How to identify Breakout - Price ActionFor the purpose of demonstrating how one can identify a trend change using Support - Resistance and Price Action, I have taken the daily chart of IEX. I had also identified and posted about it before the recent rally.
The first step is to establish a clear support and resistance line. In case of a breakout, I like to keep my target at around the same price difference range between old support and old resistance after it bounces from the resistance.
The crucial thing lies in identifying the candlestick pattern around the support - resistance. In our case, when the price first hit the resistance, it formed a clear Bearish Engulfing and the next time, it formed a healthy dark cloud cover followed by an engulfing. These are clear red flags when a trader should start booking profits.
Similair bullish patterns can be identified at support region like the Morning Star pattern as in the above chart.
In order for the price to give a breakout, Volume & Momentum play a very crucial role. A rising volume with price rise builds momentum, and increases the chances of a breakout. Another important observation is to see HOW STRONG did the PRICE BOUNCE from the support. Long wicks, very less or almost no consolidation around the support and a bounce back from an area above the support instead of retracing all the way back to the support are clear indications of trend reversal from Bearish to Bullish.
Also notice how the candle formed a Morning Star during the bounce, this further strengthens our conviction that the trend is changing.
Observe how the red candles grow smaller and smaller as they approach support, this indicates weakening of the bearish momentum.
Also the Resistance was approached in a very aggressive foray this time with clear long green candles indicating a very strong pent up demand.
I hope this analysis provides some insight into how the Price action gives an early indication of the future price movement.
Thanks for reading! Keep Learning :)
Educational
Identifying Set Ups - Price Action + MACD + EMAToggling between numerous stocks can be tiresome. Using a strategic method to identify potential set ups can save your time and deliver amazing results!
In the above chart,
I first noticed that the price was around its support. It can be confirmed by seeing the previous price swings that the support is well tested.
Next I look at the MACD to confirm if the divergence between the Signal Line and MACD line is decreasing to make sure if it is the right time to enter or not.
Usually these 2 steps take hardly a few seconds and I can form a preliminary idea about the position.
Once these two points are confirmed,
I move forward to confirm if the EMA 9,21 (which can been seen has worked out beautifully for this stock in the short time frames like 7-10 days) is actually looking bullish to enter right now. If the EMA is not already crossed, or about to cross, I can drop the share here. In this case, the EMA lines are very close and the chances of a bullish cross are good enough.
Next, I confirm my hunch by looking at the Volume data and see if the increase is price will actually be sustained by smart money flow, or fall down by retail trading pressures. Increasing volume with price increase helps to get conviction for a long position.
Finally, I check the RSI levels and I monitor them very closely to see if there is any Bullish or Hiden divergence and see how strong they might be. I also like to draw a vertical line at the key level from which RSI always bounces or retracts. Personally I prefer RSI levels between 50 and 60, after a recovery from 30-40. It just implies that the bulls are gaining control again and still leaves out plenty of room for entering a trade and making profits before it hits the overbought region.
After I am satisfied with the Technicals, the last thing remains is to check if there are any major news, events or rumours about the share and the recent EPS growth of the share. This doesnt affect a lot in the short run, but doing due diligence never hurts. It is how I identified IEX, HUL and TCS just right before they shot up.
Thanks for reading!
Keep Learning :)
Trade with Conviction - Price Action + MACD + EMAIn the chart above, we can see that the trend resistance and support lines are well established, from where prices have bounced and retreated from on multiple occasions.
After a decent recent pullback, we find the Exponential Moving Averages looking up again, almost ready for a Bull Cross.
I personally prefer 9,21 Days EMI for trading in a short time frame of 7-10 days. It can be easily seen that on numerous attempts, price has kept these EMA levels.
MACD and RSI play an important role to confirm the hunch from the preliminary screening off the Support & Resistance and EMA lines.
I try to watch out for where the RSI levels are moving toward and the key levels from where it bounces. Personally I find the 50-60 region safer, after rising from a lower level, as it not just implies that bulls are back in control, but it also leaves decent room for upside movement and gain from the share.
