How to trade doji candle like a legendhello everyone,
It's been a long that we haven't discussed anything here..
so our today's topic of discussion is how to trade/play with signs similar to Doji/ dragonfly/hanging-man etc
so we know the sign very well. we are referring here to the candlestick pattern, where there is some conflict between buyers & sellers & both keep trying to push/pull each other resulting in forming a candle where we usually see a small body candle having wicks on both sides.
so our next question is how to trade them..
1. Trend: before trading such patterns the trend should be known very well.
2. Once we have got the trend then wait for the small body candle.
3. Once we have got the candle, mark the high/low of the prior candle of the doji candle.
4. Wait for the next candle to form after the formation of doji candle.
5. once, the marked candle high/ low is breached on a closing basis you are all set to go!
examples shared
Example -1
Example-2
Example-3
Example-4
Example-5
Example-6
Example-7
Example-8
Example-9
I have shared multiple examples regarding the same & hope I be able to add some logic also..
Please note time frame must be kept the same while analyzing this setup.
I have shared entry & stop-loss levels only. will share stop loss technique in another post
Thanks for reading!!
Chart Patterns
Bullish MarubozuThe bullish Marubozo candle (open equals low, high equals close) can signal a reversal when it is found at the end of a downtrend because it shows that the sentiment has changed and that the bulls are likely to continue pushing the asset higher.
Take High and Low of Candle . Take Position at Close. Target ( Total Length of Candle/2), SL : Low of Candle.
Risk Reward Ratio: 0.5
Feel free to share your feedback and queries.
If you want to know about your stock please mention in comment.
Note: This is not Paid only for Educational purpose.
Bearish MarubozuHello Friend
The bearish Marubozu candle signifies the complete control of the sellers on the market. Such is the level of the selling pressure that market participants are willing to sell their stocks or assets at every possible price point in the session.
Take High and Low of Candle . Take Position at Close. Target ( Total Length of Candle/2), SL : High of Candle.
Risk Reward Ratio: 0.5
To Learn Follow Us.
A Comprehensive Guide to Descending Triangle.NSE:AMBUJACEM
A reliable bearish trend continuation pattern is known as Descending Triangle.
This post will cover these questions:
1. What is Descending pattern?
2. How to identify Descending Triangle?
3. Pre-requisite of pattern formation.
4. Trading Tactics.
1.What is Descending pattern?
#The descending triangle is a bearish formation that usually forms a continuation pattern during a downtrend.
#Descending triangles also sometimes function as reversal patterns at the end of an up trend, but typically they
are continuation patterns.
#Descending triangles are bearish in nature.
The descending triangle pattern here indicates that the buyers are not as aggressive as the sellers, so the price continues to generate lower highs. This shows that the demand for related security is falling.
2. How to identify Descending Triangle?
(a.) Drawing trendlines.
The bottom horizontal line (support line) is formed by two or more almost equal price lows, while the descending
trend line (resistance line) is formed by two or more declining highs.
(b.) what are Base and apex?
-The base is the vertical line drawn from the flat support trendline to the starting point (Resistance line) of the descending trend.
-The point at which both converging lines meet is called the apex point.
-The breakout should happen around 2/3 size of the whole pattern.
3. Pre-requisite of pattern formation.
(a.) Existence of prior trend.
It is very important to identify the previous trend, an established prior trend should
exist cause it's a continuation pattern. look for the pattern in a downtrend with a forecast of breakdown
from the horizontal line.
(b.)Volume pattern
While the pattern is forming the volume diminishes.
volume declines as the pattern develop and the price swings back and forth between an increasingly narrow range of
lower highs and similar lows.
However, there is a noticeable expansion in volume when the downside break occurs.
(c.) Retracement Moves.
The chances of a retracement move are very less in this pattern.
After the breakout the price can move again towards the breakdown zone to test the validity of the breakout,
on breakout the support is broken and when the price retraces the support becomes resistance and the price start moving
in the breakout direction.
4. Trading Tactics.
The entry will be below the support level and use protective stop loss above important resistance level,
or it can be above 50% of pattern range.
Minimum Take profit is the projected Base Line.
