and ensure the SL has been triggered. Its always a good thing to do.

  107. Roshan says:

    What moving average should be used for intraday swing and positional trade on volume chart for analysing .. like 10 day or 20 day or 50 day moving average like that

  108. shabaz says:

    sir,
    i want to ask that suppose i have shorten nifty at 9340 with a stoploss of 9360 and waited to decline. But on the other day, a gap up opening occured on 9400, does my stoploss triggered, if not, then i have to squareoff my position in a huge loss, or the stoploss i mentioned would automatically squaredoff in this situation?
    please clear my concept sir.

    • Karthik Rangappa says:

      No, in case of gaps, the price directly moves to a certain level and the SLs can remain pending. In such a situation, its best if you can cancel the SL and exit the trade.

  109. Mahipal says:

    Sir a share O-960,H-986,L-959.5,C-985.5 how to calculate the body length of candle in %.

  110. P R Dinesh says:

    Please make the website mobile friendly.

  111. Dhaval says:

    What is a long candle? How to measure that 10% you have mentioned?

    • Karthik Rangappa says:

      Take the range for the day (high – low) in case of bullish candles, and (low – high) in case of red candles and cross reference it with the avg range for previous few days…maybe last 10 day.

  112. Pallavi Mitra says:

    how many number of tickets are there in a single Marubozu? How can I assure that the pattern is not going to change at the last minute as the market trend can vary every minute.

  113. Anup Joshi says:

    Hi Kartick,

    Regarding Buy strength and Sell weakness
    I understood the concept of Shorting, u sell when stock when price is high and buy back when price is low,
    Buying when strength makes sense since stock will appreciate further
    But selling at weakness wouldn’t it result in loss, r u talking about selling the stock to reduce further losses.
    Can you Please explain selling weakness part.

    • Karthik Rangappa says:

      Yes, sell the stock at weakness so that it drifts down and buy it back later….this is essentially basic guidelines to shorting.

  114. Arun gowtham says:

    It is very useful to me thanks Zerodha team…and also for the replies,,, while reading the comments gives a vast knowledge about the topic….

  115. Abhi says:

    In section 5.6 (Trade trap) , it is mentioned that trading should be avoided during extremely short (below 1% of range) or long candle (above 10% of range). Can you please elaborate how to quantify this range?

    • Karthik Rangappa says:

      These candles (short or long) indicates extreme sentiment or the lack of it (for small candles), hence the essence of price action wont be reflected in the price. So better to ignore these candles on a standalone basis.

  116. Khushi says:

    Hi Karthik,
    You have helped me a lot to learn about what is the stock market with the Varsity. I wanted to ask, according to Candlesticks, if it is Red then that means it is too much selling? And also means one can buy at such less price and can sell when the Candlestick turns blue for better price?

  117. sarathtd says:

    even in day trading , minimum 1% size required?

  118. Sunil Dutt says:

    Dear karthik Ji. Today I completed this part 1 of Chapter 5. Really I was a great learning to me and you deserve many many thanks for that. God bless!!

  119. prashanth av says:

    dear karthick,
    i have a question pertaining to the price action analysis with candle stivk patterns. on which segment can it be applied. since there are both buying and selling oppurtunities its difficult to apply in cash market because you cant short in cash market unless its intraday as far as i know. THEN COMING TO FUTURES IT HAS AN EXPIRY AND HENCE CANT BE TRATED WITH CANDLE STICKS OR MVS BECAUSE THEY WORK ONLY ON AN HIGH TIME FRAME.SO WHICH SEGMENT CAN THESE BE APPLIED

    • Karthik Rangappa says:

      1) All segments/All assets/all time frames
      2) If you are looking at shorting, then maybe its best done on futures as you can carry forward the positions

  120. pradeep says:

    as you said stick to the plan, so if I were to initiate a trade in bearish marubuzo and next day it becomes bullish and continues like this for next 3-4 sessions then I must hold till i reach a stop loss

    • pradeep says:

      thanks ! i was studying the charts of Friday in my kite account and i sorted on 15 min and observed that on majority there was a reversal happening ie a bearish followed by bullish and vice versa. I am an equity trader and realised that this may not be an effective way for intraday trade on equities. Would you agree or it is just an aberration

      • Karthik Rangappa says:

        Well, if there is a consistent reversal, then maybe you should set up trades based on these patters 🙂

        Remember, you need to be quick to cease the opportunity while trading intraday!

