Technical Analysis · Field Notebook · Page 3 of set
Chapters 5 and 6 — Single Candlestick Patterns, Parts 1 and 2. One candle that hands you a full trade (Marubozu, with its stop-loss and risk-taker vs risk-averse entries), and two that hand you a warning instead (Spinning Top and Doji — indecision).
Notebook Summary · liftable, derivable from the notes below
| Bullish Marubozu | Bearish Marubozu | |
|---|---|---|
| Structure | Open = Low, High = Close | Open = High, Close = Low |
| Signal | go long | go short |
| Entry | ~ close | ~ close |
| Stop-loss | Low of candle | High of candle |
Some single candles carry a full, tradeable message on their own — one day's action is enough to act. Two things gate every such trade: the candle's shape and its length. A very short candle is subdued activity with no clear direction; a very long one is violent activity where the stop-loss sits painfully far away. The patterns worth trading live between those extremes.
Marubozu means "bald" in Japanese — a candle with no upper or lower shadow, just a real body. One side won the entire day, at every price. It is the only pattern that ignores rule 3 (look for a prior trend): a Marubozu means the same thing wherever it appears, because the day's action itself declares the new sentiment.
Bullish Marubozu — Open = Low and High = Close. Buyers took the stock at every price, closing it near the high. Look to buy near the close; the low is your stop-loss.
Bearish Marubozu — Open = High and Close = Low. Sellers hit every price, closing near the low. Look to short near the close; the high is your stop-loss.
Real candles rarely match the textbook exactly. The module's ACC Limited example reads O 971.8, H 1030.2, L 970.1, C 1028.4 — the high-to-close gap is 1.8, just 0.17% of the high. That is rule 2 in action: be flexible, quantify and verify. A wisp of shadow is fine; a large one is not a Marubozu.
Same pattern, two entry styles set by your appetite for risk.
Enters the same day. Around 3:20 PM, confirm the candle is forming: for a bullish Marubozu, check CMP ≈ high and open ≈ low. If it holds, buy near the close. Entry is close to the ideal price, so the stop is tight.
Enters the next day, and only if that day is bullish (rule 1). Buys near that day's close. The upside is double confirmation; the cost is a worse entry price and a deeper stop-loss.
Every Marubozu ships with its own stop: the low for a bullish trade, the high for a bearish one. If price breaches it, exit — the pattern has failed. Booking a loss is part of the game; even seasoned traders do it. The value of candlesticks is that losses are never open-ended: there is always a pre-set price to leave.
Sometimes you exit at the stop and the stock reverses back your way right after. That stings, but it is also part of the game and cannot be helped. Once a trade is on, hold it until the target hits or the stop breaks — do not improvise in between, or the trade tends to go bust.
In one breath: a Marubozu is one side owning the whole day — buy/sell near the close, stop at the far end, enter same-day if bold or next-day if cautious, and never trade the abnormally short or long ones.
The spinning top is the opposite of a Marubozu. It gives no entry or exit — instead it reports the mood of the market. Two features define it: a small real body (open and close nearly equal, colour irrelevant) and upper and lower shadows of roughly equal length.
Read the shadows and the story emerges. The upper shadow shows the bulls pushed price up — but failed, or the body would be a long blue candle. The lower shadow shows the bears pushed price down — and failed too, or the body would be a long red one. Both sides tried; neither could hold ground. The small body is the proof: indecision.
Alone, a spinning top means only "indecision." Placed against the trend, it turns into a real signal.
In a downtrend the bears have been in control. A spinning top says they paused, and the bulls tried (unsuccessfully) to arrest the fall. Two outcomes are now roughly equally likely: another leg down, or a reversal up. With no clarity, prepare for both. If you were waiting to go long, test the water with half your intended size — 250 shares of an intended 500. If price turns up, average up; if it keeps falling, exit with a loss on only half the position.
Mirror image. Bulls had been in control, but the spinning top means they no longer fully are — the bears got a foothold. Again two equal-probability outcomes: the bulls are pausing before another leg up, or they are fatigued and a correction looms. If you already hold the stock, book profits on half (250 of 500). If the market slides, you sold high on half and can exit the rest; if it rallies on, you are still 50% invested to ride it.
A Doji is a spinning top taken to its limit: open equals close, so there is virtually no real body at all — just a cross of shadows, which can be any length. By rule 2, a wafer-thin body still counts as a Doji; the colour is meaningless because open and close sit on top of each other.