Use position sizing according to your stoploss level.
Like this idea if you find it useful and please share with your friends.
Keep learning,
Happy trading.
Thankyou.
Beginners Guide to Market StructureMarket Structure is the most fundamental aspect of analysing charts, mastering it goes a long way in increasing one's reading of price. It provides us with a narrative with which to look at price. At a glance market structure looks quite simple but when studied in depth it has many nuances & can provide with very valuable information. Market structure is fractal in nature which means that the same pattern of price making higher highs & lower lows or vice versa repeats on all time frames. A bullish market structure on a higher time frame can have a bearish market structure on a lower time frame in its retracement leg. To analyse market structure a Top Down approach is used in which we start out by marking the structure on a higher time frame & then move down to lower time frames repeating the same process till we know where price is presently.
Price Action Trading Using Supply & Demand ZonesSupply and Demand Trading Strategy is a price action strategy that focuses on identifying Institutional Buying & Selling Footprints on a Price Chart. This strategy doesn’t rely on any indicators or oscillators; entire focus is on Price Action.
Owing to the sheer large size of their orders, Institutional buying or selling leaves behind certain footprints which create specific chart patterns.
Price Action Trading Methodology relies on a vast number of Price Patterns, however Supply Demand Trading Methodology focuses only 4 Specific Price Formations. These are classified as Supply & Demand Zones.
Supply & Demand Zones
These zones are areas on a price chart where price in the past had spent very little time and had moved in an explosive manner. Such sharp moves in price is possible only because of Institutional buying or selling. Owing to the structure of these zones, there is a very high likelihood of having unfilled institutional orders in any zone.
Demand Zone Formations
Rally-Base-Rally (RBR)
A Rally- Base- Rally is a price action pattern that represents the formation of a Demand Zone. It is generally found in strong uptrends, indicating a continuation of the uptrend. This type of pattern is characterized by a leg-in candle followed by a basing of candlesticks and then another Big Explosive leg-out candle. If you look at the leg out candle created in the chart below, it shows a strong vertical rally which is very likely due to institutional buying activity.
Drop-Base-Rally (DBR)
A Drop-Base-Rally is a formation that represents another Demand Zone pattern. It is a reversal formation, in which a drop is followed by a sideways price movement and then a strong bullish rally. The leg out candle ideally should be a big explosive move which will depict institutional buying activity.
Supply Zone Formations
Drop-Base-Drop (DBD)
Drop-Base-Drop is a price action pattern that represents a Supply zone. A bearish drop followed by a basing or sideways price movement and then an explosive bearish continuation downwards. It is a continuation pattern which can be used to trade & participate in the down trend.
Rally-Base-Drop (RBD)
Rally-Base -Drop is a price action pattern that represents another supply zone. This formation is characterized by an upward move then a basing of candles and a strong explosive move downwards. Explosive drop after basing indicates the footprint of institutional selling activity. This formation is generally found at the end of an Uptrend signalling a reversal.
Trade Action at Zones
Supply & Demand trading methodology is a retracement strategy. Long trades can be initiated when price retraces to a Demand Zone & Short trades can be initiated when price retraces to a Supply Zone.
However, all zone formations aren’t alike, one must qualify the zones based on factors like how Explosive was the move from the zone, how much time price spent in the zone & most importantly what Reward to Risk Ratios do they zones provide.
These zone formations combined with Trend, Location & Multiple Time Frame Analysis lays down the ground rules for Supply Demand Trading.
Star And BPCL?Hi in this video i explain how to trade breakout stock along with 2 breakout stocks in today's market. And things to take care of while trading breakout.
How to know that a double top or bottom will failHello Everyone as you can see here we have made two lines at the top and two lines at the bottom of the same height and you can see how it worked very well and told you very early that where it could be down and have to be cautious but it doesn't mean that everytime you find something like this you should be cautious at there and ready to exit and take the profit. Hope you get something new to learn if than pls like and follow us thanks bye.
Divergence Cheat Sheet / Types of DivergenceWhat is divergence?
Divergence is a method used in technical analysis when the direction of a technical indicator, usually some form of oscillator ‘diverges’ from the overall price trend. In other words, the indicator starts moving in the opposite direction to the price and the trading oscillator signals a possible trend reversal.
