Trading The Bullish Marubozu Pattern

 

Once you have identified the bullish Marubozu pattern it is important to know where to take the trade. The traders are divided into two. One is the risk taker and the other is the risk-averse trader.

The risk taker will not wait and try to take the trade on the same day that the Marubozu gets formed. However, the traders should ensure that the candle will end in a Marubozu. Thus he can take the trade only close to the closing time where he needs to notice if the opening price is equal to the low of the day and the closing price is looking to be approximately equal to the high of the day. If this gets satisfied then you can be confident that the candle is forming a Marubozu and that you can get into the trade when the market is about to close for the day. The trade is also buying on a strong day which is good.

The risk-averse trader, on the other hand, will wait for the candle to close and he would enter the trade on the next day. Thatis the day after theMarubozu pattern gets formed. The risk-averse trader waits for the day to end to make sure that the day was bullish. The disadvantage of this method is that the trader is buying on the next day when the price is way above what the suggested buy price was and this means that his risk on the trade is huge. But the disadvantage of this method is that the trader is making sure that the stock indeed is bullish before he is entering the trade.

Where to place the stop loss

The bullish Marubozu trade on the automated trading robot could go wrong too. So you need to know where to place the stop loss. Every candlestick pattern will have a mechanism to place a stop loss. When you trade the bullish Marubozu then the candles low is the stop loss. So in case you are a buyer and the candle breaks the low of the Marubozu then you should sell the stock at a loss.

It is important to understand that stop loss is common and even seasoned traders have to book losses once in a while. The benefit of placing a stop loss is that you do not lose your capital in a single trade. You protect your trade by placing a stop loss so you lose just a small amount.

 

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