Support and Resistance

September 29, 2022August 1, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

We learned about entry and stop loss points while analyzing candlestick patterns. However, the goal price was not discussed. This topic will be covered in this chapter.

The best technique to determine the target price is to identify the support and resistance areas. The support and resistance (S&R) levels on a chart are predicted to attract the most buying or selling. The support price is the price at which there are more buyers than sellers. Similarly, the resistance price is the price at which more sellers are expected than buyers.

Traders can utilize S&R to discover trading entry points on their own.

The Resistance

Resistance, as the name implies, is something that prevents the price from growing further. The resistance level is a price point on the chart where traders expect the stock/index to have the most supply (in terms of selling). The resistance level is always higher than the market price.

The chances of the price increase to the resistance level, consolidating, absorbing all supply, and then falling are considerable. In a rising market, one of the essential technical analysis tools that market players look at is resistance. Resistance is frequently used as a sell trigger.

Ambuja Cements Limited’s chart is shown below. The horizontal line on the chart, which coincides with Rs.215, is Ambuja Cements’ resistance level.

I purposefully compressed the chart to contain more data points, for reasons I will explain momentarily. But first, there are two things you should keep in mind while looking at the following chart:

A horizontal line indicates that the resistance level is greater than the current market price.
The current candle is at 206.75, while the resistance level is at 215. For your convenience, the current candle and its matching price level are surrounded.

Consider Ambuja cement at Rs.206 making a bullish marubuzo with a low of 202. We know this is a signal to start a long trade and that the stop loss for this trade is set at 202. With our newfound resistance knowledge, we can now set 215 as a feasible objective for this deal!

You may be wondering why 215? The reasons are straightforward: –

The resistance of 215 indicates that there is a possibility of excess supply.
Excess supply adds to the selling pressure.
Prices tend to fall as a result of selling pressure.

As a result, when a trader is long, he can look for resistance points to create targets and exit points for the transaction.

Furthermore, now that the resistance has been identified, the long trade may be completely designed as follows:

206 is the entry point, 202 is the stop loss, and 215 is the target.

The next apparent question is, how do we determine the level of resistance? It is quite simple to identify price points as either support or resistance. The process of identifying support and opposition is the same. If the current market price is less than the identified point, it is referred to as a resistance point; otherwise, it is referred to as a support point.

Because the approach is the same, let us begin by understanding’ support,’ and then proceed to the procedure for identifying S&R.

The support

After learning about resistance, determining the level of support should be simple and intuitive. Support, as the name implies, is something that prevents the price from falling further. The support level is a price point on the chart at which the trader anticipates the most demand (in terms of buying) for the stock/index. When the price falls below the support line, it is likely to rebound. The support level is always lower than the market price.

The price could decrease until it reaches support, then consolidate and absorb all of the demand before beginning to rise. In a declining market, one of the crucial technical levels that market players seek is support. The support is frequently used as a buy trigger.

Cipla Limited’s chart is shown below. Cipla’s support level is marked on the chart by the horizontal line at 435.

A few things to take note of in the chart above:

The horizontal line represents a support level that is lower than the current market price.
The current candle is at 442.5, while the support level is at 435. For your convenience, the current candle and its matching price level are surrounded.

As we did with resistance, imagine a bearish pattern forming – possibly a shooting star at 442 with a high of 446. With a shooting star, the call is overly short Cipla at 442, with a stop loss of 446.

We can set the aim at 435 because we know 435 is the immediate support.

A few things to take note of in the chart above:

The horizontal line represents a support level that is lower than the current market price.
The current candle is at 442.5, while the support level is at 435. For your convenience, the current candle and its matching price level are surrounded.

As we did with resistance, imagine a bearish pattern forming – possibly a shooting star at 442 with a high of 446. With a shooting star, the call is overly short Cipla at 442, with a stop loss of 446. We can set the aim at 435 because we know 435 is the immediate support.

So, what makes the Rs.435 target worthwhile? The decision is supported by the following reasons:

Support at 435 indicates that excess demand is most likely to emerge.
Excess demand increases purchasing pressure.
Buying demand tends to drive up the price.

As a result of the foregoing, when a trader is short, he can use support levels to define targets and exit points for the transaction.

Furthermore, with the identification of the support, the short trade is now fully designed.

442 is the entry point, 446 is the stop loss, and 435 is the goal.

Construction/Drawing of the support and resistance level.

Here is a four-step approach to help you locate and build the support and resistance lines.

Step 1) Stress data points – If the goal is to identify short-term S&R load, at least 3-6 months of data points should be loaded. Load at least 12 – 18 months of data points if you want to find long-term S&R. When you load a large number of data points, the chart appears compressed. This also explains why the two charts above appear squished.

Swing trading can benefit from long-term S&R.

S&R short term – beneficial for intraday and BTST trading.

I’ve imported 12 months of data points onto this chart.

Step2) Determine at least three price action zones – A price action zone is defined as “sticky points” on the chart when the price has demonstrated at least one of the following behaviors:
After a brief uprise, I was hesitant to move up any farther.
After a brief down move, hesitating to proceed lower.
Sharp price reversals at a specific price point
Here is a set of graphics that identify the three points mentioned above in the same order:
The circular points in the chart below suggest price is hesitant to climb higher after a quick up rise:

The circular points in the chart below reflect the price hesitant to advance lower after a quick downtrend:

The ringed points in the chart below show strong price reversals:

Step3) Align the price action zones. Many price action zones can be seen when looking at a 12-month chart. The secret, though, is to find at least three price action zones at the same price level.

Here’s an example of a chart with two price action zones that aren’t at the same price point.

