Single Candlestick Patterns (Part 1) - Zerodha Varsity PDF

12/19/2015 Single Candlestick patterns (Part 1) Zerodha Varsity

MODULES 
CHAPTER 5
Single Candlestick patterns

(Part 1)
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
http://zerodha.com/varsity/chapter/singlecandlestickpatternspart1/ 1/43
concluded that the trading action was subdued.
The following picture gives a perspective on the long/short – bullish, and bearish candle.
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 Marubuzo 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 Marubuzo has just the real body as shown below. However there are
exceptions to this. We will look into these exceptions shortly.
The red candle represents the bearish marubuzo and the blue represents the bullish
marubuzo.
5.3 – Bullish Marubuzo

The absence of the upper and lower shadow in a bullish marubuzo
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
marubuzo is formed.
A bullish marubuzo 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 marubuzo 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 marubuzo. The buy price
should be around the closing price of the marubuzo.
In the chart above (ACC Limited), the encircled candle is a bullish marubuzo. Notice the bullish
marubuzo 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 marubuzo 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.
Here is an example where the risk averse trader would have benefited :
Notice in the chart above, a bullish marubuzo 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 Marubuzo

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 marubuzo, 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 marubuzo.
Here is an example where the bullish marubuzo 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.
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.
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.
5.3 – Bearish Marubuzo

Bearish Marubuzo 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 marubuzo 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 marubuzo 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 marubuzo.
In the chart above (BPCL Limited), the encircled candle indicates the presence of a bearish
marubuzo. 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 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.
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 marubuzo. 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 marubuzo 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 marubuzo 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.
Here is a chart which show bearish marubuzo 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.
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. Marubuzo is the only pattern which violates rule number 3 i.e Look for prior trend
3. A bullish marubuzo indicates bullishness
a. Buy around the closing price of a bullish marubozu
b. Keep the low of the marubuzo as the stoploss
4. A bearish marubuzo indicates bearishness
a. Sell around the closing price of a bearish marubozu
b. Keep the high of the marubuzo 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
a. Short candle indicates subdued activity
b. Long candle indicates extreme activity, however placing stoploss becomes an

issue.
(http://zerodha.com/varsity/chapter/getting-started-candlesticks/)
(http://zerodha.com/varsity/chapter/single-candlestick-patterns-part-2/)
139 Responses to “Single Candlestick patterns (Part 1)”
Reply (http://zerodha.com/varsity/chapter/single-candlestick-patterns-part-1/?replytocom=41#respond)
SURAJ SURESH
October 20, 2014 at 11:16 am

How much of variation in high and low is acceptable in a marubuzo candle pattern. As per rule 2 be flexible with patterns.
¶ (http://zerodha.com/varsity/comment/41)
Reply
KARTHIK RANGAPPA
October 20, 2014 at 12:31 pm

Usually if the shadows are within 0.2% to 0.3% of the range it should be ok.
(http://zerodha.com/varsity/chapter/single-candlestick-patterns-part-1/?replytocom=42#respond)
Reply
RANJEET46
(http://zerodha.com/varsity/chapter/single-
August 22, 2015 at 4:58 pm
candlestick-patterns-part-1/?
How do we calculate the % can you give an example?
replytocom=17909#respond)
Reply
KARTHIK RANGAPPA
August 24, 2015 at 5:42 am

Here is the formula –
(High – Close)/Close.
(http://zerodha.com/varsity/chapter/single-candlestick-patterns-part-1/?
SUDESHNABORA
September 8, 2015 at 7:44 am

Is the above formula for bull trend or both?
If not, will the formula for bear trend be :- (high-open)/open
KARTHIK RANGAPPA

That would be (Close – low)/Close
SUDESHNABORA

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

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.
Reply (http://zerodha.com/varsity/chapter/single-candlestick-patterns-part-1/?
SAIKIRANGARAPATI
November 13, 2015 at 4:02 pm