MACD helps to now time this entry right. If its clear that the divergence levels are reducing and the lines are closing in for a Bull Cross, I can form a decent opinion if I want to wait for the cross or enter while the divergence is still decreasing. Most of the time, I enter right before it is all set for a Bull cross. It helps me to get an early entry and close my position in a day or two if the MACD cross is rejected, this keeps the losses to a minimum.
Finally, Volume surge serves to further strengthen the view that the increase in price is accompanied by smart money flowing in, and now you know that this price increase will have a sustained increase with momentum. EPS and Financial position of the company seem good, and that checks out all the major points for a long position.
To summarise, watch out for EMA and Resistance Support levels to screen stocks preiminarily. Out of the selected bunch, review the RSI and MACD levels. Increasing Volume with Price increase always helps. Check the EPS growth at least, and set the targets and stop losses as per your risk appetite.
Thanks for reading :)
Price Action with RSI and MACD - Trade with ConvictionFor the purpose of explaining the combined use of these indicators,
I have taken the example of TCS - TATA CONSULTANCY SERVICES, which recently gave a clear breakout.
Know your Lines! - By joining the recent highs and recent lows of a share price, we can identify if the share has a well tested Support & Resistance or not. I prefer those with a clear defined pattern simply because all traders are looking out for these levels and there is a pretty good chance they will hold good, if not, you will know its time to exit.
Catch the Support! - The key to any exchange profit is BUYING AT A LOW and SELLING AT A HIGH. While it might sound obvious, majority of people lose out because they FOMO in at a HIGH and then Sell at a Low to cut losses. Classic Failure Strategy. It is pretty normal if a stock is all abuzz in the market, but do not enter it based on the buzz, check if its already too late or not. If at all, buy at a pullback at Fibonacci levels 0.68 or 0.50 ( Higher Success Rate levels )
One Eye on the MACD! - What makes an Indicator exceptional is the number of people using it. RSI, MACD, STOCH are like the biblical indicators which you certainly want to check before taking a position. When the blue line of MACD cuts the signal line from below, and the price is around its support, chances are you will not repent going long.
RSI is your best friend! - RSI is very crucial to avoid buying at a high. When it is above 70( I prefer 80 ), it is better to wait for a pullback. In a bullish market, it usually bounces back from 50, but again it differs from share to share. Identify its key support and a bounce from that level around the price support when MACD is bullish, means its a good set up for a Long Position.
I also prefer to watch out for RSI and MACD divergence to see the momentum of the price. If the RSI or MACD is making lower HIGHS while the Share Price is making Higher HIGHS, it means the momentum is weaking and one must watchout for a nice pullback.
To summarise, Identify the Support and Resistance, Check if MACD has turned bullish when the pricce has pulled back to its support, Check if RSI has bounced from its support and preferably above 50 ( It means bulls are in control ). If everything checks out, it should be an ideal long setup.
I hope you take back something from the explanation, This strategy has almost everytime worked for me. I hope it does for you too.
Keep Learning :)
Inverted Hammer in Monthly Chart** The shooting star candlesticks pattern, also known as the Pinbar (or bearish pinbar/inverted Hammer) by some, is one of the most popular candlestick patterns among price action traders. It was the first candlestick signal that I relied on, and one that I still use today, although I trade it much differently than most other price action traders.
# What is a Shooting Star Candlestick Pattern?
*The shooting star consists of a long upper wick (shadow) that is, at least, twice the size of the
real body. It should have a relatively small lower wick or none at all. Its real body can be bearish or bullish (see in the chart) and is usually relatively small in comparison to previous candlesticks.
*The shooting star candlestick pattern, like all the other candlestick entry signals, must be traded
within the context of the market. In other words, a true shooting star candlestick signal can only
come after an uptrend in price (see the chart).
Note: Never trade a candlestick formation that looks like a shooting star from consolidating price
action or a tight ranging market.
A shooting star candlestick pattern is a strong reversal signal, and unlike most other price action
signals, this one does not need another candle for confirmation, according to the standard trading
technique.
However, the proprietary filters that I personally use to qualify a good shooting star are quite
different, so let’s go over those now.
#What Makes a Good Shooting Star (Pinbar/Inverted Hammer) Pattern?
