How to avoid false Marubozu signals and setting stop-loss

In most instances, the stop-loss for any trade taken on the basis of a marubozu candlestick should be low or high of the candle. Although marubozu is a strong candlestick pattern, it is wise to avoid extremely small (less than 0.5 percent range) or long candle (over 5 percent range). 

A candle that is extremely small means a reduced trading activity and therefore it may be a false signal. At the same time, a long candle indicates extreme activity and in that case, the stop-loss for the trade will be deep. Because of this, avoid trading on candles that are either too long or too short. Also, take additional confirmation from another pattern or technical analysis before going into a trade.

Basically, when trading marubozu candlesticks,

• Watch for bullish or bearish candlesticks to form
• If bullish, take a long when price breaks above
• Place stop below candlesticks 
• If bearish, take a short when price falls below
• Place a stop above candlestick