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..?
KARTHIK RANGAPPA
November 15, 2015 at 3:21 am

For reasons that you have stated (upper and lower shadow) this would not qualify as a Marubuzo.
DECO

Just feel sitting in the auditorium of Harward university listening a great but simple lecture of renowned professor
KARTHIK RANGAPPA Reply (http://zerodha.com/varsity/chapter/single-

candlestick-patterns-part-1/?replytocom=100#respond)
Glad to know you are liking the content
HAWWA

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.
Reply (http://zerodha.com/varsity/chapter/single-
KARTHIK RANGAPPA
candlestick-patterns-part-1/?replytocom=127#respond)
Good to know that hawwa !
RAJ

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.
KARTHIK RANGAPPA

It would be hard to distinguish this Raj. One good way make some sense of this is by looking into the volumes.
RAJ

karthik Ji, If a volume bar represents both buy and sell qty together, its difficult to know from volume also,
what is tot buy and tot sell, because every buy is result of some sell obviously and vis versa. kya kia jay…
KARTHIK RANGAPPA

Suggest you read through this about volumes – http://zerodha.com/varsity/chapter/volumes/
(http://zerodha.com/varsity/chapter/volumes/)
ABBY Reply

Umm The pic for the Bearish Marubuzo has blue ears.. that got me off guard ..
Otherwise Great content
VISHVENDRA89 Reply (http://zerodha.com/varsity/chapter/single-

December 27, 2014 at 9:18 am
that pic should have red ears… hehe
KARTHIK RANGAPPA
THIYAGU

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

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.
DEEPESH

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

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.
PRAKASHBABU

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

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.
AASTROGURU

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

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
NIMESH
December 7, 2014 at 2:45 pm

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

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 (http://zerodha.com/varsity/chapter/dow-theory-part-2/) as one the checklist
items while qualifying a trade.
PRADEEP K

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

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.
GURU
GURU

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.?
KARTHIK RANGAPPA

Guru, notice after the pattern occurred what followed were a series of red candles triggering the stop loss.
N S RANA

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

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.
Reply
GURUMOORTHY

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

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.
Reply (http://zerodha.com/varsity/chapter/single-candlestick-
CHELLA70
patterns-part-1/?replytocom=3225#respond)
U r great
KARTHIK RANGAPPA
VENKATREDDYMR

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

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.
ADAPA SRINIVASA RAO

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

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
April 13, 2015 at 4:57 am

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?
KARTHIK RANGAPPA
April 13, 2015 at 6:18 am

Swing trading and positional trading are pretty much the same where one enters a trade today
with an expectation of holding on to such trades for few days or months. Look back period should
be at least 6 months of end of day data.
RANJEET46
April 13, 2015 at 7:24 am

Thank you sir for your timely reply.
KARTHIK RANGAPPA
April 14, 2015 at 4:05 pm

Most welcome!
VASANTH

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

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.
VASANTH

which is the best platform to identify the candlestick patterns clearly? can i go for Z5 candlestick chart or something like
amibroker?
Reply
KARTHIK RANGAPPA
January 1, 2015 at 10:21 am

Even better would be Zerodha Pi Check this – http://zerodha.com/pi/ (http://zerodha.com/pi/)
VASANTH

Thank you for your immediate response. If i place AMO for any script in the evening when it will be placed?Before 9:15?
KARTHIK RANGAPPA
Nope, it will go after the markets open, post 9:15 AM.
Reply
DEVAKI

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

January 3, 2015 at 4:45 pm
I’d prefer a 15 min or a 5 min candle, nothing beyond that.
RAVI
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.
KARTHIK RANGAPPA
January 3, 2015 at 4:58 pm
Makes sense, will keep this in mind while posting charts.
THELEGEND

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

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
January 10, 2015 at 10:52 am

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!