** Some of the filters that I use to qualify a good shooting star make taking the entry completely
different than the standard method. In my experience, these filters have drastically improved my
strike rate with the shooting star candlestick pattern.
# Confirmation Close
The first filter that I want to talk about is the confirmation close. This is probably the most important filter that I use on the shooting star, and it’s also the filter that changes the way you must take your entry with this pattern. Basically, as a sign that the uptrend is actually ending, after the shooting star signal, you want to see a bearish candlestick that closes below the real body of the previous candlestick and You can add in your strategy for more accuracy.
** Historically in Nifty 50 when in monthly chart Pinbar/shooting star/inverted hammer appears at top that sign of bearish trend .(see in the chart)
Kindly Let me know if you have any questions.
Thank You
TCS EDUCATIONAL CHART COMBINING MARKET SRTUCTURE & ACCUMULATIONtoday we'll discuss about market structure and accumulation range bound market
the price started a bearish trend by making lower highs
then the price sustained to go any lower
the market then came in range bound structure
and with breakout we saw huge volumes
now for the future analysis-
=== the strength of impulse waves is declining so we might see some consolidation/distribution phase
SORRY FOR THE VOICE _/\_
if u have any doubts feel free to ask in comments section
Bullish Flag PatternFlag Pattern is one of the most popular chart patterns, formed by price action, which is contained within a small rectangle or a channel in the shape of a flag. Flags are short-term continuation patterns that mark a small consolidation before the previous move resumes.
A flag chart pattern is formed when the market consolidates in a narrow range after a sharp move. Usually a breakout from the flag is in the form of continuation of the prior trend. Flags give very relatively small risk and high and quick profits.
# What is Bullish Flag Pattern?
When the prices are in an uptrend a bullish flag pattern shows a slow consolidation lower after an aggressive uptrend. This indicates that there is more buying pressure moving the prices up than down and indicates that the momentum will continue in an uptrend. Traders wait for the price to break above the resistance of the consolidation after this pattern is formed to enter into the market.
# Trading with Bullish Flag Pattern ?
Traders can enter into a trade when the price breaks above the upper trend lines. It is formed when there is an increase in the demand that makes the prices to move up .When the demand is more than supply, price breaks outside the flag above the resistance and prices continue to move upwards.
# Duration:
Flags are short-term patterns that can last from 1 to 12 weeks. There is some debate on the timeframe and some consider 8 weeks to be pushing the limits for a reliable pattern. Ideally, these patterns will form between 1 and 4 weeks. Once a flag becomes more than 12 weeks old, it would be classified as a rectangle. The reliability of patterns that fall between 8 and 12 weeks is debatable.
# Volume:
Volume should be heavy during the breakout of flag upper boundary .
#Stop Loss:
A stop-loss can be placed outside the flag on the opposite side of the breakout.
Kindly Let us Know if you have any question .
Engage- Reversal Pattern -3 Outside Reversal setupThe Third Video on Education series - Engage - The Trade Setup
The Reversal Pattern that I have discuss is the Outside reversal setup, which is a pattern that can spotlight some of the best reversal opportunities in the market.
studied from Book Secrets of a Pivot Boss: Revealing Proven Methods for Profiting in the Market
www.amazon.in
Happy learning.
( Education purpose for all )
Comments
The limit lines of MarketMARKETS ARE HIGH AS A KITE :
Historically, this acts as strong resistance for markets. Markets tend to reach this point when there is too much optimism around. This is the most dangerous level for investors in the market. Retail investors are extremely greedy here. Expect a bubble to burst soon.
CRITICALLY HIGH :
At this line, the markets are relatively too expensive and can show consolidation. Investors should show caution and stay fearful.
MID LINE:
Markets will oscillate above and below this line quite often. This line is a regular market trend.
CRITICALLY LOW:
With good hopes and optimism around, markets will stop consolidation over here. This is where we should be greedy.
MARKETS ANNIHILATED:
In 20 years' history, markets have reached this line only once. This is an extreme line and takes it as a lottery ticket. Prices extremely rarely will consolidate to this line, but when it does it might be the best time to invest in your lifetime.
