The Bearish Marubozu Candlestick Pattern is used by Manual Traders, but does it actually deliver profits?

Bearish Marubozu is a popular Candlestick Pattern and it is taught by educators and featured on websites providing knowledge to those with the patience to learn.  This is another article in a series of articles that cover popular Technical Analysis methods and are backtested to see how they handle different scenarios.  Often, Technical Analysis strategies would entail more than just one criteria, but in this case the Bearish Marubozu Candlestick Pattern Family (Black Marubozu Candlestick, Opening Marubozu Candlestick, Closing Marubozu Candlestick) will be a part of it after the results from the Bullish Marubozu Candlestick Pattern yielded a very poor sample.

How the Bearish Marubozu Candlestick Pattern will be tested.

About the Modeling Quality

In MetaTrader 4, there is the Strategy Tester and it backtests trades that have taken place in the past.  Is it the most accurate method of backtesting?  No, unless you are using "real ticks", which may still fall out of alignment with the particular broker and it becomes a complete mess.  So the modeling quality rates with what is considered a 'tick' in MT4 is going to be 90%, which should provide a good enough simulation as long as the backtested strategy is not scalping or too sensitive to news events where fluctuations within a minute can create whipsaws.  It is generally a good enough modeling quality rate for just about anything else.

Multiple Results with Different Time Frames, Trading Styles and Instruments

The following Time Frames will be used:

  • 5 Minute
  • 1 Hour
  • 4 Hour
  • 1 Day

Styles featured will include:

  • 140 pip Take Profit and Stop Loss of 100 pips
  • 140 pip Take Profit with a 20 pip Stop Loss
  • 140 pip Take Profit with a 20 pip Stop Loss and a 40 pip Trailing Stop
  • 140 pip Take Profit with a 60 pip Stop Loss
  • 80 pip Take Profit and Stop Loss of 100 pips
  • 80 pip Take Profit with a 20 pip Stop Loss
  • 80 pip Take Profit with a 20 pip Stop Loss and a 30 pip Trailing Stop
  • 80 pip Take Profit with a 60 pip Stop Loss
  • 20 pip Take Profit and Stop Loss of 100 pips
  • 20 pip Take Profit with a 20 pip Stop Loss
  • 20 pip Take Profit with a 20 pip Stop Loss and a 15 pip Trailing Stop
  • 20 pip Take Profit with a 60 pip Stop Loss

Used as an all-encompassing pattern for testing purposes.

Instruments Used will Include:

  • EURUSD
  • USDJPY

What range of time will be the Bearish Marubozu Candlestick Pattern be tested?

The Bearish Marubozu Candlestick Pattern will be tested during the period of June 1, 2015 to May 31, 2018.  Is it necessarily an adequate time frame to test?  Possibly not, but there are a wide array of market environments.

What is The Bearish Marubozu Candlestick Pattern? 

After the results of the Bullish Marubozu Candlestick Pattern (sample sizes were too small), this test will include Opening Bearish Marubozu Candlesticks, Closing Bearish Marubozu Candlesticks, and Black Marubozu Candlesticks.

Opening Bearish Marubozu Candlesticks are tall Black Marubozu Candlesticks with the main exception being that only the High is equivalent is to the Open.

Closing Bearish Marubozu Candlesticks are tall Black Marubozu Candlesticks with the main exception being that the Low is equivalent to the Close.

Black Marubozu Candlesticks are tall Candlesticks with the High and Low equivalent to the Open and Close respectively.

bearish marubozu candlestick

EURUSD - 5 Minutes

140 pip Take Profit and Stop Loss of 100 pips

140 pip Take Profit with a 20 pip Stop Loss

140 pip Take Profit with a 60 pip Stop Loss and a 40 pip Trailing Stop

140 pip Take Profit with a 60 pip Stop Loss

80 pip Take Profit and Stop Loss of 100 pips

80 pip Take Profit with a 20 pip Stop Loss

80 pip Take Profit with a 40 pip Stop Loss and a 30 pip Trailing Stop

80 pip Take Profit with a 60 pip Stop Loss

20 pip Take Profit and Stop Loss of 100 pips

20 pip Take Profit with a 20 pip Stop Loss

20 pip Take Profit with a 20 pip Stop Loss and a 10 pip Trailing Stop

20 pip Take Profit with a 60 pip Stop Loss

EURUSD - 1 Hour, 4 Hour, Daily

Not enough trades to form a proper sample size.  3-6 trades for each scenario provides nothing to glean from the Bearish Marubozu Candlestick family on a 1 Hour Chart.  No trades for any scenario on a 4 Hour or Daily Chart.

USDJPY - 5 Minutes

140 pip Take Profit and Stop Loss of 100 pips

140 pip Take Profit with a 20 pip Stop Loss

140 pip Take Profit with a 60 pip Stop Loss and a 40 pip Trailing Stop

140 pip Take Profit with a 60 pip Stop Loss

80 pip Take Profit and Stop Loss of 100 pips

80 pip Take Profit with a 20 pip Stop Loss

80 pip Take Profit with a 40 pip Stop Loss and a 30 pip Trailing Stop

80 pip Take Profit with a 60 pip Stop Loss

20 pip Take Profit and Stop Loss of 100 pips

20 pip Take Profit with a 20 pip Stop Loss

20 pip Take Profit with a 20 pip Stop Loss and a 10 pip Trailing Stop

20 pip Take Profit with a 60 pip Stop Loss

USDJPY - 1 Hour, 4 Hour, Daily

Not enough trades to form a proper sample size.  No trades for each scenario provides nothing to glean from the Bearish Marubozu Candlestick family on a 1 Hour Chart, 4 Hour Chart or Daily Chart.

Conclusions and Takeaways

The Bearish Marubozu Candlestick Pattern Family will produce trading opportunities on a shorter time frame.  Black Marubozu Candlesticks, Opening Marubozu Candlesticks, and Closing Marubozu Candlesticks make enough appearances on a 5 Minute Chart to make it worth pursuing to a very limited extent.  The best approach with this the Bearish Marubozu Candle is to do the following:

  1. Trade more than one currency.
  2. Automate or else you miss it.
  3. Create a pair of sub-accounts as you may wish to approach EURUSD and USDJPY differently.
  4. EURUSD:  Smaller Take Profit points with lower reward to risk ratio may best.
  5. USDJPY:  Larger Take Profit points and reward to risk ratio above 1 worked.  The most moderate scenario worked best for USDJPY, 80 pip Take Profit with a 60 pip Stop Loss.

More updates will be made to this article to reflect other currency pairs, but it seems that both Bullish and Bearish Marubozu Candlestick Pattern Family members are all more prevalent on smaller time frame charts.

Is this the most accurate candlestick pattern?  No.  However, it is not something to completely discount altogether.