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"Crossover" your limits with "Crossovers" !!!!Through series of educational posts we have got an elaborate knowledge of candlestick pattern which include both reversal and continuation patterns and this post is somewhat different from candlestick it's all about moving average crossovers. General concept of crossover is that a fast moving average surpasses slow one in any directional trend and could help you be in right side, A moving average crossover occurs when two different moving average lines cross over one another, Because moving averages are a lagging indicator, the crossover technique may not capture exact tops and bottoms. But it can help you identify the bulk of a trend. A moving average crossover system helps to answer these three questions: Which direction might the price be trending (if at all)? Where might be a potential entry point for a trend trade? When might a trend be ending or reversing? All you have to do is plop on a couple of moving averages on your chart, and wait for a crossover. If the moving averages cross over one another, it could signal that the trend is about to change soon, thereby giving you the chance to get a better entry. By having a better entry, you have the chance to have better reward. -> Short term crossovers: it includes 5 DEMA crossover 20DEMA , this crossover is for daily timeframe i.e. for short term traders 5DEMA CROSS ABOVE 20DEMA although some move was left out but then also the return was splendor NOTE: crossover give signal only on conformation so some move could be left out. 5DEMA CROSS BELOW 20DEMA -> Long term crossovers: it includes some important crossovers i.e. Golden and Death crosses GOLDEN CROSS: here major moving average crosses each other i.e. 50DEMA cross above 200DEMA it signifies major uptrend in large time frame though we have seen major fall in metal sector but still they are golden cross period DEATH CROSS: here major moving average crosses each other i.e. 50DEMA cross below 200DEMA it signifies major downtrend in large time frame the major fall in nifty was predicted by me earlier with help of this cross In summary, moving average crossovers are helpful in identifying when a trend might be emerging or when a trend might be ending. The crossover system offers specific triggers for potential entry and exit points. These triggers should be confirmed with a chart pattern or support and resistance breakouts My Observation :- short term moving average crossovers could be confirmed with RSI i.e. if RSI is greater than 50 uptrend possible and if less than 50 downtrend possible if it is not the crossover could be false in that case wait for conformation. long term moving average crossovers could be confirmed with RSI i.e. if RSI is greater than 60 uptrend possible and if less than 40 downtrend possible if it is not the crossover could be false in that case wait for conformation.
NSE:NIFTYEducation
by Chaser30
4
'CONTINUE' trading with 'CONTINUATION' pattern_2nd Edition_!!!In previous idea of continuation pattern, which comprise explanation of some continuation patterns like triangles, flags and pennants it was stated that in next post I'll be back with patterns such as head & shoulder , double top and bottoms and we're back. As we have discussed in the previous section, that market can be either in trending phase or in a range-bound phase. No trend generally lasts forever in the market. After prolonged or medium or shorter duration up and downtrend, the market often reverses and a move starts in the opposite direction of the prior move. Often we find that well defined geometrical patterns are formed in the chart which provides good indication of price reversals. These patterns are called reversal classical chart patterns. When they are formed as a bullish reversal pattern they are said to be part of accumulation. On the other hand if they are formed at the top of a price move just before bearish reversal, then they are part of distribution. However, a geometrically shaped consolidation does not necessarily mean price reversal. Often price resumes the erstwhile trend post the consolidation move. These are called continuation classical chart pattern. We will discuss about few of the classical chart patterns in the following section. -> Head & Shoulder -: Head and Shoulder pattern is a bearish reversal pattern. This pattern appears after an uptrend. This pattern is formed with three consecutive tops with middle one being higher than the other two. The middle top is called the head and the two side peaks are called the shoulders. On joining the intermediate troughs, we get the neck-line. On ultimate break below the neckline, usually a short trade is taken with a stop-loss above the top of the nearest shoulder. The target is usually considered as the distance between the neckline and head, projected from the point of break. If the volume in the down leg of the right shoulder is on the higher side and break happens with high volume, the conviction is on the higher side for the reversal. An Inverse Head and Shoulder is just mirror image of the Head and Shoulder pattern. This should appear after a sustained down trend, the rule of stop loss and target are similar. This often acts as a very effective bullish reversal pattern. -> Double Tops and Bottoms -: These chart patterns are well-known patterns that signal a trend reversal – these are considered to be one of the most reliable patterns and are commonly used. These patterns are formed after a sustained trend and signal to chartists that the trend is about to reverse. These patterns are created when price movement tests support or resistance levels twice and is unable to break through. These patterns are often used to signal intermediate and long-term trend reversals. Double top: Double bottom: -> Mechanism of Continuation Pattern -: Continuation patterns provide some logic to the price action. By knowing the patterns, a trader can create a trading plan to take advantage of common patterns. The patterns present trading opportunities that may not be seen using other methods. Unfortunately, simply because the pattern is called a "continuation pattern" does