*This is a log graph of 20 years. Markets are never linear, they change in percentages relative to the last price which is not linear.*
HOW TO BUY STOCKS USING MOVING AVERAGEMoving average is the most common indicator in technical analysis also be the most important indicator, as it serves as the foundation of countless others.
1) What is a moving average?
Moving average (MA) is a simple technical analysis tool that smooths out price data by creating a constantly updated average price. The average is taken over a specific period of time like 10, 20, or 50 days, or any time period as suitable. The indicator is known as a ‘moving’ average, since its value keeps changing as the data keeps changing over time. I have used a band of 20 DMA.
Here’s an example. Say the closing prices of ITC for the last 5 trading days are:
Closing prices
Day 1: Rs. 215
Day 2: Rs. 220
Day 3: Rs. 222
Day 4: Rs. 226
Day 5: Rs. 239
In this case, the moving average of ITC for a 5-day period is calculated like this.
= (Day 1 price + Day 2 price + Day 3 price + Day 4 price + Day 5 price ) ÷ 5 days
= (Rs. 215 + Rs. 220 + Rs. 222 + Rs. 226 + Rs. 239) ÷ 5 days
= Rs. 224.
When used appropriately, they provide easy insight into a trend’s direction, its magnitude, support and resistance. Works magically, for those who depend on support and resistance strategies to generate entry points. However, for those who prefer to trade price reversals, using moving average crossover strategies is perfectly viable as well.
2) How to buy stocks using moving average? (I use a band of 20 DMA as my strategy)
a) By identifying support and resistance as shown in the chart: A moving average can also act as support or resistance. In an uptrend, an average may act as a support level, as shown in the chart. This is because the average acts like a floor (support), so the price bounces up off of it. In a downtrend, a moving average may act as resistance; like a ceiling, the price hits the level and then starts to drop again.
b) By identifying the trend as shown in the chart: Look at the direction of the moving average to get an idea of which way the price is moving. If it is angled up, the price is moving up, angled down, and the price is moving down, if moving sideways, and the trend is likely in a range.
Disclaimer I'm not an expert, i'm still learning. Sharing knowledge will enrich me with more knowledge. This strategy works well for me it may or may not work for you. I tried to explain in a layman's point of view. I reserve the right to be wrong.
Two Candlestick Pattern - Bullish EngulfingA bullish engulfing pattern is a candlestick pattern that forms when a small Red candlestick is followed the next day by a large Green candlestick, the body of which completely overlaps or engulfs the body of the previous day’s candlestick.
Bullish engulfing patterns are more likely to signal reversals when they are preceded by four or more black candlesticks.
Investors should look not only to the two candlesticks which form the bullish engulfing pattern but also to the preceding candlesticks.
Limitations -
A bullish engulfing pattern can be a powerful signal, especially when combined with the current trend; however, they are not bullet-proof. Engulfing patterns are most useful following a clean downward price move as the pattern clearly shows the shift in momentum to the upside. If the price action is choppy, even if the price is rising overall, the significance of the engulfing pattern is diminished since it is a fairly common signal.
The engulfing or second candle may also be huge. This can leave a trader with a very large stop loss if they opt to trade the pattern. The potential reward from the trade may not justify the risk.
Establishing the potential reward can also be difficult with engulfing patterns, as candlesticks don't provide a price target. Instead, traders will need to use other methods, such as indicators or trend analysis, for selecting a price target or determining when to get out of a profitable trade.
Important Points-
The Green candlestick of a bullish engulfing pattern typically has a small upper wick, if any. That means the stock closed at or near its highest price, suggesting that the Candlestick Closed while the price was still surging upward.
This lack of an upper wick makes it more likely that the next candlestick will produce another Green candlestick that will close higher than the bullish engulfing pattern closed, though it’s also possible that the next day will produce a Red candlestick after gapping up at the opening. Because bullish engulfing patterns tend to signify trend reversals, analysts pay particular attention to them.
{Source - Investopedia.com}
TREND and its typesThe market never moves in a straight direction. It is characterized by so called zig-zag pattern. Depending on the direction of the market it can be labeled as "Trend of the market". A vast part of technical analysis is based on this trend analysis.