        • pradeep says:

          I have been reading daily charts of multiple stocks to spot a marubuzo but could not spot it, you being far more experienced in spotting, can you safely say that the pattern is not a regular ocurrence but if it ocurres the way you defined. I am asking this question just for you to share the experience

          • Karthik Rangappa says:

            These patterns do occur regularly, but its kind of hard to put a number against the frequency of occurrence. However, I can tell you that they are more likely to occur on stock charts as opposed to index charts.

    • Karthik Rangappa says:

      Absolutely. You hold till SL is breached or target is achieved.

  121. Somya Rana says:

    Hello Karthik
    I’m very new to all this and right now I’m not actually trading anywhere. I’m doing the modules to gain knowledge and somehow i just cannot wrap my head around the whole concept of Stoploss. Can you please explain it again with an example.

    Thank You

    • Karthik Rangappa says:

      Ok, assume you bought a stock at 100 with an expectation that it will go to 105 and you hope to make a profit of 5. As you understand, there is also a risk involved here. Instead of going to 100, it can drop to 95 or 90 or any other price point. So you dont want to live with this uncertainty and want to ensure that below a certain point of loss you dont want to hang on to the loss making stock. This point is called the stoploss point, which literally means you are stopping yourself from making further loss. So you can probably keep 95 as a stoploss for this trade.

  122. Pravin D says:

    Hi All,
    I have recently opened an account with zerodha. I’m super newbie to stocks and trading. The selection of articles here is really useful. After reading about the marubozu pattern I have a of questions regarding “shorting”
    1. Day 1 is Bearish Marubozu, Can I do a pre-market short trade for the next day? (Short Delivery)

  123. ZQ0852 says:

    Dear sir,
    I have a doubt “Can I do intraday trading tomorrow, based on the pattern formed today”
    e.g. toaday is bullish marubozu formation, so expecting that it will so bullish sentiment for next few session I go long on in morning and then sqare off by evening or whenever I make a significant profit”

    Regards

  124. Nishant says:

    Thanks for Varsity contents. I am just starting on studying this resource on TA.

    Seeking a clarification on this post on Maribozu candlestick pattern.

    The chart example you have given is for the End-of-day trading chart, am I correct?

    The Bullish and Bearish Maribozu you have explained based on OHLC for each trading day. So, this applies for positional/swing trading where one takes delivery of stocks, am I right? Because making a buy of stocks at 3:20 pm does not really allow one for intraday trade, isn’t it?

    If we have to apply Maribozu candlestick pattern for intraday trading, we should be looking for maribozu on 15-minutes, hourly charts, isn’t it?

    Please let me know if I have inferred this correctly.

  125. Subhradeep Sharma says:

    Hello,
    i had zero knowledge about market, “introduction” helped me a lot..
    but brother i don’t understand, as i read earlier, if there is a buyer there needs to be a seller. My question is..
    1. how it happens, when the market opens, the first share bought, where is it bought from ? ans as you said, in marubozu bulish market, if i buy around 3:20 p.m. and if i don’t sell it, will it be automatically sold at the end of the market ? who is going to buy ?
    2. i don’t understand the rule number 1. buy in the bulish market and sell in the bearish market ? isn’t i am going to make a loss ?

    • Karthik Rangappa says:

      1) For every buy there is a seller. You can always, buy/sell in futures and position will be carried forward overnight.
      2) The idea is to stick to the trend, hence the rule.

    • Chintan Kapadia says:

      Brother, buy in bullish market and sell in bearish market, it’s not how you are understanding.
      It means buy first and sell later (long position) when it’s bullish trend & sell first and buy later (short posiotion) when it’s bearish trend.

  126. sujay says:

    karthik sir how to approach support/resistance shokker canndles

  127. Raghav says:

    Sir, i want to ask that entry to stop loss is made everyday or once made it continues to be unless we cancel the stoploss??Secondly ,in bullish marubozu why stoploss is said to take same for both risk averse and risk taking person,for risk averse stop loss will be relatively much deeper therefore he must make stoploss at higher​ price , isn’t it??