Look at the chart below; I’ve circled three price action zones that are all around the same price points:

It is vital to ensure that these price action zones are well-spaced in time. This means, if the first price action zone is found in the second week of May, it will be important to identify the second price action zone at any moment after the fourth week of May. (well-spaced in time). The greater the distance between two price action zones, the more powerful the S&R identification.

Step 4) Draw a horizontal line connecting the three price activity zones. Based on where this line falls about the current market price, it becomes either support or resistance.

Analyze this graph.

From left to right:

The first circle denotes a price action zone with a sharp price reversal.
The second circle denotes a price action zone in which the price is sticky.
The third circle denotes a price action zone with a sharp price reversal.
The fourth circle denotes a price action zone in which the price is sticky.
The fifth circle represents Cipla’s current market price of 442.5.

In the above chart, all four price movement zones are located near the same price point, 429. The horizontal line is well below the current market price of 442.5, indicating that 429 is an immediate support price for Cipla.

Please keep in mind that whenever you perform a visual exercise in Technical Analysis, such as detecting S&R, you run the danger of approximation. As a result, always leave space for error. The price level is typically represented as a range rather than a single price point. It is a zone or area that provides support or resistance.

Following the argument outlined above, I would be content to view a price range of 426 to 432 as a support region for Cipla. There is no set guideline for this range; I simply deducted and added 3 points to 429 to achieve my support price range!

Here is another chart for Ambuja Cements Limited that shows both S&R.

Ambuja’s current price is 204.1, with support at 201 (below the current market price) and resistance at 214. (above current market price). So, if one is too short Ambuja at 204, the target can be 201 based on support. This would most likely be a good intraday trade. Based on resistance, 214 can be a plausible target expectation for a trader going long at 204.

There are at least three price action zones identified at the price level at both the support and resistance levels, all of which are well-spaced in time.

Reliability of S&R

The support and resistance lines are just indicators of a probable price reversal. They should never be taken for granted. Like anything else in technical analysis, the potential of an event occurring (based on patterns) should be weighed in terms of probability.

For example, according to the Ambuja Cements –

204 is the current market price.

214 = resistance

The anticipation is that if Ambuja cement moves up at all, it will run with resistance at 214. That is, at 214, sellers may arise, potentially dragging down prices. What guarantee do you have that the sellers will come in at 214? In other words, what is the resistance line’s dependence? To be honest, your guess is just as good as mine.

However, it can be observed in the past that anytime Ambuja reached 214, it reacted unusually, resulting in the development of a price action zone. The price activity zone is widely spread over time, which is reassuring. This means that 214 is a time-tested price action zone. Keeping the first rule of technical analysis in mind, “History tends to repeat itself,” we proceed with the expectation that support and resistance levels will be fairly honored.

S&R points that are effectively constructed are usually well respected in my trading experience.

Optimization of checklist

Perhaps we have arrived at the most critical point in this module. We will begin by learning a few optimization techniques that will assist us in identifying high-quality deals. Remember that when you pursue quality, quantity is always sacrificed, but this is a worthwhile sacrifice. The goal is to find high-quality trading signals rather than numerous but worthless trades.

In general, optimization is a strategy for fine-tuning a process to achieve the best potential results. In this case, the procedure is about identifying transactions.

Let us return to candlestick patterns, perhaps to the very first one we learned – bullish marubuzo. A bullish marubuzo indicates a long trade near the marubuzo’s close, with the low of the marubuzo acting as the stop loss.

Assume the bullish marubuzo has the following credentials:

Close = 448, Open = 432, High = 449, Low = 430

As a result, the entry point for the long trade is around 448, with 430 as the stop loss.

What if the marubuzo’s low also corresponds with reliable time-verified support? Do you notice a surprising intersection of two technical notions here?

To go far, we have a double confirmation. Consider it in the following terms:

A recognized candlestick pattern (bullish marubuzo) indicates that the trader should begin a long transaction.
Support at the stop loss price indicates to the trader that there is substantial buying demand near the bottom.

A well-crafted trading setup is essential when dealing with a fairly unpredictable environment such as the markets. The occurrence of the two conditions mentioned above (marubuzo + support at the low) implies the same action, which is to begin a long trade in this case.

This brings us to an essential point. What if we had a checklist (or, if you prefer, a framework) for every deal we considered? Before starting a trade, the checklist would serve as a guideline. The trade must adhere to the parameters outlined in the checklist. If it does, we accept the deal; otherwise, we reject it and hunt for another trade opportunity that meets the checklist.

They claim that discipline accounts for 80% of a trader’s performance. The checklist, in my opinion, forces you to be disciplined; it helps you avoid making rash and foolish trading decisions.

To begin with, we have the checklist’s first two important factors:

The stock should have a distinct candlestick pattern. a) In this subject, we learned some of the most prominent patterns. To begin, you can only use these patterns to complete the checklist.
S&R should confirm the transaction. The stop-loss price should be in the vicinity of S&R.
1. The low of the pattern should be near the support for a long trade.
2. For a short trade, the pattern’s high should be near the resistance.

From now on in this module, as and when we learn new TA concepts, we will build this checklist. But to quench your curiosity, the final checklist will have 6 checklist points. When we have the grand 6 checklist points, we will weigh down each one of them. For example, checklist point number 4 may not be as important as point number 1, but it is more important than 100 other factors that distract the trader.