The market is usually classified into three different trends.
Uptrend
Downtrend
Sideway trend
1) An UPTREND is when the market makes a series of higher Peaks and Troughs.
2) A DOWNTREND is when the market makes a series of declining Peaks and Troughs.
3) A SIDEWAY-TREND or often called a Period of Consolidation is when the market is moving sideways (forming a channel). Price moves in a flat Horizontal pattern. This shows equilibrium. Supply and demand forces are on par with each other and nullify.
It is suggested not to trade in such a TRENDLESS market because most of the technical analysis tools that we use are based on calculations of trends. There is a high chance of a false signal getting generated in such a trendless market. Waiting for a break (and maybe retest of the channel S&R ) should be a wiser idea.
//Healthy discussion is really powerful. Let's start one in the comments. Feel free to through in your ideas//
MINDA CORP - Let's Observe The last Chart of Hindustan Copper had many missing the entry before it broke out and hit upper circuit.
So here I bring Minda Corp which I think will emulate Hindustan Copper to some extent.
This is for everyone to learn as well.
Cup has been formed. Now either wait for a small pull back where one can accumulate after it turns around or be ready for it to race up and retest.
My Hunch is because of the Double Bottom, the stock is strong for an upward rally but the rejection candle may show temporary weakness providing everyone with an opportunity to enter this space.
TATA POWER - No Target Enjoy AnalysisI can interpret an upcoming breakout in this chart is so many ways. This is why technical Analysis isn't difficult. One just needs to have an eye and correlate.
I'm not giving any Stop loss or Targets here. This is for you guys to interpret it the way you like and take your decisions. If it fails, this chart would tell you why it failed as well.
Those who want to learn can learn many things from this chart.
Bullish Three Drives Pattern in NIFTYAccording to bullish three drives pattern nifty indicating reversal of previous downtrend. Today we got the breakout of its resistance trend line if nifty sustain above this level one more trading session then we will get confirmation about the uptrend in market.
According to pattern there was a good entry near 14150 level. It was also 100 Day's EMA level support. Also, Can take breakout entry of downtrend parallel channel of this pattern for target of each swing high. This breakout can give movement upto first swing high 15425+.
IRON FLY STRATEGY FOR NIFTY 10 MAR EXPIRYIron Fly is a non directional strategy that works very well in a sideways market. I was of the view that the market would be sideways for the reasons mentioned in the video. This worked very well for the weekly expiry and it is used very often in confusing markets such as this.
This was one of my first attempts at vocally explaining strategies so I may not have been as clear in the details.
Let me know if you have any questions about this strategy in the comments. Please LIKE if you would want to see more content like this. :)
📚 Learn More 💰 Earn More with us: Ascending Triangle📚 LEARN MORE
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Ascending Triangle Definition:
An ascending triangle is a type of triangle chart pattern that occurs when there is a resistance level and a slope of higher lows.
It is defined by two lines:
. A horizontal resistance line running through peaks.
. An uptrend line drawn through the bottoms.
The higher lows indicate more buyers are gradually entering the market and buying pressure increases as price consolidates moving further towards the apex.
An ascending triangle is classified as a continuation chart pattern.
If price can break through the resistance level, that level will now act as a support level.
Breakouts can also happen in both directions. Statistically, upward breakouts are more likely to occur, but downward ones seem to be more reliable.
In most cases, the buyers will win this battle and the price will break out past the resistance. But Sometimes the resistance level is too strong, and there is simply not enough buying power to push it through. Therefore you should be ready for movement in EITHER direction.
ENTRY:
We would set an entry order above the resistance line and below the slope of the higher lows.
TARGET:
Target is approximately the same distance as the height of the triangle formation.
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The 90-90-90 rule - Why do traders fail?"Many are called, but few are chosen". Ever heard this proverb?
This is certainly true for trading, in fact, there is even a rule in trading about this, the 90-90-90 rule. So what does this rule say?
"90% of traders lose 90% of their money in 90 days"
😱😱😱
That's right, statistics show that 90% of people who start trading lose the majority of their money in less than 3 months. But why is that so? In this post I will try to lay out the reasons for failure, if you are a new or struggling trader, I'm sure you'll find this useful. Let's get into it ...