Precisely, the % is with reference to the range of the day.
MANU
January 18, 2015 at 11:58 am

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).
KARTHIK RANGAPPA

Shorting over multiple days is quite easy with futures. If you are leverage averse, then do check out the SLBS option
on NSE – http://www.nseindia.com/products/content/equities/slbs/slbs.htm
(http://www.nseindia.com/products/content/equities/slbs/slbs.htm)
BBHALAJI

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

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.
Reply
MOHD NIZAMUDDIN
February 3, 2015 at 10:19 pm

Hi karthik, I want to ask you àbout shorting please explain it. Can we hold the stock for days in sell call ?
KARTHIK RANGAPPA
February 4, 2015 at 4:49 am

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.
SAIKIRANGARAPATI
March 16, 2015 at 2:31 pm

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
March 16, 2015 at 4:24 pm

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.

March 17, 2015 at 4:34 am
Wow! You just echoed my thoughts Devaki
Reply
SAIKIRANGARAPATI
March 17, 2015 at 6:15 am

Hi Devaki Nandan
Thanks for your Views and thanks to Karthik also.
SAIKIRANGARAPATI
March 17, 2015 at 6:36 am

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
March 18, 2015 at 5:42 am
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
March 18, 2015 at 5:40 am

Most Welcome !
KARTHIK RANGAPPA
March 17, 2015 at 4:33 am

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.
KIRTI
March 22, 2015 at 11:41 am

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
March 23, 2015 at 5:08 am

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.
SAIKIRANGARAPATI Reply (http://zerodha.com/varsity/chapter/single-candlestick-

March 27, 2015 at 11:05 am
Hi Karthik,
Is PNB formed a Hammer on 27-03-2015?
Regards,
SaikiranGarapati
KARTHIK RANGAPPA
March 28, 2015 at 11:57 am
It certainly looks like!
SAIKIRANGARAPATI
March 27, 2015 at 3:52 pm

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
March 28, 2015 at 12:13 pm

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.
PEARL
April 3, 2015 at 9:54 am

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?
KARTHIK RANGAPPA
April 4, 2015 at 4:45 am
Yes, that is correct.
VIKAS.GHODE
April 11, 2015 at 3:37 pm

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
April 11, 2015 at 10:01 pm

No in fact I have nearly 5 or 6 trading accounts with different brokers and I see not advantage having so many
VIKAS GHODE
June 9, 2015 at 9:33 am

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
June 10, 2015 at 11:30 am

Well, instead of buying in 1 account and selling in the other why dont you try buying both the Call
and Put option simultaneously?
KRISHNA
April 15, 2015 at 8:53 am

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?
KARTHIK RANGAPPA
April 17, 2015 at 5:03 am

You just need to see the end of day charts! I would suggest you use http://www.chartink.com
(http://www.chartink.com), they are quite good.
CHETAN
April 18, 2015 at 12:29 pm

friday’s closing the nifty seems to have formed a bearish marobuzo…can you confirm
Reply
KARTHIK RANGAPPA
April 19, 2015 at 2:57 am
Yes, and right on top there is a bearish engulfing pattern
Reply
ANIRUDHA KALE
April 18, 2015 at 1:28 pm

how to find difference between high low and open close for each candle.pleas provide easy method.
April 19, 2015 at 2:58 am

The easiest way is to take the data onto excel and plot the difference.
AJAY KUMAR BHAGAT
April 19, 2015 at 11:05 am

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
April 19, 2015 at 11:10 am

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.
ANAND
May 1, 2015 at 3:13 pm

Hi,
How can one identify if trade should be lon or short if there are too many marubuzo candle(bullish & bearish both)
KARTHIK RANGAPPA
May 2, 2015 at 9:09 am
Well, you stay away from that scrip
TRAMADEVI
May 17, 2015 at 6:17 am

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
KARTHIK RANGAPPA
May 17, 2015 at 5:13 pm
Well, I suppose upto 1% should be ok
ENTRY PROCEDURE AND ACTIVE TRADE MANAGEMENT..... - DISCRETIONARY-TRADING (HTTP://WWW.DISCRETIONARY-