Conclusion

S&R are price points on the chart
Support is a price point below the current market price that indicates buying interest.
Resistance is a price point above the current market price that indicates selling interest.
To identify S&R, place a horizontal line in such a way that it connects at least 3 price action zones, well-spaced in time. The more number of price action zones (well spaced in time) the horizontal line connects, the stronger is S&R
S&R can be used to identify targets for the trade. For a long trade, look for the immediate resistance level as the target. For a short trade, look for the immediate support level as the target.
Lastly, comply with the checklist for optimal trading results

Trading View

July 22, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

Interesting features in Trading view

If you haven’t already heard, Trading View is now available on Kite. The TradingQ&A post announcing the beta launch may be seen here.

Given this, I’d like to share a few of my favourite. Trading view (TV) features, which I think will be useful to you, especially if you’re new to TV. I’m not going to go over the most obvious charting elements on TV, which I’m sure are very simple to grasp. These are a few unusual ones that come in helpful when working with charts.

Multi timeframe setting

This function is not unique to television, but I believe it works better on television than on other platforms. I’m sure most of you are familiar with the various layout options.

Assume you want to trade ‘Indigo’ on an intraday basis. One thing you should consider before placing your order is how Indigo’s pricing changes over time. The consistent practise reduces the frequency from once a day to 15 or 5 minutes. While this fits the goal, it would be interesting to observe how the chart looks at different periods in real time. This allows you to anchor the price and have a view on where the current market price stands in relation to other timeframes. For example, I prefer to look at the 1-day, 30-minute, and 15-minute charts all at once.

With TV, you can do this very easy. Here’s how:

Select a layout that you are familiar with by clicking on the ‘Select Layout’ option in the top right corner. Because I want three charts, I chose a three-chart arrangement that matches my needs.

This is how the chart layout looks after you select it. All three charts now show the same scrip and time frame, i.e. Indigo’s 1-day chart –

Also, the one on the left panel is highlighted among the three charts, as indicated by the blue border.

The following step is to switch the time frame between the three periods. My personal preference is to keep the left panel at the frequency on which I expect to trade, i.e. 15 minutes, the right top panel at 30 minutes, and the right bottom panel at 1 day. You can adjust the time-frequency by clicking on the chart (the chart is highlighted and a blue border appears) and selecting the desired frequency. A red arrow indicates the frequency change option.

With this structure, I can now view all of the price movements throughout all time periods in an one shot.

Once you get this set up, you can do some interesting things. The crosshair, for example, is in sync here –

When you place the crosshair on a specific price point, it shows across all time periods at the same time. This allows you to have a perspective on the price action as it unfolds over multiple time spans.

If you wish to focus on one of the three charts, click the toggle button at the right bottom. This will magnify the chart and help you focus better –

You can annotate the chart, write notes, and limit its visibility to a specific timeframe. For example, the end-of-day chart may indicate a double top; if so, I’ll be ready with my shorts. This, however, is at the end of the day chart. So I can just remark on that chart. Select a text box by clicking on the text options –

Drop the text box to the desired time range and scribble your comments –

That’s with the multi-timeframe functionality, which I believe is useful for intraday transactions.

Undo Redo

This is a wonderful feature that I enjoy. Many times, I muck up the charts by putting trend lines and indicators that don’t make sense, such as this one –

In most other platforms, you’d have to select the trend line and erase it if you wanted to get rid of it. This is something you can do on TV with a single click. Please keep in mind that the undo functionality only undoes the most recent activity.

Visibility

This is yet another interesting feature. The visibility options allow you to visualise a specific drawing or trend line only within a specific time period. Here’s an example of a Fibonacci retracement on an end-of-the-day chart –

When I switch to an hourly chart, I can still see the Fibonacci retracement –

This can be a distraction because the study may not be applicable to this time range. You can fix the research solely to the relevant time frame on TV, and if you change the time frame, the study will not display.

To do so, double-click on the study and select Settings –

I’ve stated that the study should only be visible at the end of the day chart. As a result, if I modify the frequency, this study will no longer appear.

Go to date

This one is fantastic. How many times have you wanted to know how the stock price behaved on a certain date at a specific time? Let’s say I want to know what Infy did on January 2nd, 2019, at 12:30 PM. To figure this out, you normally have to scroll through the charts, and after a little trial and error, you’ll come up with the exact date. There is no such trouble with television because it includes a ‘Go-to’ feature. This tool is so effective that it can take you to the exact candle, even if you’re using it intraday. This is visible at the very bottom of the chart –

I’m looking at the March 5th, 12:15 PM candle –

Hd Images

How many times have you made a significant chart with a lot of research on it? You want to share it with a friend via what applications or tweet it, but you end up taking a snapshot of the chart, which produces an unappealing effect. You can avoid this by snapping high-quality photos of the chart while watching television.

All you have to do to get the image is press ‘Alt + S’ –

This will give you an option to either save the image or tweet it.

I’ll keep this chapter open. I’ll add more interesting features as I discover them myself. Meanwhile, if you have something interesting to share, go ahead and comment below.

Happy trading!

Trading get started

September 29, 2022July 21, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

The Charting Software

We’ve learned a lot about Technical Analysis during the last chapters. If you’ve read through all of the chapters and understand what’s discussed, you’re almost ready to start trading with Technical Analysis. This chapter’s goal is to get you started by finding technical trading opportunities.

Please keep in mind that the recommendations in this chapter found in my trading expertise.

To begin, you will require chart visualisation software, also known as ‘Charting Software.’ The charting programme allows you to examine and evaluate various stock charts. Needless to say, charting software is a must-have for every technical analyst.

There is various charting software program available. ‘Metastock’ and ‘Amibroker’ are the two most popular. The majority of technical analysts employ one of the two charting software packages. Needless to mention, these paid applications, and you must obtain a software license before utilizing them.

You may utilize a few free charting tools online, which are available on Yahoo Finance, Google Finance, and pretty much all business media websites. However, if you want to be a technical analyst, you should invest in good charting software.

