The Basic Candlestick Patterns

Marubozu Candlesticks

A Marubozu candle has no wicks! So if it is a bullish Marubozu, its open is low and its close is high. If you see a bearish Marubozu, its open is high and its close is low. A Marubozu is a strong continuation pattern that suggests bulls or bears are in total control of the market.

A white-and-green (bullish) Marubozu suggests that the bulls are in total control. Think about it in terms of the battle between the bulls and the bears. When the candle opened, the bears were not able to push the price down to make a new low. The bulls pushed up consistently and closed at the high.

A red (bearish) Marubozu suggests that the bears are in total control. Once again, the battle started, but the bulls this time were not able to make a new high. Instead, the bears pushed down consistently, with the bulls unable to hold their ground. So, the candle closed at its lowest point.

Marubozu candles are a very strong indication of a continuation. Since the bulls and bears have so much power shown by the Marubozu it can be expected to carry through to the next candle.

Spinning Top

A Spinning Top indicates a big fight is happening between bulls and bears. Both sides are giving it their all! Nobody has won the fight yet, so the candle closes near its opening price. Take a look at the Spinning Top below for a clearer explanation.

A Spinning Top’s body can be either bullish or bearish—but that isn’t overly important. What is important is that two wicks on either end are much larger than the body. This indicates a struggle between bulls and bears, but neither was able to claim a decisive victory. In a trend, a spinning top indicates indecision.

Spinning Tops are critical in predicting reversals as they often occur when a trend is coming to an end.

If a Spinning Top appears during a bullish trend, it indicates to us that bears could be taking back control and potentially ending the trend. Until the Spinning Top formed, the bulls were in total control. But now, the Spinning Top suggests to us that the bears are fighting back, and the bulls are struggling to continue their bullish trend.

Spinning Tops are also known as reversal candles. The Forex4Noobs community tends to call them indecision candles instead. The term reversal candle is a bit of a misnomer. A Spinning Top does not indicate a definite reversal; it shows a possibility for a reversal.

The color of the body is not extremely important with a Spinning Top. It can suggest which side has slightly more power, though. If it has a white or green body, then the bulls are slightly stronger and vice versa.

Dojis

Strength: Medium

Dojis come in different shapes and sizes, but they are all characterized by having no body. This means the price closed at the same place that the price opened. Most traders subscribe to the ‘close enough is good enough’ philosophy with Dojis. So if the candle still has a body but it is very small, you would still consider the candle a Doji.

A Doji is also a form of indecision and is similar to a Spinning Top. Whenever you see a Doji on your chart, you know there is a strong fight going on between the bulls and bears. No side outright wins this fight, so it closes in the open or at least very near it.

You can see from the image above that a Doji tells a very similar story to a Spinning Top. Pretty much all indecision (reversal) candles tell you a similar story. We will go into greater detail in the next section.

All Dojis indicate indecision and a possible reversal if they form a trend. So, if a Doji forms a bullish trend, it suggests that the bulls have become exhausted and the bears are starting to fight back.

Don’t get too excited, newbie! Candles are not perfect indicators. If you take a trade every time you see a Doji form in a trend, you will not be a profitable trader. You will lose big. Always remember that these candles only indicate the potential for a reversal and are not definitive. To utilize indecision candles effectively, you need to look for confirmation candles and ideally use them with other forms of analysis.