Everything you learned about the spinning top applies to the Doji — same indecision, same stance. In practice Dojis and spinning tops often appear in a cluster, and a run of them screams uncertainty before the next big move (a Doji after a healthy uptrend often precedes a correction; in a downtrend, indecision before the next leg).
In one breath: the spinning top and Doji both mean indecision — neither side won — so against a trend they signal an equally likely turn or continuation, and the safe play is half size until direction shows.
Because the Marubozu is the trend-changing event. One side bought or sold at every single price all day — that is such a strong statement of new sentiment that what came before it barely matters. The other patterns are subtler and need the context of a prior trend to reverse.
For now, the pattern only defines your entry and stop-loss; you protect the downside and let the trade run. The module supplies targets later, using support and resistance levels. Until then, trailing your stop or booking at a sensible round level is the practical stand-in — but the "official" method comes in a later chapter.
Risk averse. Entering the next day, only on a confirming candle, filters out failed patterns entirely (the module's loss examples were saved this way). You pay for it with a worse entry and deeper stop, but as a beginner the confirmation is worth more than the few points you give up.
Correct — because the body is tiny, open and close are almost the same price, so "up" vs "down" is noise. What carries the meaning is the shape: small body, long shadows on both sides. A red spinning top and a blue one say the same thing: nobody won.
You act small, not fully. The half-position keeps you positioned for the move that is certainly coming while capping your loss if it goes the wrong way. Doing nothing is also a valid choice; the point is to never take full risk on genuine 50/50 uncertainty.
There is no fixed number — this is exactly where rule 2 lives. Pick a threshold (say, body under some small percent of the day's range) and apply it consistently. The spirit: open and close were effectively the same, so no side established control.
Two only. Both run in your head or a scratch file — no software, no invented tools.
Here is a candle (numbers modelled on the module's own examples; treat as one day's OHLC):
O 960.20 H 988.60 L 959.85 C 988.50Step 1 — test the shape. Bullish Marubozu wants Open ≈ Low and High ≈ Close. Open 960.20 vs Low 959.85 → gap 0.35. High 988.60 vs Close 988.50 → gap 0.10. Both wisps are tiny.
Step 2 — flexibility check (rule 2). As a % of price, 0.35 and 0.10 on a ~₹988 stock are well under a fraction of a percent — comfortably inside "quantify and verify." So the small shadows are acceptable; it qualifies as a bullish Marubozu.
Step 3 — direction and entry. Bullish → go long, buy near the close → entry ≈ 988.5.
Step 4 — stop-loss. For a bullish Marubozu the stop is the candle's low → 959.85. No target from the pattern.
shape: O~L (0.35 gap), H~C (0.10 gap) -> BULLISH MARUBOZU
rule 2: gaps << 1% of price -> acceptable shadows
trade: BUY (long) near close -> entry ~ 988.50
stop : low of candle -> 959.85
target: none from the pattern (set later via S/R)A new trader reports back on Chapters 5–6. Four statements are wrong. Find each and correct it.
A. "It's a bullish Marubozu, so I'll set my stop-loss at its high."
B. "This Marubozu is in an uptrend, so I first need a prior downtrend to trade it."
C. "A green spinning top is bullish, a red one is bearish."
D. "Spinning tops are a coin flip, so I'll go all-in on my full 500 shares."A — wrong. For a bullish Marubozu the stop is the low; the high is the entry area. The high-as-stop rule is for a bearish Marubozu. Fix: bullish stop = low of the candle.
B — wrong. The Marubozu is the one pattern that ignores prior trend — it trades the same in any context. Fix: no prior downtrend needed; act on the Marubozu itself.
C — wrong. A spinning top's colour is irrelevant because open and close are nearly equal. Both colours mean the same thing: indecision. Fix: read the shape (small body, equal shadows), not the colour.
D — wrong. Genuine 50/50 uncertainty is exactly when you reduce size. Fix: take a half position (250 of 500) and wait for direction before adding or exiting.
A wrong -> bullish Marubozu stop = LOW (high = entry)
B wrong -> Marubozu ignores prior trend; trade it as-is
C wrong -> spinning top colour irrelevant = indecision
D wrong -> 50/50 = HALF size, not all-in