Consider the charting software to be a DVD player; once installed, you will still need to rent DVDs to view movies. Similarly, once you’ve installed charting software, you’ll still need to give it data in order to see the charts. The required data feed provides by the data vendors.

There are numerous data suppliers in India who provide data feeds. I would recommend that you search the internet for reputable vendors. You must notify the data vendor of your charting software, and he will provide you with data feeds in a format compatible with your charting software. Of course, the data feeds are not free.

When you sign up with a data vendor, he will first provide you with all of the historical data, after which you will need to update the data from his server on a regular basis in order to stay current.

According to my experience, purchasing the current version of a reputable charting software (Metastock or Amibroker) can cost you somewhere between Rs.25,000/- and Rs.30,000/-. Add an additional Rs.15,000/- to Rs.25,000/- for data feeds. Of course, while the software costs only once, the expense of data feeds is recurring every year. Please keep in mind that previous versions of the charting software may be substantially less expensive.

If you don’t want to spend so much money on charting software and data feeds, there is another option. And that would be Zerodha’s Pi.

As you may be aware, Zerodha has its own trading terminal known as ‘Pi.’ Pi can help you in a variety of ways; I’d like to highlight a few of them in the context of Technical Analysis:

It is bundles:- Pi is a charts programme and a data feed package rolled into one.

Great Visualization:-Pi helps you visualize charts across multiple time frames, including intraday charts.

Advanced Feature:-Pi offers advanced charting capabilities, as well as 80 built-in technical indicators and more than 30 sketching tools.

Scripting your strategy:-Pi features a scripting language that can practice to code technological strategies and backtest them on historical data. Please keep in mind that we will soon be adding a module on developing trading strategies and scripts to Varsity.

Easy opportunity recognition:-The Raspberry Pi contains a pattern recognition feature that allows you to draw a screen pattern. After you’ve drawn, tell Pi to scout for that pattern across the market, and it’ll do it for you.

Trade form PI:- Pi also allows you to trade directly from the chart (a huge plus point for a technical trader)

Data dump:– Because Pi has a large historical data dump (over 50,000 candles), backtesting your technique will be more efficient.

Your personal trading assistant:-Pi’s ‘Expert Advisor’ brings you up to date on the trends emerging in live markets.

Super Advanced feature:- Pi equip with Artificial Intelligence and Genetic Algorithms. These are optimization tools that assist you in optimizing your trading algorithms.

It is free:– Zerodha is providing it at no cost to all of its active traders.

The list is lengthy, ranging from basic to advanced functions. I strongly advise you to try Pi before investing on a charting package and data feed bundle.

Which timeframe to choose

We talked about ‘Timeframes.’ I’d like you to go over it again to refresh your memory.

One of the most perplexing issues for a beginner technical analyst is deciding on a timeframe to scan for trading possibilities. There are other timeframes to choose from, including 1 minute, 5 minutes, 10 minutes, 15 minutes, EOD, Weekly, Monthly, and Yearly. It is very easy to become perplexed about this.

The higher the timeframe, as a rule of thumb, the more dependable the trading indication. A ‘Bullish Engulfing’ pattern on the 15-minute timeframe, for example, is significantly more trustworthy than one on the 5-minute timeframe. Keeping this in mind, one must select a timeframe dependent on the length of the deal.

So, how do you determine the length of your trade?

I recommend avoiding day trading if you are new to trading or are not a seasoned trader. Begin with trades that can hold for a few days. This refers to as ‘Positional Trading’ or ‘Swing Trading.’ An avid swing trader will often hold his trading position for a few days. A swing trader’s best lookback period is 6 months to a year.

A scalper, on the other hand, is an experienced day trader who often uses a 1 minute or 5 minute period.

When you’re comfortable holding deals for several days, go on to ‘Day Trading.’ My guess is that your shift from positional to day trading will take some time. Needless to say, the changeover period is far shorter for a determined and disciplined trader.

Lookback period

The number of candles you want to see before making a trading choice is simply the look back period. A lookback time of three months, for example, means you’re looking at today’s candle against the backdrop of at least the previous three months’ data. This will help you establish a perspective on today’s price action in relation to the previous three months’ price action.

What is the ideal look back period for swing trading opportunities? In my experience, a swing trader should search for at least 6 months to a year of data. Similarly, a scalper should look at the last 5 days of data.

When plotting the S&R levels, however, you need lengthen the look back period to at least 2 years.

The opportunity universe

The Bombay Stock Exchange (BSE) has over 6000 listed stocks and the National Stock Exchange (NSE) has approximately 2000 listed stocks (NSE). Does it make sense for you to scour these thousands of stocks every day for opportunities? Clearly not. You must choose a portfolio of equities that you are comfortable trading over time. This group of stocks would be your “Opportunity Universe.” You search your opportunity universe every day for trade chances.

Here are some tips for choosing equities to develop your opportunity universe:

Ascertain if the stock has adequate liquidity. Examining the bid-ask spread is one technique to ensure enough liquidity. The wider the spread, the less liquid the stock.

You might also have’minimum volume criteria.’ For example, you can only evaluate stocks with a daily volume of at least 500000.

Check that the stock is in the ‘EQ’ category. This is mostly due to the fact that equities in the ‘EQ’ segment can be day traded. I agree, I discouraged day trading for a beginner, but if you started a positional trade and the target encounters the same day, there is no damage in closing the position intraday.

This is a bit tough, however make sure the stock is not driven by the operator. Unfortunately, no measurable mechanism exists to detect operator-driven stocks. This comes from personal experience.