    • Karthik Rangappa says:

      You will have to place the SL order every day as unfortunately, you cannot carry forward your SL orders overnight. Every CS pattern comes with a preset SL level…this is the same for both risk averse and risk taker.

  128. ananth says:

    What moving average should be used for intraday ? and time frame ( 5 minute candle or 15 minute candle ?

  129. Jay says:

    In the case of a bearish Marubozu, we should short the stock. But if the price of the stock goes up, then we will lose money, even with a stoploss equal to the high price of the day. And in case the price goes on falling, when do we sell the stock?

    • Karthik Rangappa says:

      Yes, if the SL hits then you need to take a loss and exit the position. As far as profit booking in concerned, you need to have a target price in mind. The chapter on support and resistance throws some insights into this.

  130. Suman Singh says:

    As per the bullish Marubuzo the next trading session is expected to be optimistic i.e. the candle will be blue. But in one of the examples, you showed that the risk averse would have gained (example of ACC) as the next session was red and he wouldn’t have initiated the trade. So my question is: if the marubuzo is bullish and expectation for the next session is also blue, how come it became red and what do we do is such cases. as, our prediction goes wrong here

  131. NITESH SHARMA says:

    Hi Karthik,
    Is coding possible for Marbozu in PI

  132. NIKHILESH says:

    Hi Team,

    Do we have any PDF download of the Module as we had it previously.

    Regards,
    Nikhilesh

  133. ARUN MENDIRATTA says:

    Karthik,
    I am getting stuck in one place ,whether to classify a candle as marubuzo or not.
    1.Should we approach the visual method or calculate with OHLC.
    2. Also if O=1376, L=1376, C==1441, H=1450. is it a bullish marubuzo???
    3. If yes how u calculated upper shadow & real body percentage???

  134. sangram panda says:

    sir,
    thank you for this awesome article I have a doubt.

    I understand the bullish market to make a profit Buy price= close and sl= low so next day it may be profitable.
    but in the Bearish market how can some one make a profit because next day price will go down (history tends to repeat it self).
    didn’t get it.
    SL is higher than buying price. how?

  135. Sanyam Kumar says:

    Earlier in this chapter we did discuss about the length of the candle. One should avoid trading during an extremely small (below 1% range) or long candle (above 10% range).

    1% range or 10% range ka pata kaise chalega…?

  136. Vaibhav says:

    Hi Kartika,

    Has ICICI bank formed MARUBOZU on 14th August?

  137. Ronak Shah says:

    I do not quite understand this part of the chatper.

    “Please notice, as per the text book definition of a marubozu Open = Low, and High = Close. However in reality there is a minor variation to this definition. The variation in price is not much when measured in percentage terms, for example the variation between high and close is 1.8 which as a percentage of high is just 0.17%. “

    • Karthik Rangappa says:

      This means that the Marubuzo formed, can have a slight upper and lower shadow. This should be ok as long the shadows are small.

      • Ronak Shah says:

        1.The charts used as examples are daily charts? and this indicator has been working well what timeline chart ?
        2. When you say we should overlook very small candles and very large candles for this pattern could you tell us what is very large and small in terms of percentage between open and close.

        • Karthik Rangappa says:

          1) Yes, most of the charts are EOD
          2) Something like less than 0.5% and more than 10%. Give this a try, if this does not suit your temperament, feel free to tweak this.

  138. Rinkesh Ahuja says:

    If we are holding a stock, then we should sell whenever recognizable pattern of ‘bearish’ is observed. I hope it is not just for ‘short’ trade.

  139. Ash says:

    Hi Karthik –

    You mentioned “The variation in price is not much when measured in percentage terms, for example the variation between high and close is 1.8 which as a percentage of high is just 0.17%. ” . So is this % should be between 0.2-0.3% as mentioned earlier in the Q&A by you?

    Thanks,
    Ash

  140. Alikoya KK says:

    Is it Marubuzo or Marbozu?

  141. anmol says:

    The trade on the bearish marubuzo would be to short BPCL approximately at 341.7 with a stoploss at the high point of the candle. In this case the stoploss price is 356.0. Of course at this stage we still haven’t dealt with setting targets, and we will figure that out much later in this module.

    can you please explain the concept of shorting in stock market and also in context with bpcl.