Once divergence appears, there is a higher chance of a reversal, especially if divergence appears on a higher time frame.
Oscillator indicator for divergence patterns is Weis Wave Volume, macd, the RSI, CCI, or stochastic OBV.
Types of divergences
There are 4 types of divergence, which are broadly classified into two categories:
1) Regular or Classic Divergence
2) Hidden Divergence
With each of these two categories, you have a bullish or a bearish divergence. Therefore, the four types of divergences are summarized as:
1) Regular Bullish Divergence
2) Regular Bearish Divergence
3) Hidden Bullish Divergence
4) Hidden Bearish Divergence
Divergence patterns indicate that a reversal is coming soon and becoming more likely but this is not an instant change. The more divergence there is visible, the more likely a reversal does become. Here are some guidelines:
The entry can not be taken on the basis of divergence indicator alone.
It’s best if a trader mixes the divergence indicator pattern with their strategy.
Use Higher time Frames.
Guide to Recession - What Is It? Recession is a scary word for any country An economic recession occurs when the economy shrinks. During recessions, even businesses close their doors. Even an individual can see these things with his own eyes:
1. People lose their jobs
2. Investment lose their value
3. Business suffers losses
Note: The recession is part of an economic cycle.
If you haven't read that article, you can check it below:
What is the Recession?
Two consecutive quarters of back-to-back declines in gross domestic product constitute a recession. The recession is followed by the peak phase. Even if a recession lasts only a few months, the economy will not reach its peak after serval years when it ends.
Effect on supply & Demand - The demand for goods decreased due to expensive prices. Supply will keep increasing, and on the other hand, demand will begin to decline. That causes an "excess of supply" and will lead to falling in prices.
A recession usually lasts for a short period, but it can be painful. Every recession has a different cause, but they have the main reason for the cause of the recession.
What is depression? - A deep recession that persists for a long time eventually leads to depression.
During a recession, the inflation rate goes down.
How to avoid recession?
1. Monetary Policy
- Cut interest rates
- Quantitative easing
- helicopter money
2: Fiscal policy
- Tax Cut
- Higher government spending
3: higher inflation target
4: Financial stability
Unemployment :
We know that companies are healthy in expansion, but there is a saying, "too much of anything can be good for nothing."
During peak,
The company is unable to earn the next marginal dollar.
Companies are taking more risk and debt to reset the growth
Not only companies but investors and debtors also invest in risky assets.
Why does lay-off occur?
After the peak phase, companies are unable to earn the next marginal dollar. Now, the business is no more profitable. CCompaniesstart to reduce their costs to enter into a profitable system. For example - Labour
Now, Companies are working with fewer employees. Fewer employees must work more efficiently. Otherwise, they may be lay-off by the company too. You can imagine the workload and pressure.
You may argue that they should leave the company! Really? Guys, we just discussed the employment rate declines. How will you get a job when there is no job? Now, you get it!
Let's assume the effects of the recession on the common man:
Condition 1: He may be laid off.
Condition 2: Perhaps he will be forced to work longer hours. The company is unable to maintain a positive outlook. Fewer employees are doing more work due to massive lay-off. His wages decline, and he has no disposable income.
As a result, consumption rates are reduced, resulting in lower inflation rates. A slowdown in the economy is caused by lower prices, which decrease profits, resulting in more job cuts.
Four Causes of Recession:
1. Economic Shocks
2. Loss of Consumer
3. High-interest rates
4. Sudden stock market crash
1) Economic shocks - When there is an external or economic shock the country faces. For example, COVID-19,
2) Consumer confidence - Negative perception about the economy and the company from consumers who lack confidence in their spending power. Instead of spending, they will choose to save money. As there is no spending, there is no demand for goods and services. The absence of spending results in a lack of demand for goods and services.
3) High-interest rates - High-interest rates will reduce spending. Loans are expensive, so few people take them out. Consumer spending, auto sales, and the housing market will be affected. There can be no good demand if there is no lending. There will be a decline in production.