🤯 EXPECTATIONS
•
Many start trading because they've seen or read about success stories, people becoming rich overnight, they might even have a friend who has been successful in trading and they think (to say it in Jeremy Clarckson's famous words) "How hard can it be?. With this approach, failure is imminent...
📐 NOT HAVING A PLAN
•
"If you fail to plan, you are planning to fail - Benjamin Franklin . Trading without a plan results almost certainly in failure. Your trading plan should include the definition of your setup, entry, stop loss, profit taking, trade management, risk management and money management.
🔄 NOT TESTING YOUR PLAN
•
OK, you have determined how you will trade, what defines your entries and exits, how much of your capital you will risk and how you will manage your trades. But do you know what is the expectancy of that plan? Do you know how much trades you will win on average, and how many you will lose? How much money can you expect to make?
Backtesting your plan, executing it flawlessly time after time on historical data will give you that information and the confidence to execute your plan time and time again without hesitation.
😱 EMOTIONS - THIS IS THE BIG ONE!
•
If did not take the time to create a trading plan and backtest it, you don't really know what you are doing and emotions will have the best of you.
Fear, greed, hope, excitement, anxiousness, boredom and frustration will drive your hard earned capital away from you.
Results of these emotions are : trading too much, letting your losers run and cutting winners short, revenge trading, overleveraging etc...
I could write an entire post about each of the emotions and how they can affect you while trading, but it would make this post too lengthy. Just know that emotions are your biggest enemy when trading, for best results you should be in a stoic state when trading.
🕺 EGO
•
"The market can remain irrational longer than you can remain solvent.". If you want to prove the market that you are right, you are doomed to fail. The market is always right, no matter what happens, so you better learn to accept that your analysis or prediction of what would happen was wrong and cut your losses. Fast!
📚 LACK OF EDUCATION
•
It takes many years to learn a skill or a profession, trading is no different. If you think about making lots of money without putting the time in to learn and test, you pretty much guarantee yourself to fail.
You wouldn't want a lawyer without education to defend you in court, or a self-proclaimed surgeon who learned on YouTube to operate on you, would you?
💰 STARTING CAPITAL TOO LOW
•
If you're starting with a low capital, you will tend to try and make it grow fast, resulting in taking too many trades, too high of a risk, too high leverage. If you start with a low capital, you'll have to be OK with the fact that it will grow slowly and that it will take (a lot of) time to build up a sizeable account.
🚦 BUYING OR FOLLOWING SIGNALS
•
"There is no such thing as easy money." You might think that you don't have the time to learn about trading, making and backtesting a trading plan. So why not follow signals?
Ask yourself what you know about this service? How profitable is it (and don't just go from the claims they make)? Do you know anything about the reason for a signal, why was it triggered?
Have you talked to other users who used the service, what do they think about it? Why is this person/company selling signals if they are so successful as they claim? Philanthropy ? 🤔
📉 INDICATORS OVERLOAD
•
Indicators can help you make decisions for trading, but too many indicators can and will lead to opposite signals or "analysis paralysis.
Most indicators are derived from price, so it makes sense to learn how to read price action and discover the story behind the candles.
🆕 THE NEXT SHINY OBJECT SYNDROME
•
You took the time to develop a trading plan and even tested it, but you run into a drawdown... Rather than counting on your experience and the expectancy that you know is there, you look for a new shiny method of trading, until the same thing happens again with this new method ... Rinse & repeat, never giving the chance for your original method, which you know was working when you tested it, to prove its worth ...
Alright, I think I have provided the main reasons why new or inexperienced traders fail. Knowing why they (or you) fail is one thing, doing something about it is not a small feat. But with enough dedication, persistance and the right mindset, you can prove these statistics wrong!
Feel like reasons are missing, let me know in the comments below.
So what is your story?
Are you a successful trader now but recognize these reasons for failure?
Are you a new trader? Was this helpful?
What did/will you do to overcome this?
What did/do you struggle most with?
Help the TradingView community by commenting below.
"Trading is a ruthless business that does not take any hostages, so you better come prepared." - Nico Muselle
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