  142. Mahija Mandalika says:

    When there is a bearish marubozu, if the stoploss is at the high point(opening price), and we sell the stock if the price goes above the stoploss, then won’t we be selling stock whose prices are increasing?

  143. Puneet says:

    Dear kartik sir. Can you tell suppose i have opened the site of nse india during market hours. And suppose a stock is too bearish or bullish how will i get to know upper circit has come. If upper circuit has come it means all buyers no sellers so than only bid price will be shown and no ask price. I know in equity cash trading will be stopped after circuit but how will i know that now only buyers are there and no sellers same for when there are only sellers and no buyers .And thanks in advance please clear my doubt.

  144. jagan says:

    Hi karthik sir…………….thanks for the excellent work………i am trying to practice this lesson….yesterday(6/9/17) sunpharma formed bearish Marubuzo., am i right?…….but today it is not acting like bearish continuation….so it is false indication……..will it happens sometimes?…or i am predictiong anything wrong?..pls clarify

  145. naveen says:

    Sec 5.3. Buy price 1028.4 and stoploss 970.
    Question is,”Why I would keep stoploss at such low value of 970 and not around and <1028.4, i.e. the buy price? Wouldn't that minimize the loss?

  146. naveen says:

    Last line of ACC chart (Sec 5.3) says, “both risk takers and risk averse would have been profitable in their trades.” How ? I couldn’t figure out.
    Risk Taker will buy at 1028. Ok he can sell next day and book profit.
    Risk averse will buy at the end of the next day of Marubujo. And when he try to sell the next day, i.e. second day to Marubujo, the candle stick is all red.
    Kindly explain.

  147. Rahul says:

    Which charting tool is used in the screenshot coz I don’t see this in Kite?

  148. venu says:

    Marubuzo bearish or bullish is applied for 1 min chart , or 30 mins or 1 days

  149. Arun mendiratta says:

    Hi karthik,
    By % range for marubuzo u mean only High-Low.
    Suppose High =100 & low=90, then % range=10
    Am i right??

  150. Karan patel says:

    You said

    “However the risk averse would have avoided buying the stock entirely because the next day happened to be a red candle day.”

    But question is being risk averse trader , why i should wait for the whole day before placinh order? My understanding is if yesterday it was bullish marubuzo , i will buy that stock in the morning session very next day. please explain if i am wrong.

    • Karthik Rangappa says:

      Remember the first rule of CS? Buy strength and sell weakness? So to ensure you comply with this rule, you will have to make sure you are buying on a blue candle day, which you can figure out by EOD.

  151. ARUN says:

    Hello sir,
    I was going through last 3 years chart of ACC and i was looking for marubuzo pattern. now my qn is if i consider shadow relaxation upto 0.6% there are hundreds of marubuzo formed. U have said in the chapter that upto 0.2-0.3% should be considered. But in the above comments u have said to someone that upto 0.6% is good…I am really confused what to consider and what not?

  152. kunal says:

    we should buy only on a blue candle day and sell on a red candle day
    what does it mean will u plz explain

  153. raghuram says:

    Dear team Zerodha,
    I am learning through varsity since 1 month and want to be successful in the market. What I feel is that one cannot learn only from theory and needs a real time trading platform to learn, examine and experiment all the charts and indicators. Am I right ? I request answers for the following:-
    1. Can I study all the charts and also draw different indicators by opening account with a broker like zerodha without putting money in trading account till the time i feel confident ?
    2. I am a salaried person. I think the best bet for me is to trade in F&O and to become a swinger or positional. This thinking is due to time constraints during day time. Am I right ?

    • Karthik Rangappa says:

      1) Yes, you can. When you open an account you will get access to our trading platform which also has a charting engine
      2) Positional trades.

  154. Renuka says:

    Hi Karthik,
    Your tutorials are the best for beginners like me.Thanks a ton!
    Please help me sort this out.
    I understand that we need to buy back the shares on the same day we short.We cannot carry forward to next day.In that case,
    If I short at 3:20 PM on a given day, I actually have no scope of buying back as market is almost closing.So how do I go about it.

  155. Kanika Agarwal says:

    Thanks a lot Karthik and Zerodha for this initiative in the form of Zerodhavarsity! Though I haven’t yet applied any of these methods and rules to an actual trade but reading these modules one by one is actually giving me a sense of direction which I was searching for so long in Technical Analysis.
    I really hope I can actually start materialising this knowledge into successful trading.