If you are having difficulty finding stocks that meet the criteria outlined above, I recommend sticking to the Nifty 50 or the Sensex 30. These are all known as index stocks. The exchanges carefully choose index stocks; this procedure guarantees that they meet several criteria, including those indicated above.

For both swing traders and scalpers, keeping the Nifty 50 as your opportunity universe is definitely a good idea.

The scout

Let us now look at how one should go about selecting equities for trading. In other words, we will strive to identify a procedure that will allow us to search for trading chances. The method is best suited for swing traders.

We have finally determined the four most important factors-

I suggest using Zerodha’s Pi charting programme.

Data at the end of the day

Opportunity Nifty 50 stocks – Universe

Positional transactions with the option to square off intraday if the target encounters on the same day.

Look back period – 6 months to a year While charting the S&R level, increase to 2 years.

After I’ve addressed these critical practical issues, I’ll disclose my trade opportunity scanning process. I’ve separated the procedure into two parts:

Part 1 The shortlisting process

I examine the chart of all of the equities in my opportunity universe.

When I look at the chart, I simply pay attention to the last three or four candles.

When I check the last three candles, I search for any discernible candlestick pattern.

If I come across an intriguing pattern, I mark it down for further examination and continue the scouting process. I always double-check all 50 charts.

Part 2 The evolution process

At this point, I usually have 4-5 shortlisted companies (of of the 50 stocks in my opportunity universe) that have a discernible candlestick pattern. I then proceed to thoroughly evaluate these 4-5 charts. I usually spend 15 to 20 minutes on each chart. When I look at the shortlisted chart, I do the following:

I generally consider how strong the pattern is; I’m particularly interested in determining whether I need to be more adaptable.For example, if a Bullish Marubuzo has a shadow, I consider the length of the shadow in relation to the range.

Following that, I examine the ‘previous trend.’ The preceding trend for all bullish formations should be a downtrend, while the prior trend for all bearish patterns should be an upswing. I do pay close attention to previous trends.

If everything appears to be in order (i.e., I have recognised an identifiable pattern with a well-defined prior trend), I proceed to analyse the chart further.

Following that, I examine the volumes. The volume must be equal to or greater than the 10-day average volume.

If both the candlestick pattern and the volume confirm, I check the support (for a long trade) and resistance (for a short trade) levels.

The S&R level should (as much as feasible) coincide with the trade’s stoploss (as defined by the candlestick pattern)

If the S&R level is more than 4% away from the stoploss, I stop studying the chart and move on to the next one.

I then search for Dow patterns, notably double and triple top and bottom formations, flag formations, and the probability of a range breakout.

Needless to add, I also establish the trend in the primary and secondary markets.

If steps 1 through 5 are satisfactory, I calculate the risk to benefit ratio (RRR)

To compute RRR, I first define the target by graphing the support or resistance level.

The RRR should be at least 1.5.

Finally, I check the MACD and RSI indicators to see if they confirm, and if I have extra money, I raise my trade size.

Typically, only one or two of the 4-5 nominated equities will qualify for a trade. There are days when no trade possibilities exist. Making the decision not to trade is a significant trading decision in and of itself. Keep in mind that this is a highly strict checklist; if a stock confirms the checklist, my conviction to trade is very high.

I’ve said it many times in this module, and I’ll say it again: once you place a trade, do nothing until your objective encounters or your stoploss is trigger. Of course, you can trail your stop-loss, which is a good idea. Otherwise, do nothing if your trade meets the checklist, and keep in mind that the deal is very limited, so your chances of success are high. So staying put with conviction makes sense.

The Scalper

A scalper is a concentrated trader with a keen sense of price. To make trading judgments, he uses specific charts such as 1 minute and 5-minute timeframes. A successful scalper executes numerous such deals throughout the day. His goal is straightforward: a huge quantity deal that he intends to hold for a few minutes. He aims to profit on minor fluctuations in the stock. Remember the checklist we mentioned, but don’t anticipate all of the checklist requirements to fulfill because the transaction time is relatively short.

If you want to be a scalper, here are some guidelines:

Remember the checklist we mentioned, but don’t anticipate all of the checklist requirements to fulfill because the transaction time is relatively short.

If I had to choose just one or two items from the scalping checklist, it would be candlestick pattern and volume.

While scalping, a risk-reward ratio of even 0.5 to 0.75 is acceptable.

Scalping should only done with liquid equities.

Have an effective risk management strategy in place, and be quick to book a loss if necessary.

Keep an eye on the bid-ask spread to see how volumes are developing.

Keep an eye on worldwide markets; for example, a decrease in the Hang Seng (Hong Kong stock exchange) generally leads to a drop in local markets.

Choose a low-cost broker to keep your spending under control.

Use margins wisely and avoid overleveraging.

Use dependable intraday charting software.

Stop trading and go away from your terminal if you suspect the day is going wrong.

Scalping is a day trading practise that needs mental fortitude and a machine-like mentality. A successful scalper enjoys volatility and is unconcern with market movements.

Conclusion

If you wan to be a technical trader, you should invest in good charting software. Zerodha’s Pi is my favourite.

Choose the EOD chart for both day and swing trading.

If you enjoy scalping the markets, look at intraday charts.

For swing trading, the lookback period should be at least 6 months to 1 year.

To begin with, the Nifty 50 is a fantastic opportunity universe.

The opportunity scanning process can divide into two stages.

Part 1 entails scanning the charts of all the stocks in the opportunity universe and shortlisting those that show a recognizable candlestick pattern.

Part 2 is investigating the shortlisted charts to see if they meet the checklist.

