What are the similarities between spinning tops, marubozus, and dojis?
All of them are basic Japanese candlesticks!
Let’s look at each form of candlestick and what it means in terms of price movement.
Spinning tops are Japanese candlesticks with a long upper shadow, long lower shadow, and little actual bodies. The actual body color is unimportant.
The Spinning Top pattern represents buyer and seller indecision.
The small genuine body (whether hollow or filled) moves little from open to close, and the shadows indicate that both buyers and sellers were fighting but neither could gain an advantage.
Despite the fact that the session began and ended with no change, prices moved dramatically upward and lower in the interim.
The outcome was a deadlock in which neither buyers nor sellers could gain an advantage.
- When a spinning top emerges during an upswing, it usually indicates that there aren’t many buyers remaining and that the trend may be changing.
- When a spinning top emerges during a downtrend, it usually suggests there aren’t many sellers remaining and a likely direction reversal is imminent.
In Japanese, the term “marubozu” means “bald head” or “shaved head.”
A bald candlestick, also known as a shaved candle, has no shadow or wick.
The high and low are the same as the open and close depending on whether the candlestick’s body is filled or hollow.
In the image below, you can see two types of Marubozus.
A White Marubozu has a long white body that is devoid of shadows. The open price is the lowest price, and the close price is the highest price.
This indicates the candle began at its lowest point and ended at its highest point.
This is a strong bullish candle, indicating that buyers dominated the whole session. It is usually the first portion of a bullish continuation or reversal pattern.
A Black Marubozu has a long black body that is devoid of shadows. The high is equivalent to the open, and the low is equal to the close.
This signifies that the candle began with the greatest price and ended with the lowest price.
This is a strong bearish candle, indicating that sellers dominated the price action during the day. It usually denotes a bearish continuation or reversal.
Here are some parameters based on where a marubozu is located and what color it is:
- If a White Marubozu forms at the end of an uptrend, a continuation is likely.
- If a White Marubozu forms at the end of a downtrend, a reversal is likely.
- If a Black Marubozu forms at the end of a downtrend, a continuation is likely.
- If a Black Marubozu forms at the end of an uptrend, a reversal is likely.
Doji candlesticks have the same open and close price or have unusually short bodies. A Doji’s body should be very tiny and seem as a thin line.
Doji candles indicate hesitation or a battle for territory between buyers and sellers.
During the session, prices fluctuate above and below the open price, but they close at or around the open price.
Neither buyers nor sellers were able to win control, resulting in a tie.
Doji candlesticks are classified into FOUR kinds.
The length of the higher and lower shadows might vary, resulting in a forex candlestick that resembles a cross, an inverted cross, or a plus sign.
Both the singular and plural forms of the term “Doji” are used.
When a Doji appears on your chart, pay close attention to the candlesticks that precede it.
If a Doji appears after a succession of candlesticks with long hollow bodies (such as White Marubozus), it indicates that the buyers are becoming weary and weakened.
More purchasers are required for the price to continue climbing, but there are none! Sellers are salivating at the prospect of coming in and driving the price back down.
If a Doji emerges after a succession of candlesticks with extended filled bodies (such as Black Marubozus), it indicates that sellers are growing weary and weakened.
More sellers are needed to keep the price falling, but they are all sold out! Buyers are salivating at the prospect of a low-cost purchase.
While the slide is stalling due to a lack of new sellers, additional purchasing strength is needed to confirm any turnaround.
Look for a white candlestick to close above the open of a lengthy black candlestick.
In the following classes, we’ll look at specific Japanese candlestick patterns and what they mean.
By the end of this Japanese candlesticks lesson, you should be able to detect several types of candlestick patterns and make effective trading decisions based on them.