4) Sudden stock market crash - evade people's trust in the stock market. As a result, they do recall their money and emotion drives them crazy. It can also be considered a psychological factor. As a result, people will not spend money and GDP will decline.
Consumer Spending:
During the recession, consumers don’t have additional income called disposable income.
Consumer spending parts
-- Durable goods - Lasts for more than one year
-- Non-durable goods - Lasts for less than one year
-- Service - Accounting, legal, massage services, etc
Durable goods surfer during the recession. Non-durable goods are recession-proof because their day-to-day fundamentals are not affected by recessions.
Let's take an example of two stocks,
ABC Food vs ABC car
But, will you stop buying food because of the recession? Will you reduce your consumption of toothpaste, bread, and milk?
The answer is "NO".
Consumers buy the same amount of food in good or bad times, On the other hand, consumers only trade in or trade off their car purchase when they are not only employed but optimistic about the safety of their jobs & confident that they could get a promotion or a high paid job with another employer. And People's disposable income is absorbed during the recession.
Consumer spending is the crucial point to displacing recession.
Auto sales:
As we discussed, few people buy cars during a recession. New car sales count as economic growth. You may have heard about 0% loans. The company facilitates a 0% loan to increase auto sales. Mostly, people repair their cars or buy old cars during the recession.
You may see a boost in the used car market and spare parts selling companies’ sales.
Home sales/housing markets:
I have a question now!
Which is your biggest asset? Most of you will say, my home!
New home sales are part of economic growth. Also, house price impact how wealthy consumer feel. Higher the home prices, the more they feel rich, and vice versa. When home prices are higher, consumers feel they are wealthy and they are willing to spend. But when house price declines, they reduce spending/consumption.
If your biggest asset price declines, you don’t spend and the economy takes a longer time to recover. A higher rate stops increasing the home price because they have to pay more EMI. central bank reduces rates during the recession, and the housing market rate boosts because the loan/EMI is cheap.
Interest rates:
Generally, interest rates decline during a recession. Central banks cut interest rates that’s why loans become cheap.
Benefits of Lower interest rates -
- - Boost in the housing market.
- - Increase sales of durable goods
- - Boost in business investment
- - Bonds and interest rates have an inverse relationship. An economic downturn tends to bring investors to bonds rather than stocks, which can perform well in a recession.
- - During the recession, interest rates are lower and banks highers the criteria for getting loans, so that people can face the abstracts while lending money.
Stock Market:
I want to clarify that, the stock market is not an economy. The economic cycle is lagging behind the market cycle and sentiment cycle. It gives me a chill as a technical analyst and a sad moment as an economics lover. Sometimes it's ahead, and sometimes it's behind. Recession = bear market .
Recession-Proof Industries:
* Consumer staples
* Guilty pleasures
* Utilities
* Healthcare
* Information technology
* Education
I will write about this in the future, but for the time being, let's get back to technical analysis .
Trends- Based on Price MovementUptrend- In an uptrend, both the peaks (tops) and troughs (bottoms) of a stock chart keep increasing successively. So, every day or so, the stock price touches a new high and falls lower than it did previously. Don’t be a mistake; this need not be a lifetime high. It could be the highest the stock touched in the past few days, weeks, or months too. This steady rise in tops and bottoms indicates that the market has a positive sentiment. It expects the stock has a higher chance to appreciate more than depreciate. So, more investors buy, thus driving the price higher. Similarly, each time the stock falls, investors see it as an opportunity to buy even more. They don’t wait for it to fall to the previous level. They buy the stock before that. This arrests the fall.
Sideways- In a sideways trend, a stock doesn’t move notably in either direction during an extended period. Peaks and troughs continue to be constant and there is no significant move to decide whether to buy a stock or not. A sideways trend occurs when the force of demand & supply are nearly equal. A sideways trend is also called a ‘horizontal trend’. In this trend stock trading between two parallel horizontal support and resistance lines with less movement.
Downtrend- A downtrend is a pattern, where a stock is falling constantly. Not only are successive peaks lower, but successive troughs are also lower. This means that investors in the market are convinced that the stock will fall further. Each little rise in the stock’s price is used by investors to sell their existing quota of shares. No further buying takes place at these levels. Such a stock must not be bought, no matter how much its price has fallen especially if you are a short-term investor. If you are a long-term investor, you may want to wait until the stock price falls further.