Scalping recommend for experienced swing traders

Single Candlestick

September 29, 2022July 21, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

Introduction

Firstly, A single candlestick design, as the name implies, made up of a single candle. As you may expect, the trade signal is generate based on one day’s trading activity. Trades based on a single candlestick pattern can be tremendously rewarding if the pattern is accurately identified and executed.

Secondly, When trading with candlestick patterns, one must pay attention to the length of the candle. The length represents the day’s range. The longer the candle, in general, the more intensive the buying or selling activity. If the candles are short, it indicates that the trade action was quiet.

At last, The following illustration depicts the long/short – bullish and bearish candle.

Moreover, Trades must also be fit depending on the length of the candle. Trading on muted short candles should be avoid. We shall comprehend this viewpoint as we learn about specific patterns.

The Marubozu

Importantly, The Marubozu is the first single candlestick pattern we’ll learn. In Japanese, the word Marubozu means “Bald.” We shall soon understand the terminology’s context. The bullish marubozu and the bearish marubozu are the two forms of marubozu.

Furthermore, Let us first establish the three most important candlestick rules. We discussed it in the previous chapter, and I’ve reprinted it below for your convenience:

First, Invest in strength and sell weakness.

Second, Patterns must be adaptable (verify and quantify)

Third, Look for the previous pattern.

Surely, Marubozu is likely the only candlestick pattern that breaches guideline number three, which is to look for a past trend. A Marubozu can emerge anywhere on the chart, regardless of the previous trend, and the trading implications are the same.

Definitely, Marubozu defines in the textbook as a candlestick with no upper and lower shadows (therefore appearing bald). As depicted below, a Marubozu possesses only the true body. There are, however, exceptions. We will investigate these exceptions as soon as possible.

Without a doubt, The bearish marubozu represents the red candle, while the bullish marubozu represents the blue candle.

Bullish Marubozu

Undoubtedly, In a bullish marubozu, the lack of the upper and lower shadows indicates that the low is equal to the open and the high is equal to the close. As a result, whenever the Open = Low and the High = Close, a bullish marubozu forms.

Especially, A bullish marubozu suggests that there is so much purchasing interest in the stock that market participants were willing to buy it at every price point during the day so the stock closed near its day high. Whatever the previous trend was, the performance on the marubozu day implies that sentiment has shifted and the stock is now positive.

Surely, The anticipation is that this quick shift in attitude will result in a wave of bullishness, which will last for the next few trading sessions. As a result, when a bullish marubozu appears, a trader should search for purchasing chances. The buying price should be around marubozu’s closing price.

Last but not least, The circled candle in the above chart (ACC Limited) is a bullish marubozu. It’s worth noting that the bullish marubozu candle lacks an upper and lower shadow. The candle’s OHLC data is as follows: Open = 971.8, High = 1030.2, Low = 970.1, Close = 1028.4

It should be noted, Please keep in mind that the textbook definition of a marubozu is Open = Low and High = Close. However, there is a slight exception to this rule. When measured in percentage terms, the price change is little; for example, the difference between high and close is 1.8, which is 0.17 percent of high. This is where the second rule comes into play: be flexible, quantify, and verify.

Also, With the occurrence of a Marubozu, the expectation has shifted to the upside, and one would be a buyer of the stock. The following is the trade setup for this:

Stoploss = 970.0 and Buy Price = Around 1028.4

As a present, candlestick patterns do not provide us with a target. However, we will return to the topic of defining goals later in this session.

As well as, When do we buy the stock after we’ve decided to buy it? The answer is dependent on your risk tolerance. For example, Assume two categories of traders with differing risk profiles: risk-takers and risk-averse traders.

Clearly, The risk taker would purchase the shares on the same day that the marubozu accepted. The trader must, however, authenticate the occurrence of a marubozu. Validation is a simple process. At 3:30 p.m., Indian markets close. So, at about 3:20 PM, check to see if the current market price (CMP) is roughly equal to the day’s high price and the day’s opening price is roughly equal to the day’s low price.

Indeed, If this condition is encounter, you can buy the stock around the closing price because the day is building a Marubozu. However, It is also important to notice that the risk-taker is buying on a bullish/blue candle day, therefore adhering to Rule 1, i.e., buying on strength and selling on weakness.

Another risk-averse trader would buy the stock the following day, that is, the day after the pattern has formed. To comply with rule number one, before purchasing the trader, confirm that the day is bullish. This means that a risk-averse buyer can only purchase the stock near the end of the day.

Besides, The disadvantage of buying the next day is that the buy price is far higher than the indicated buy price, and so the stop loss is rather large. As a result, the risk-averse trader buys only after double-checking that the bullishness is truly established.

According to the ACC’s graph above, both the risk taker and the risk-averse would have profited from their trades.

Another case in point is Asian Paints Ltd, where both the risk-taking and risk-averse traders would have profited.

Accordingly, A bullish Marubozu has encircled in the chart above. The risk-taker would have opened a deal to buy the stock near the close of the day, only to lose money the next day. On the other hand, The risk-averse, on the other hand, would have avoided purchasing the stock totally since the next day occurred to be a red candle day. According to the rule, we should only buy on blue candle days and sell on red candle days.

The Stoploss on Bullish Marubozu

What if, after purchasing, the market reverses its course and the deal fails? As I previously stated, candlestick patterns include a risk control system. In the case of a bullish marubozu, the stock’s low serves as a stop loss. If the markets go in the opposite direction after you execute a buy trade, you should quit the stock if the price breaches the marubozu low.

While Here’s an example of a bullish marubozu that qualified as a purchase for both risk-averse and risk-taking investors. O = 960.2, H = 988.6, L = 959.85, C = 988.5 is the OHLC

However, the pattern eventually collapsed, and one would have had to take a loss. The stop loss for this trade would be the Marubozu low, which is 959.85.