  156. Kush jana says:

    Thanks for versity. Is there any practical training provide for stock market from zerodha or you or anywhere? Please let me know, if yes then please email me kindly,

  157. Kush jana says:

    Thanks a lot

  158. bunny says:

    What is the time frame(1 mins, 5 mins, 10 mins charts e.t.c) I need to consider while looking at charts for recoganisable candle stick pattern

  159. Nalla Sivam says:

    Very great tutorial!!! Very simple to understand for the beginners. Great work. Keep it up.

    Sorry to point out this typo error: in some place the word “marubozu” is typed as “marubUZO”. Please check and correct it.

    But I really appreciate your work and overall Zerodha is great.

    • Karthik Rangappa says:

      Ah, I’m aware of the name mismatch Nalla. But I’ve taken cover under the ‘pronoun’ pretext 🙂
      Happy learning!

  160. PRAMOD says:

    Hi
    My Zerodha Client Id is YG8404

    On 28th Oct 2017 & 29th Oct 2017 candle stick chart stock of ‘IOC’ formed a clear Bearish Engulfing after an uptrend and today i.e. on 30/10/2017 ‘IOC’ formed a DOJI / Spinning Top (Not clear to me).

    Can you please suggest a likely hood to take place tomorrow on 31/10/2017. i.e. IOC will go down or up or it will remain sideways ?
    Also what pattern on 30/10/2017 IOC has formed a DOJI ? or a Spinning Top ?

    Appreciate if you can answer quickly.

    Many thanks in Advance

    • Karthik Rangappa says:

      Pramod – please do not give out your client id in a public forum.

      The uptrend before the bearish engulfing is not very convincing to me. The pattern on 30th is a spinning top.

      • PRAMOD says:

        To confirm that stock is in uptrend or downtrend what period of chart we need to analyze bearish / bullish engulfing pattern for one or two days trade.

        Also should volume needs to be more than previous day volume on the day when bearish / bullish engulfing pattern is formed or only more than 10 days average volume is sufficient.

        Please confirm which candle stick pattern in combination has higher probability say 70% to assume the trend.

        • Karthik Rangappa says:

          For short term – I’d suggest you look at 15 days chart. Volumes too needs to be high, especially around the pattern formation time. No candlestick pattern or indicator works on the same 2 stocks. For example, bullish engulfing along with RSI may work on SBI but may not on HDFC. The trick is to backtest and be aware of which pattern/indicator (has a better probability) works on which stock.

          • PRAMOD says:

            Many Thanks.

            I have read quite a few comments appreciating you and you can also add me as your appreciator.
            The article was old but you still reply to queries and doubts of people, that is a great work.
            To show interest consistently is sign of a master and you truly are a master.

          • Karthik Rangappa says:

            Hahah…thanks for the kind words, Pramod 🙂

            Happy learning.

  161. Sashidhar. L says:

    The question is slightly off topic and I apologize for that in advance. After seeing a number of charts, one thing I noticed is that when there is a huge increase in volume, it suddenly increases/ decreases the price of the stock (especially in one minute chart). There is almost no change or very little change in price and suddenly the next minute, there is a huge upsurge in volume, as well as change in price. Sir can you please explain what exactly goes on there? Thank you.

    • Karthik Rangappa says:

      Please don’t apologize for this 🙂

      This can get a bit tricky since you are watching 1-minute chart. 1-minute charts are full of noise. I’d suggest you take a look at slightly higher time frame…at least 10-15 mins one.

  162. Kushal says:

    Hello Karthik,

    first of all, thanks a lot for all your contribution and replies against most of the naive questions.

    I have been following all the previous modules/replies responsibly and must say your efforts are worth enough to call you a mastermind with outstanding intellect.

    I have a number of questions, so please accept my apology for the long comment, in advance. I am sure most of them already been answered, however, I still have little confusion!

    Regarding identifying Marubozu, I have sequence of questions

    1. A candlestick without or within the identified range of (0.3%) shadow can occur anytime in a trading single day. if it occurs, then around closing time (i.e 3:20 pm) one needs to cross check the below-specified conditions for Bullish or Bearish Marubozu?