Volume price analysis & Volume Divergence Cheat sheetWhat makes volume price analysis so crucial?
Volume and price analysis play a major role in trading and investing. Volume analysis helps traders and investors identify whether there is significant interest in a particular security. It also helps to identify potential buying and selling pressure, which can be useful in predicting future price movements. Price analysis helps to identify trends and price patterns, which can be useful in making trading and investing decisions. Volume and price analysis are important tools that can be used to spot trading opportunities and make sound decisions.
2 important things to keep in mind when analysing volume:
1. An increase in volume shows that market players are eager to participate in the developing market activity and want to see the price move higher in an uptrend or lower in a downtrend and are willing to buy higher in an uptrend or sell lower in a downtrend.
2. A drop in volume shows that traders are less interested in seeing prices rise in an uptrend or fall in a downtrend and are more eager to purchase lower in an upswing and sell higher in a downtrend.
Volume Divergence:
It is essential to check whether price and volume patterns are similar when comparing them. In that case, there is a good chance that the trend will continue. A volume divergence occurs when price and volume diverge, which indicates that the underlying trend may not be as strong.
According to my observations, whenever a stock is trading at a high volume, it seems to strongly trend either upward or downward. Here are some important concepts in volume price analysis:
1.When the price of a stock rises with increased volume, it indicates that the bull trend is stronger and buyers are interested, and this is a trend continuation signal.
2. If the stock price rises but volume decreases, it indicates that the bull trend is weakening and may reverse, and buyers are not interested. Price and volume divergence suggest a trend reversal.
3. If the price is falling while the volume is increasing, it indicates that the bearish trend is quite strong and sellers are active.
4. if the price is falling and the volume is decreasing, it indicates that the bearish trend is weakening and will soon reverse, signifying divergence between price and volume and a trend reversal.
IEX is about to complete it's correctionIndian energy exchange is now about to complete it's correction ,it is doing a double correction in major wave IV, fifth to the upside is still due. We can expect correction to complete near 124.85-125.85 and then final V wave target will be 407.
And I'm expecting fifth to be extended because normal projection limit of wave V are 0.382 & 0.618 but as you can see these levels are already under wave III so wave V will be an extended wave.
'RESUME' the trend journey with a 'PAUSE' candleDefinition:- As the name suggests pause candle is the candle formed in between the trend, the change is usually opposite the trend
i.e. if the underlined script is moving in an uptrend then the pause candle will be of negative change and the color will be red and vice-versa.
The pause candle indicates a pause in fresh positions by market participants and an entry chance for players expecting reversals.
Also, it's an opportunity for new players to enter the trend i.e. for those who have missed the initial trend.
Rules or Characteristics of a pause candle:-
1. Prior candles should be aggressive i.e. large candles of the opposite color.
2. It is generally of very small size as compared to the previous one and of the opposite color.
3. Volume is considerably low as compared to previous candles.
4. The RSI level of the spot where this candle originates is usually between the band of 35-75.
The psychology behind the pause candle:- In the market everything has a cause and a reason similar pause candle also conveys its message to the market players.
The generation of the pause candle signifies that there is fatigue among the participants who were driving the stock or are taking some break.
Also, it alerts that new hands have entered into the trend and are trying to offer resistance. Those who are looking for reversals spot this candle and enter into
trade with the hope of reversals, they are generally weaker hands.
Bigger hands those who were the driving force of the trend also want the new player to enter the trend so that they hunt them down and resume the
rally at a lower price.
How to trade pause candle:- Now, as small players, we don't know what goes inside but try to predict the message through the candle. If a pause candle
is formed it doesn't mean the exhaustion of trend or reversal rather indicates a pause in fresh market position.
But, here the aggressive trader enters with trades opposite to the trend. At this stage, two cases arise, note talking for an uptrend:-
-> The next candle's high crosses above the high of the pause candle:
Maximum times this is the case that arises, here the candle after the pause candle crosses the high of the pause candle now what does this indicate?