In addition to this, Booking a loss is a necessary element of the game. Even seasoned traders experience this. The nicest part about following the candlestick is that the losses cannot continue endlessly. Apart from this, If the transaction begins to move in the opposite direction, there is a clear agenda for what price one must get out of the deal. In this situation, taking a loss would have been the logical thing to do as the stock continued to fall.

Of course, there may be times when the stop loss trigger and you exit the trade. However, the stock may reverse course and begin to rise after you exit the deal. But, regrettably, this is part of the game and cannot keep away from. Whatever happens, the trader should follow the regulations and not look for reasons to break them.

Bearish Marubozu

Previously, Bearish Marubozu denotes excessive pessimism. In this case, the open is equal to the high and the close is equal to the low. Close = High, while Open = Low.

A bearish marubozu signifies that there is so much selling pressure in the stock that market participants sold at every price point during the day, causing the stock to close near its day low. Whatever the previous trend was, Even so, the behavior on the marubozu day implies that sentiment has shifted and the stock is now bearish.

The idea is that this abrupt shift in attitude will carry forward over the following several trading sessions, and hence shorting possibilities should consider. The selling price should be close to marubozu’s closing price.

Whereas, The circled candle in the chart above (BPCL Limited) indicates the presence of a bearish marubozu. It’s worth noting that the candle lacks an upper and lower shadow. The candle’s OHLC data is as follows:

Close = 341.7, Open = 355.4, High = 356.0, Low = 341.

As previously discussed, a tiny variance between the OHLC figures resulting in modest upper and lower shadows is acceptable as long as it is within a fair range.

Remember, once you start a trade, you should stick with it until either the target or the stop loss encounter. If you try to do something else before any of these event triggers, your trade will almost certainly fail. Staying on track with the plan is therefore critical.

Absolutely, A trade can initiate based on the individual’s risk tolerance. On the same day, around the closing, the risk-taker can initiate a short transaction. He must, of course, ensure that the candle is creating a bearish marubozu. To accomplish this at 3:20 PM, The trader must confirm whether the open is roughly equal to the high and the current market price is roughly comparable to the low. If the condition runs into, it is a bearish marubozu, and a short trade can open.

Despite, If the trader is wary of taking risks, he can wait until the next day’s close. After establishing that the day is a red candle day, the short trade will be complete at 3:20 PM the following day. This is important to guarantee that we follow the first guideline of buying strength and selling weakness.

In the BPCL chart above, both risk takers and risk-averse investors would have profited.

Moreover, Cipla Limited is another chart where the bearish marubozu has been successful for both risk-taking and risk-averse traders. Remember, these are short-term trades, and profits must book quickly.

Here’s a chart of a bearish marubozu pattern that would not have worked out for the risk-taker, but a risk-averse trader would have avoided the transaction because of rule 1.

The Trade Trap

We discussed the length of the candle earlier in this chapter. Trading should be avoided during a modest (less than 1% range) or extended candle (above 10 percent range)

A small candle implies low trading activity, making it harder to determine the trade’s direction. A lengthy candle, on the other hand, suggests high activity. The positioning of stop loss would be a difficulty with long candles. The stop loss would be high, and the penalty for paying would be severe if the deal went bad. As a result, trading on candles that are either too short or too lengthy should be avoided.

Conclusion

Remember the rules that govern how candlesticks work.
Marubozu is the sole pattern that breaks rule number three, i.e. Look for the previous pattern.
A bullish Marubozu signifies that you are bullish.
Buy near the close of a bullish Marubozu.
Maintain the Marubozu’s low as the stop loss.
A bearish Marubozu suggests that you are bearish.
Sell near the close of a bearish Marubozu.
Maintain the Marubozu’s high as the stop loss.
An ambitious trader can enter the trade the same day the pattern appears.
Risk-averse traders can place the transaction the following day, as long as it follows rule number one, i.e. buy strength and sell weakness.
Candles with unusual lengths should not be traded.
A short candle implies low activity.
Long candles imply high activity; nevertheless, setting stop loss becomes difficult.

Candlestick

September 29, 2022July 21, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

The big assumption is that history tends to repeat itself.

Firstly, As previously stated, one of the key assumptions of technical analysis is that history tends to repeat itself. This is most likely one of the most crucial assumptions in Technical Analysis.

Secondly, It would make important to analyze this assumption more at this point because candlestick patterns rely significantly on it.

Assume that on July 7, 2014, a few things are happening in a specific stock. Let us refer to this factor as:

Factor 1:-The stock has fallen for four consecutive trading sessions.
Factor 2:-Today is the fifth session, and the stock is sliding on somewhat lesser volumes.
Factor3:-The stock’s trading range today is quite narrow in comparison to the previous four days.

Thirdly, With these factors in play, let us imagine that on the next day (8th July 2014), the stock’s decline is arrested and the price rises to a positive close. As a result of the three variables, the stock increased on the sixth day.

Moreover, After a few months, say, the same collection of circumstances is seen for 5 consecutive trading sessions.

What would you anticipate for the sixth day?

Importantly, The assumption is that history tends to repeat itself. However, there is one limitation to this assumption. When a group of circumstances that has worked in the past tends to repeat itself in the future, we expect the same outcome to occur, providing the factors are the same.

Besides, Based on this assumption, we can expect the stock price to rise in the sixth trading session even this time.

Candlestick Patterns what to expect?

Furthermore, Trading patterns are identified using candlesticks. Patterns, in turn, assist the technical analyst in establishing a trade. The patterns are created by arranging two or more candles in a specific order. However, powerful trading signals can sometimes be spotted by a single candlestick pattern.