    2. To ascertain one out of two Marubozu, the conditions to be cross-checked are:

    2.1 If Open = High and Close = Low it’s Bearish Marubozu?
    2.2 if Open = Low and Close = High it’s Bullish Marubozu?

    3. Let’s say one of the above two conditions (from 2.1 or 2.2) has been satisfied, next step is to check the Shadow lengths. And to calculate the shadow lengths, if i just copy what Vishal Saini had said on June 5, 2016, at 8:53 am. (which you agreed as correct) and adding your example values (O=971.8, H=1030.2, L=970.1 and C=1028.4)
    In Bullish Marubuzo:
    i) (high-close)/close For Upper Shadow which is [(1030.2-1028.4)/1028.4] x 100 = 0.17%, which is below <0.3% Value, hence condition satisfied.
    ii) (low-open)/open For Lower Shadow which is [(970.1-971.8)/971.8] x 100 = 0.17%, which is below <0.3% Value, hence condition satisfied.
    as above two criterion have been satisfied, we can call it Bullish Marubuzo and take actions according to to the type of trader we are?
    And similarly, if Bearish Marubuzo seems to be forming!
    iii) (low-close)/close For Lower Shadow
    iv) (high-open)/open For Upper shadow

    i think if above conditions are satisfied one can execute the trade and set the target and stop loss, correct me if i am wrong?

    i have no understanding about Futures, F&O, swing or any other term you might have used in the replies above, i am expecting to see them in next sessions!

    Once again thanks in advance.

    • Karthik Rangappa says:

      Kushal, thanks for the kind words and encouragement. I’m happy to note that you’ve liked the contend so far.

      1) Yes, a marubuzo can form anytime during the day – what the point is that it should sustain through the day, until closing. Hence, you need to revalidate the patter around close
      2) Yes for both
      3) Yes, considering the flexibility aspect – I would go ahead and consider this a Marubuzo
      3.1 and 3.2) Yes, the calculation is correct

      The same logic applies for bearish Marubuzo as well. Guess, you’ve got the pattern;s identification perfectly well.

      Good luck.

  163. Tyson says:

    Hi Karthik, You are such a help for us. Just wanted to know when you say a days candle, How can i relate it to 5 minutes chart. Does it mean last candle of the day on a 5 minute chart.

    Thanks Buddy

    • Karthik Rangappa says:

      When I say, days candle, the Open if for the start of the day, low is the lowest point of the day, high is the highest point, and close is the closing price. Now shrink that day to 5 mins (or 10, 15, or 30 mins) and you have that 5 mins candle. For example a 5 mins candle between 10:05 to 10:10 AM represents the OHLC during that 5 mins.

      • Tyson says:

        Thanks for prompt reply Karthik.
        Could you please give me a simpler example (I know you have kept it very simple though) .
        This is one point holding me back and I am going into loses.
        Please help.

  164. RAGHURAM says:

    Hi Karthik,
    Why do I see candles with lower volume bigger than candles with high volume ?

    • Karthik Rangappa says:

      It could be a low volume day, but the range could be large.

      • Raghuram says:

        But, I think shadows are there to denote range for a particular time frame / candle. I am still not clear from your answer sir. Kindly explain.

        • Karthik Rangappa says:

          Lower volumes indicate lower liquidity. Lower liquidity means higher volatility. Higher volatility means larger range within which the stock trades. Larger range indicates larger candle.

  165. Ashish says:

    “The disadvantage of buying the next day is that the buy price is way above the suggested buy price, and therefore the stoploss is quite deep.”

    I did not understand why the stoploss would be deep? Can’t he put the stoploss at the next day’s opening price to reduce it?

    Btw, thanks for the awesome series on stock markets.

    • Karthik Rangappa says:

      It means if the suggested buy price is 50, SL is 47. But you buy at 52, the SL is still at 47. So a difference of 5 from the original SL level.

  166. Ognish Banerjee says:

    I have a doubt. According to the article i should sell my security as soon as i see a bearish marubozu that too depending on my risk appetite. But my point is even it is a bearish maribozu or any of kind bearish candle. I’m always making loss right?. Cause the price of my security has fallen. Is it possible to predict exactly when the bearish marubozu or any bearish candle will form so that i can sell it on the verge to make a maximum profit out of it?