The indication is that the trend drivers or bigger hands are active again and those who have taken a position against the trend are trapped and will
try to escape hence, the move will be much sharper as compared to the initial trend.
How to benefit in this case? When you spot such a pause candle that is formed after a continuous trend set it to alert candle and wait for the next candle
to form. If the next candle crosses the high of the pause candle take the position along the trend and your stop would be the low of the pause candle which is generally
too small and ride the sharper trend which is usually equal to the initial one.
-> The next candle's low crosses below the low of the pause candle:
Though not arises usually sometimes it does occur, here the candle after the pause candle crosses the high of the pause candle now what does this
indicate?
The indication is that the trend drivers or bigger hands are in the backseat and are not seeing further upside also there is a chance that they can book
profits at this level.
How to benefit in this case? When you spot such a pause candle that is formed after a continuous trend set it to alert candle and wait for the next candle
to form. If the next candle crosses below the low of the pause candle take the position against the trend and your stop would be the high of the pause candle which is generally
too small and ride the reversal trend which is usually half of the initial one. This case comes under the reversal candlestick patterns on which earlier an article was published
by me but here we are concerned about a pause candle after which rally resumes.
Here, is an example of a different scenario though it doesn't match the above said cases but still the background is of a pause candle.
HIL was trading above a rising trendline and suddenly breakdown the line after which we see continue 2-3 red candles following the candles a pause candle is
formed with all the above-discussed properties but rather than showing the sharp downfall it again forms a pause candle but note stop loss is not triggered.
Here 3-4 pause candles are formed and finally it breakdown all the low with a big red candle and then afterward we saw a huge, sharp downfall.
The motive to explain the above example was that though sometimes we don't see rapid action but if your stop is not triggered and the candles are with
the low volume then you can assure that a sharp move is pending and sooner or later it will happen.
Note: The only constraint is to identify the correct pause candle for which you can refer to the above-said rules are very important. Sometimes the candle after the pause candle
crosses both the high and low of the pause candle in that circumstance you have to check the color of the candle, for uptrend it should be green then you can
take the position else if it's red then wait for the next candle, and vice-versa for the downtrend.
NIFTY MIDCAP DIVERGENCENSE:NIFTY NSE:CNXMIDCAP NSE:CNXSMALLCAP Diverging for couple of days. Ideally the broad market shall start picking up.
While Nifty is getting selling pressure near the Highs today. Midcap and Smallcap Index getting buying near support zone.
Midcap and Smallcap shall start picking up from here on.
The Broader Market Indices must converge with the Mainstream Index Nifty 50.
Inter-market Divergence is not sign of healthy trend. Longer the time the divergence prevails it leads to trend reversal.
As Nifty and Bank Nifty are near the Highs along with other Indices. Broader Market Indices and stocks shall pick up the trend now.
#crudeEducational video as how to identify a double top pattern.
A double top is a bearish technical reversal pattern which is not so easy to spot as one needs a confirmation of a break down point.
Question comes, How to identify the target of Double top pattern!
After the confirmation of the pattern, your minimum target is equal to the size of the formation. In other words, when a stock breaks out of a double top formation, the price target is the range of the formation added to the breakout level.
How to compare relative performance between stocks and indices ?You can compare the relative performance by using the compare option on charts. The compare function tool is used to compare the market movements of two or more different symbols simultaneously. Popular use for a comparison chart is comparing two companies within the same sector.
Click on the Compare or Add symbol button (displayed as plus sign) on the toolbar along the top of the chart, search and add the indices/stock which you would like to compare. You will see a representation of the percentage comparison from the beginning price point to the current price.
To delete the comparison line right-click on it and click on ‘Remove’.
This example is comparison chart of Nifty Bank and Nifty PSU Bank.
After 12 years i.e. 1st November, 2010 - 7th November, 2022:
Nifty Bank - 214% Positive
Nifty PSU Bank - 31% Negative
Nifty PSU Bank has given breakout.
I hope this little information on comparing indices/stocks is useful. Please feel free to write any additional information in the comments section below.
Thanks and happy learning/trading.
Disclaimer: This is for demonstration and educational purpose only. This is not buying or selling recommendations. I am not SEBI registered. Please consult your financial advisor before taking any trade.
