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What do spinning tops, marubozus, and dojis have in

common?

They’re all the basic types of Japanese candlesticks!

Let’s take a look at each type of candlestick and what

they mean in terms of price action.

Japanese candlesticks with a long upper shadow, long lower shadow,

and small real bodies are called spinning tops. The color of the real
body is not very important.

The Spinning Top pattern indicates the indecision between the buyers
and sellers.

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The small real body (whether hollow or filled) shows little movement from
open to close, and the shadows indicate that both buyers and sellers
were fighting but nobody could gain the upper hand.

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Even though the session opened and closed with little change, prices
moved significantly higher and lower in the meantime.

Neither buyers nor sellers could gain the upper hand, and the result was
a standoff.

If a spinning top forms during an uptrend, this usually means there

aren’t many buyers left and a possible reversal in direction could

occur.
If a spinning top forms during a downtrend, this usually means there

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aren’t many sellers left and a possible reversal in direction could

occur.

Sounds like some kind of voodoo magic, huh? “I will cast the evil spell of
the Marubozu on you!”

Fortunately, that’s not what it means. Marubozu means there are no

shadows from the bodies.

The word “marubozu ” translates to “bald head” or “shaved head” in

Japanese.

So a Marubozu candlestick is a bald candle or shaved candle means it

has no shadow or wick.

Depending on whether the candlestick’s body is filled or hollow, the high

and low are the same as its open or close.

Check out the two types of Marubozus in the picture below.

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A White Marubozu contains a long white body with no shadows. The

open price equals the low price and the close price equals the high
price.

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This means that the candle opened at its lowest price and closed at its
highest price.

This is a very bullish candle as it shows that buyers were in control of the
entire session. It usually becomes the first part of a bullish continuation
or a bullish reversal pattern.

A Black Marubozu contains a long black body with no shadows. The

open equals the high and the close equals the low.

This means that the candle opened at its highest price and closed at its
lowest price.

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This is a very bearish candle as it shows that sellers controlled the price
action the entire session. It usually implies bearish continuation or
bearish reversal.

Depending on where a marubozu is located and what color it is, here are
few guidelines:

White Marubozu

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.

Black Marubozu

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 at least their
bodies are extremely short. A Doji should have a very small body that
appears as a thin line.

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Doji candles suggest indecision or a struggle for turf positioning

between buyers and sellers.

Prices move above and below the open price during the session, but
close at or very near the open price.

Neither buyers nor sellers were able to gain control and the result was
essentially a draw.

There are FOUR special types of Doji candlesticks.

The length of the upper and lower shadows can vary and the resulting
forex candlestick looks like a cross, inverted cross, or plus sign.

The word “Doji” refers to both the singular and plural form.

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When a Doji forms on your chart, pay special attention to the preceding
candlesticks.

If a Doji forms after a series of candlesticks with long hollow bodies (like
White Marubozus), the Doji signals that the buyers are becoming
exhausted and weakening.

In order for the price to continue rising, more buyers are needed but
there aren’t any more! Sellers are licking their chops and are looking to
come in and drive the price back down.

If a Doji forms after a series of candlesticks with long filled bodies (like
Black Marubozus), the Doji signals that sellers are becoming
exhausted and weakening.

In order for the price to continue falling, more sellers are needed but
sellers are all tapped out! Buyers are foaming in the mouth for a chance
to get in cheap.

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While the decline is sputtering due to a lack of new sellers, further buying
strength is required to confirm any reversal.

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Look for a white candlestick to close above the long black candlestick’s
open.

In the next following lessons, we will take a look at specific Japanese

candlestick patterns and what they are telling us.

Hopefully, by the end of this lesson on Japanese candlesticks, you

will know how to recognize different types of candlestick patterns and
make sound trading decisions based on them.

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