TRADING.COM/ENTRY-PROCEDURE-AND-ACTIVE-TRADE-MANAGEMENT/)
June 19, 2015 at 5:24 am

[…] 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 […]
Reply (http://zerodha.com/varsity/chapter/single-candlestick-
JYOTI PRAKASH
June 22, 2015 at 5:00 pm
Article is very good and descriptive. Like it.
There is a spelling mistake, its “Marubozu”

June 23, 2015 at 5:15 am
Thx Will make the changes.
VIKAS AHLAWAT
July 7, 2015 at 3:48 pm

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
July 8, 2015 at 6:52 am

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.
NEERAJ
July 10, 2015 at 3:05 am

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.
KARTHIK RANGAPPA
July 10, 2015 at 5:29 am
Thank you so much Neeraj, really glad you liked it
ADY
July 12, 2015 at 1:56 pm

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
July 13, 2015 at 7:08 am

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.
ALEX
August 6, 2015 at 11:29 am

Sir, what does the chart pattern of Techmahindra, tell us. There was a sharp fall today, is this bearish engulfing?
KARTHIK RANGAPPA
August 7, 2015 at 6:47 am
It does look like a bearish engulfing pattern.
Reply
RU0271
August 17, 2015 at 3:02 am

A bullish morobuzo does not always mean that the trade shall be bullish tomorrow.
KARTHIK RANGAPPA
August 17, 2015 at 6:35 am

However it enhances your odds of making a profit, provided all other factors in the checklist is validated.
SUDESHNABORA

SUDESHNABORA

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?
YOGI

Bullish Marubozu in GM Brewries on 23rd September 2015. Let’s see where it takes the stock.
Reply
KARTHIK RANGAPPA
September 26, 2015 at 12:56 pm

Yeah, and I hope all the other variables in the check list are in place.
KIRTI Reply
October 2, 2015 at 4:10 am

Great going so far. I followed the chart and now GM hits 500. Can anybody give a target here
KARTHIK RANGAPPA
October 5, 2015 at 6:29 am

Happy to know that Kirti. By the way, no targets, no tips, no recommendations here. Zerodha Varsity is
only about sharing market related knowledge.
ALOK

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.
KING Reply (http://zerodha.com/varsity/chapter/single-

Prior trend doesn’t matter.
KING
Prior trend doesn’t matter in Marubuzo.
yup!
KARTHIK RANGAPPA

Prior trend for Marubuzo is not required. If the pattern appears after an up trend, then the idea would be to short
the asset.
RAJEEV
October 16, 2015 at 1:13 pm

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

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.
RAJEEV
October 18, 2015 at 12:00 pm

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

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.
Reply
KARTHIK

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?

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

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

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

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?
HARI

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 Reply

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
Can send you an excel with the calculations.
HARI

Karthik bro,
Excel link : https://drive.google.com/file/d/0B4YbuL88T8AMY0p6azMxZGlxMzg/view?usp=sharing
(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
Reply
KARTHIK RANGAPPA
Not bad at all! Seem all good to me!
My only suggestion – separate out the Green and Red patterns.
HARI
thank you very much Karthik bro
Do you have a question or comment?

Name *

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12/19/2015 Single Candlestick patterns (Part 1) ­ Zerodha Varsity

Single Candlestick patterns

concluded that the trading action was subdued.

5.2 – The Marubozu

1. Buy strength and sell weakness

5.3 – Bullish Marubuzo

Buy Price = Around 1028.4 and Stoploss = 970.0

5.4 – The Stoploss on Bullish Marubuzo

5.3 – Bearish Marubuzo

A bearish marubuzo indicates that there is so much selling pressure in

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

5.4 – The trade trap

Key takeaways from this chapter

b. Long candle indicates extreme activity, however placing stoploss becomes an

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12/19/2015 Single Candlestick patterns (Part 1) Zerodha Varsity