📚Learn More💰Earn More - Inverse Head and Shoulders in EURCAD📚 LEARN MORE
💰 EARN MORE
Inverse Head and Shoulders Definition:
A head and shoulders pattern is also a trend reversal formation.
It is formed by a Valley (left shoulder), followed by a Lower Valley (head), and then another Higher Valley (right shoulder).
A “Neckline” is drawn by connecting the highest points of the two Peaks. Neckline resistance does not need to be strictly horizontal.
This illustrates that the downward trend is coming to an end.
When a Head and Shoulders formation is seen in a downtrend, it signifies a major reversal.
The pattern is confirmed once the price breaches the neckline resistance.
In this example, we can easily see the head and shoulders pattern.
How to Trade the Head and Shoulders Pattern:
ENTRY:
we put an entry order above the neckline.
TARGET:
We can also calculate a target by measuring the lowest point of the head to the neckline.
This distance is approximately how far the price will move after it breaks the neckline.
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'LEAP' the 'GAP' with the knowledge !!!Definition of a Gap:-
- Gap is a space left behind by a script in its price chart.
- It is the area of discontinuity price in the respective script.
- The reason may be anything but generally it occurs due to sudden changes in the sentiment of the market due to some events or news related to the particular script.
Types of Gaps:-
1. Common Gaps -
These gaps are not so certain to be considered. They are visible casually and almost every day as we have seen Nifty gaps up or down daily without any event or news. They have a high tendency to be filled (price generally comes back to that gap).
2. Breakaway Gaps -
A much more significant gap indicates the start of a new trend. Often seen at resistance or support points for example a stock is trading in a small band bounded with resistance and support and suddenly breaks the band with a gap on either side, now this gap indicates the start of the new trend which is according to the level which is broken.
Higher volumes at the gap point further confirm the move.
3. Runaway Gaps -
Runaway gaps are quite similar to the above one but, the major difference between them is runaway gaps are seen in the middle of the trend and breakaway gaps are seen before the trend. This gap indicates the strength of the trend and confirms the buying/selling interest in the stock.
This gap generally occurs in aggressive buying/selling interest due to news or events.
4. Exhaustion Gaps -
These gaps occur at the stage of exhaustion of the trend i.e. the trend is very close to finishing. If spotted correctly it could provide you exit at a very sweet spot. It is a typical sign of trend reversal. It generally occurs after the spike in the price of the stock.
This indicates that the market players are not interested to take the position at such a high/low price. The volumes would be unusual in this case.
My Observation: Breakaway and Exhaustion gaps can be spotted with help of RSI, if you RSI at choppy levels i.e. 40-60, and a significant gap is formed it is generally a breakaway gap. And if RSI is at extreme levels i.e. 15 or 85 and a significant gap is formed it is usually an exhaustion gap.
Trend is your friend & the fallacy of catching reversalsHere in this video, I discuss with you a losing trade which I took today and what we can learn from it.
I also share with you important things regarding gaps , and how a beginner is always trapped in reversals and why it's profitable to stay on the current side of the trend.
Follow @piyushrawtani if you find this video helpful .
Rounding Top patternHey everyone! 👋
Last week, we wrote about the "Rounding bottom" pattern. If you missed last week’s post, you can catch up here:
Today we are going to cover the "Rounding top" pattern along with a few examples.
Please remember this is an educational post to help all of our members better understand concepts used in trading or investing. This in no way promotes a particular style of trading!
The post will shed some light on the following topics:
➡ Basics and identification of the pattern
➡ Components
➡ Important aspects
What is a Rounding top pattern?
• A rounding bottom is a bearish reversal pattern that resembles the shape of the inverted "U".
• Rounding top pattern occur at the end of long uptrends and indicate a potential reversal.
• The pattern is also referred to as an inverted saucer due to its resemblance to an inverted saucer.
• Although, the volume and price move in sync but in practice, this can vary widely.
• When the price moves down from the neckline, it indicates weakness and suggests that the stock may begin a new downtrend.
Components of a Cup and Handle pattern:
A rounding bottom pattern can be divided into three main parts.