    Thank you!

  167. chidambaram says:

    Hi Sir,
    Thanks for your prompt replies.
    I have doubt that after we enter a trade and if the price drops considerably without hitting stop loss (but near to stoploss) can we increase our quantity again?

  168. chidambaram says:

    Hi sir,
    If we have missed to enter the trade on both P1 and P2 day with all the checklist confirming, can we go on the trade on the start of the every next day (say P3)? If so still for that day also do we need to check the rule “buy strong and sell weak”?

  169. Varun says:

    I wanted to know what is the difference between quantitative analysis and technical analysis. Are they the same?

    • Karthik Rangappa says:

      Quantitative Analysis requires you to look at the numbers/data from a statistical (or mathematical) perspective. For example, measuring the spread in terms of standard deviations, studying the distribution of data, or looking at stationarity of the time series. However, TA requires you to look at the stock price chart to identify price patterns.

  170. chidambaram says:

    Hi Sir,
    1. You have mentioned to avoid trading based on smal candes(less than 1%) ,how to calculate this?the real body length alone should be more than 1% or the length of the entire candle along with shadow?Does this applies to intraday trading also? Usually i see intraday(in 15 mins chart) candle real body to be less than 1% length only.Then in that case how to do a intraday trading?
    2.If a bullish marubuzo is formed in a downtrend/bearish marubuzo in a up trend, with a low volume at support level/resistance levels respectively ,then can we enter a short trade/long trade respectivey in the same direction of the trend at that point,on confrmation of P2 beign red candle/blue candle respectively?

    • Karthik Rangappa says:

      1) More from an EOD perspective. I measure the length of the real body excluding the shadows.
      2) Yes, you can consider Marubuzo requires no prior trend.

  171. AJAS says:

    Hi, appreciate your effort for making this modules this much simple. can you explain how we use marubuzo patterns for intraday trading, i mean how the patterns forms ?

  172. hari says:

    apollo tyres chart of H1 of 15/12/2017 is a perfect eg of Marubozu on up trend

  173. hari says:

    Also Coal India 15/12/2017 H1 chart first candle 9.15 am

  174. Roshni Kanchan says:

    Hi Karthik,
    I just want to thank you for the excellent articles. And for your time, effort and patience in answering all the questions. I learn from the article and then some more from the Q-A following the article. 🙂
    You are amazing!!
    Regards
    Roshni

  175. Jitesh says:

    Thank you for amazing articles you have written here.
    If I saw a bullish Marubuzo say for a 5 min chart (10:00 – 10:05) for a particular day on some stock, then :
    1)Can a intraday buy call be taken on that stock?
    2)What other indicator can I check to confirm the buy signal ?
    3)Currently I use RSI and 5,10,20 EMA. Is it a good combination of indicators for intraday trading ?

  176. Vibhor says:

    Hi,
    Can you please open 1D chart for NHPC for 21st Dec & 22 Dec 2017.
    as said in this chapter that the longer the candle, the more intense is the buying or selling activity.
    but if you see chart, 21st Dec candle is very long as compared to 22nd Dec, still on 21st dec there was less volume than 22nd?
    how is it possible? can you please explain?

  177. Vibhor says:

    hi,
    in this chapter you said One should avoid trading during an extremely small (below 1% range) or long candle (above 10% range).
    can you explain how this percentage is calculated? also why should we avoid too long candles?

    • Karthik Rangappa says:

      Long candles (say something like 6-8%) could be outside the daily volatility range. This can lure you into setting up deeper stop losses, and if the trade goes wrong, you will take a deeper hit than usual.

  178. rahil parikh says:

    Can u plz tell what duration shall we keep while observing candle sticks 1 min 5 min 10 min for day trading and what other indicators shall we use to generate a buy signal

  179. Tushar says:

    Karthik, the training modules are excellent. I feel this information to be empowering thus boosting my confidence. I have not found a more complete guide to understanding the various aspects of the stock markets and their interrelations anywhere online apart from Varsity. I have bought and sold stocks for a few years, but I realize only now that I knew nothing before!

    As for the question, am I correct in assuming that the mazrubuzo candlestick is only studied for the entire days OHLC? i.e the chart has to be set in intervals of days and not any other? What if I am looking at a 15 min candlestick chart to day trade, and find a marubuzo…is it applicable?