not mean it is always reliable. A pattern may appear during a trend, but a trend reversal may still occur. It is also quite possible that, once we have drawn the pattern on our charts, the bounds may be slightly penetrated, but a full breakout does not occur. This is called a false breakout and could occur multiple times before the pattern is actually broken and a continuation or a reversal occurs. Rectangles, due to their popularity and easy visibility, are highly susceptible to false breakouts. Patterns can also be subjective, as what one trader sees is not what another trader sees, or how another trader would draw or define the pattern in real time. This is not necessarily a bad thing, as it can provide traders with a unique perspective on the market. It will require time and practice for the trader to develop his or her skill in finding patterns, drawing them and formulating a plan on how to use them. My Observation -: These geometrical patterns are formed after a trend in that particular stock, it generally resumes the previous trend after being out of the pattern but some times it reverses the previous trend hence, it is advised to wait for the conformation to play the pattern. And we can use RSI for conformation i.e. if you are seeing pattern breakout then just check if RSI is greater than 60 and if not than the chances of fakeout is more also in case of breakdown just check if RSI is below 40 else it can reverse. #Enjoy_trading
NSE:NIFTYEducation
by Chaser30
'CONTINUE' trading with 'CONTINUATION' pattern !!!!Market can be either in trending phase or in a range-bound phase. No trend generally lasts forever in the market. After prolonged or medium or shorter duration up and downtrend, the market often reverses and a move starts in the opposite direction of the prior move. Often we find that well defined geometrical patterns are formed in the chart which provides good indication of price reversals. These patterns are called reversal classical chart patterns. When they are formed as a bullish reversal pattern they are said to be part of accumulation. On the other hand if they are formed at the top of a price move just before bearish reversal, then they are part of distribution. However, a geometrically shaped consolidation does not necessarily mean price reversal. Often price resumes the erstwhile trend post the consolidation move. These are called continuation classical chart pattern. We will discuss about few of the classical chart patterns in the following tutorial. -> Triangles -: Triangles are one of the most well-known chart patterns used in technical analysis. The three most common types of triangles, which vary in construction and implications, are Symmetrical Triangle, Ascending Triangle and Descending Triangle. These chart patterns are considered to last anywhere from a couple of weeks to several months. These are areas of consolidations after a trending move and are generally continuation patterns, i.e. the erstwhile trends resumes after the breakout. However, in certain cases they act as reversal patterns. They can appear both in up-trend and down-trend. -Symmetrical Triangle -: This kind of triangle is formed when the price of the script consolidate in range which is getting narrower with the time, i.e. the sequence of lower highs and higher lows. -Ascending Triangle -: This kind of triangle is formed when the price of the script consolidate in range which lower bound is getting higher with a stiff upper bound, i.e. the sequence of higher lows but almost equal highs. -Descending Triangle -: This kind of triangle is formed when the price of the script consolidate in range which higher bound is getting lower with a stiff bottom bound, i.e. the sequence of lower highs but almost equal lows , it is juxtapose of ascending triangle. -> Flags & Pennants -: These two short-term chart patterns are continuation patterns that are formed when there is a sharp price movement followed by a generally sideways price movement. The patterns are generally thought to last from one to three weeks . They can appear both in up-trend and down-trend. Flag : Pennant: -> Rectangles -: Often there will be pauses in a trend in which the price action moves sideways, bound between parallel support and resistance lines. Rectangles, also known as trading ranges, can last for short periods or many years. This pattern is very common and can be seen often intra-day, as well as on longer-term time frames. ->Mechanism of Continuation Patterns -: Continuation patterns provide some logic to the price action. By knowing the patterns, a trader can create a trading plan to take advantage of common patterns. The patterns present trading opportunities that may not be seen using other methods. Unfortunately, simply because the pattern is called a "continuation pattern" does not mean it is always reliable. A pattern may appear during a trend, but a trend reversal may still occur. It is also quite possible that, once we have drawn the pattern on our charts, the bounds may be slightly penetrated, but a full breakout does not occur. This is called a false breakout and could occur multiple times before the pattern is actually broken and a continuation or a reversal occurs. Rectangles, due to their popularity and easy visibility, are highly susceptible to false breakouts. Patterns can also be subjective, as what one trader sees is not what another trader sees, or how another trader would draw or define the pattern in real time. This is not necessarily a bad thing, as it can provide traders with a unique perspective on the market. It will require time and practice for the trader to develop his or her skill in finding patterns, drawing them and formulating a plan on how to use them. My Observation -: These geometrical patterns are formed after a trend in that particular stock, it generally resumes the previous trend after being out of the pattern but some times it reverses the previous trend hence, it is advised to wait for the conformation to play the pattern. In the next publication I'll try to elaborately explain continuation patterns like - head & shoulder, double top & bottom, wedge; Till then, #Enjoy_trading
NSE:NIFTYEducation
by Chaser30
4