• Advance
• Formation of the base
• Decline
Important aspects:
1. Prior Trend: Since it is a bearish reversal pattern, the prior trend must be an uptrend. The top of a rounding bottom should ideally mark a new high or reaction high. The stock may trade sideways or flat for a long duration before the formation of the pattern.
2. Advance: The advance that leads to the formation of the high, can take a variety of forms. Sometimes, the up move has many whipsaws while other times, the stock may just trade flat.
3. High: In general, the pattern resembles an inverted "U" shaped top. However, it can also resemble an inverted "V" or an "M," but the high should not be too sharp. In addition to this, there is always a possibility of a new high due to a buying climax.
4. Decline: In general, the formation of the right half of the pattern should take about the same amount of time as the left half. This means that the down move of the highs should take about the same time as the up move. Moreover, the decline shouldn't be too sharp, or else there is a possibility of a bear trap.
5. Breakdown: The pattern is confirmed once the price breaks and sustains below the neckline. The price may return to the neckline to test for the supply before continuing downwards.
6. Volume: In general, the volume levels should be
- High during the up move
- Low during the formation of the base
- Rising during the down move
However, these are only guidelines and should not necessarily be taken at face value.
7. Target: Using the measurement objective, the target comes out to be equal to the depth of the base. It can be measured by calculating the distance between the bottom of the base and the neckline.
8. Stop-loss: Ideally, the stop loss is placed at the highest point of the base. But if the price oscillated up and down a number of times near the neckline, the stop-loss can also be placed above the most recent swing high.
Exhibit: Rounding top pattern with a failed breakout
Thanks for reading! As we mentioned before, this isn't trading advice, but rather information about a tool that many traders use. Hope this was helpful!
See you all next week. 🙂
– Team TradingView
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Not every swing high is a Fake Breakout !Good morning traders.
If you have entered long at the high of the green candle as shown in the chart you would have thrown out of the market by taking your SL and kept you thinking Oh! It must be a Fake Breakout.
-->We all know that market structure is combination of waves.
-->These waves will follow Primary trend, Secondary trend and all the minor trends on the way.
-->In the Bullish momentum - Price will form Higher highs and higher lows.
-->In the Bearish momentum price will form Lower highs and lower lows.
-->If we observe the recent path the market is following, it has formed higher highs and higher lows.(Bullish If i have to say)
-->Before Friday the recent swing low the market has formed at 17637 level.
About the fake breakout - The price level it broke has hardly respected once. If the price has respected that level 2-3 times and then if it breaks it and comes back into range then we may call it a fake breakout or if it has broken the previous swing low then we can consider it as a fake breakout.
Since none of the above mentioned has happened its just be a another swing high and market is still in up move.
Above concept is done.
Now on Friday market has formed a new swing high 17830 level and major swing low is 17637 levels. If price can go past 17835 on Monday then swing low will be shifted to 17723 levels.
Then why I post shorting trades in the Ideas?
I try to plan my trades at the extremes (at swing lows and swing highs).
There is no point in going long at a swing high unless our stop loss is huge.
That is why in a bull structure I plan to buy at swing lows or I plan to short at swing highs both of them will have small SL and High rewards. Do you agree with me in this aspect?
If we observe our recent market openings, it has opened with gap ups. So I don't want to risk huge SL for limited intraday up move that's why I plan contra trades.
On Monday I will be cautions because SGX Nifty is showing 18000 + and it will make it as a good supply zone.
I will observe the price action in smaller time frames and plan my trade.
The future market direction will be decided at these levels.
--> What we need to observe?
--> Whether the market is accumulating at this level or Distributing at this level.
I have written so much in this ,I will write more based on the response I get from this. I know few of these will be confusing, do let me know If you want to know about particular concepts then I will have Idea about what I should be writing for.
*SECURING THE TRADE AND PROTECTING THE CAPITAL SHOULD BE YOUR FIRST PRIORITY.
*NOT A SUGGESTION VIEWS ARE FOR EDUCATIONAL PURPOSES.
If you think video analysis will be good for better understanding & If you want me to do video analysis pls give a boost. Your boost and follow is my MOTIVATION.