    • Karthik Rangappa says:

      Happy to note that you are liking the content on Varsity, Tushar!
      You can set the time frame to any desired value. The candlestick patterns are still applicable. However, my personal favorite is a marubuzo formation on an EOD basis.

  180. Tushar says:

    One more question….is it advisable to trade on long Marubuzo or better to avoid considering long candlestick? It yes can we place a stoploss halfway though the high price for a bearish Marubuzo instead of the high price and similarly for Bullish Marubuzo?

  181. Sateesh Kumar says:

    Hi Karthik,

    This type of content helps a lot for beginners like me.
    Is there any place/Website where we can look for “All the Stocks which fall under Bullish/Bearish Marubuzo” ?

    Thanks

  182. Ishwari Saraogi says:

    Sir,

    If a stock made a good bullish candle on the daily candlestick charts and a Hanging Man kind of patterns on the weekly charts, what would be trade set up for that stock? Buy/Sell/Do nothing?

    Many thanks

    Best wishes,

    Ishwari

    • Karthik Rangappa says:

      This can be tricky and really depends on the timeframe of the trade. If it is for a day or two, pay more attention to daily patterns. If it is more than that, I;d suggest you pay attention to the weekly pattern also.

      • Ishwari Saraogi says:

        Ok, when we trade we should look for daily/weekly/monthly candle stick to better judge the direction of the script? No conflict or in line (all period candlestick pattern), the better would be success factor for that trade?

  183. rajesh says:

    Are only whole day marubozu are useful? or we can consider marubozu’s formed in 1hr, 4hr chart also? Are marubozu’s helful in intraday trading?

    • Karthik Rangappa says:

      You can trade based on candlestick patterns formed based on 1,4, or 5 hours candles. However, I’m not a big fan of this. I personally prefer to look at EOD charts to build the strategies for the day.

  184. Sampath says:

    In some charts both blue and red marubozu’s are present, i.e multiple marubozu’s. Which should i follow if there are multiple marubozu’s?

  185. Rahul says:

    Do you mean, that the risk averse trader is conforming bearish marubozu on the next day of 3.20pm?

  186. deepak says:

    what will be the time difference between each candle to analyze all these parameters?

  187. Perceval says:

    Hi Karthik,

    I’m learning a lot from your useful website. Thank you!

    Please ‘bear’ with me — I don’t understand this statement: “A bearish marubozu indicates that there is so much selling pressure in the stock that the market participants actually sold at every price point during the day…”

    This statement might be taken to imply that two different times t1 and t2 between open and close necessarily satisfy p1>p2 for t1<t2. Is this the intended meaning?

    I'm asking because I was under the impression that the bearish marubozu only meant that O=H and C=L with any number of excursions in price back and forth between these values between opening and closing times. And an 'up' excursion is therefore not excluded.

    Thank you. -Mark

    • Karthik Rangappa says:

      Mark, the selling pressure that I’m referring to is for intraday. So through the day, the stock got sold at every price point.

  188. Vignesh Doraiswamy says:

    Hello Karthik
    My doubt is with the concept of selling on a red candle day and buying on a blue candle day. I saw few queries about this concept in the above comments. But i’m not clarified with the answers. So let me elaborate a bit and please make me clear.
    1) I must buy strength and sell weakness.
    2) For eg: I’m going long today with SBIN at 308rp. Since today(19-1-18) is blue candle day. I’m buying strength.
    3) Suppose 22-1-18 also seems to be blue candle day and SBIN stock is being sold at 315rp.
    4) Let us consider 24-1-18 to be red candle day. And the SBIN stock is sold at 305rp.
    5) Should i sell my stock on 22-1-18 for 315rp to make a profit of 7rp or sell my stock on 24-1-18 for 305rp and make a loss of 3rp as it is said that i must sell on red candle day ?
    6) Shorting on red candle day would definitely make profit given if the stock prices go down on next few days. But how would selling the shares that i bought on 19-1-18 on a red candle day make profit?

    • Karthik Rangappa says:

      Vignesh, I understand your concern. Have you ever tried trailing your SL? If no, I think its best if you trail your SL so that you can lock in profits.

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