As a result, candlesticks can be divided into two types: single candlestick patterns and multiple candlestick patterns.

We shall learn the following under the single candlestick pattern.

Marubozu
Bullish Marubozu
Bearish Marubozu
Doji
Spinning Tops
Paper umbrella
Hammer
Hanging man
Shooting star

Not only but also, Multiple candlestick patterns are made up of several candles. We shall study the following from the various candlestick patterns:

Engulfing pattern
Bullish Engulfing
Bearish Engulfing
Harami
Bullish Harami
Bearish Harami
Piercing Pattern
Dark cloud cover
Morning Star
Evening Star

Indeed, You’re probably wondering what these names mean. Some of the patterns keep their original Japanese names, as I explained in the last chapter.

Especially, Candlestick patterns assist traders in developing a comprehensive point of view. Each pattern includes a built-in risk mechanism. Candlesticks provide information on both the entry and stop-loss prices.

Few assumptions specific to candlesticks

Surely, Before we go in and start learning about the patterns, there are a few more assumptions to consider. These assumptions apply just to candlesticks. Pay close attention to these assumptions because we will be returning to them frequently later.

At last, These assumptions may not be evident to you at this point. I’ll go through them in greater depth as we go along. However, keep the following assumptions in the back of your mind:

First, Buy strength and sell weakness:-A bullish (blue) candle represents strength, while a bearish (red) candle represents weakness. As a result, whenever you buy, make sure it’s a blue candle day, and whenever you sell, make sure it’s a red candle day.
Second, Be flexible with patterns (quantity and verify):- While the textbook description of a pattern may mention specific parameters, there may be slight deviations in the pattern due to market conditions. As a result, one must be somewhat adaptable. However, one must be flexible within boundaries; therefore flexibility must always be quantified.
Third, Look for a prior trend:-If you are searching for a bullish pattern, the preceding trend should be bearish, and vice versa if you are looking for a bearish pattern, the prior trend should be bullish. We’ll start with single candlestick patterns in the future chapter.

Conclusion

History tends to repeat itself; we changed this premise by including the factor angle.
Candlestick patterns are classified as single or multiple candlestick patterns.
Three key assumptions apply to candlestick patterns.
Invest in strength and sell weakness.
Be adaptable; quantify and verify.
Look for a previous pattern.

Types of Chart

September 27, 2022July 20, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

Introduction

Firstly, After determining that the Open (O), High (H), Low (L), and Close (C) are the best ways to describe the trading action for the given period, we require a charting technique that displays this information most understandably. Charts can become fairly complex if a quality charting technique is not used. Each trading day has four data points, namely the OHLC. A 10-day chart requires the visualization of 40 data points (1 day x 4 data points per day). You can imagine how difficult it would be to show 6 months or a year’s worth of data.

Secondly, As you may expect, standard charts such as the column chart, pie chart, area chart, and so on are ineffective for technical analysis. The line chart is the sole exception.

Thirdly, Regular charts do not function since they only show one data point at a given time. Technical Analysis, on the other hand, requires four data points to be display at the same time.

The following are some examples of chart types:

First, the Line chart

Second, Bar chart

Third, Japanese Candlestick

Furthermore, The focus of this section will be on Japanese Candlesticks; but, before we get there, we’ll learn why we don’t apply line and bar charts.

The Line and Bar chart

Importantly, The line chart is the simplest basic chart type, with only one data point used to create the chart. A line chart is create in technical analysis by plotting the closing prices of a stock or an index. Each closing price represents a dot, and a line connects the dots.

Undoubtedly, If we are looking at 60-day data, a line chart is create connecting the dots of the closing prices for 60 days.

Especially, Line charts can be produce for a variety of time frames, including monthly, weekly, and hourly. If you want to create a weekly line chart, you can utilize weekly closing prices of securities as well as other time frames.

Surely, The simplicity of the line chart is its advantage. The trader can identify the whole security trend with a single glance. However, the simplicity of the line chart is also a disadvantage. The line chart provides no further information to analysts other than a general perspective of the trend. Furthermore, the line chart considers only the closing prices, omitting the open, high, and low values. As a result, traders prefer not to utilize line charts.

The bar chart, on the other hand, is more adaptable. A bar chart shows each of the four price variables: open, high, low, and close. A bar made up of three parts.

The Central Line:-The top of the bar indicates the highest price the security has reached. The bottom end of the bar indicates the lowest price for the same period.

The left mark/tick:-Indicates the open.

The right mark/tick:-Indicates the close

For example

Open – 70

High – 75

Low – 65

Close – 74

For the above data, the bar chart would look like this:

As you can see, we can plot four different price points in a single bar. If you want to see a 5-day chart, we will see 5 vertical bars, as you could expect. So forth and so on.

The left and right marks on the bar chart change based on how the market has moved throughout the day.

If the left mark, which represents the initial price, is lower than the right mark, it means that the close is higher than the open (close > open), indicating that the markets had a positive day. Consider the following: O = 51, H = 56, L = 51, C = 56. The bar is color blue to signify that it is a bullish day

Similarly, if the left mark is higher than the right mark, the close is lower than the open (close open), indicating a bad day for markets. Consider the following: O = 79, H=81, L=74, C=75. The bar is color red to show that it is a bearish day.

Importantly, The length of the central line represents the day’s range. The difference between the high and low can be characterize as a range. The longer the line, the bigger the range; the shorter the line, the smaller the range.

However, Even though the bar chart displays all four data points, it lacks visual attractiveness. This is most likely the most significant disadvantage of a bar chart. When looking at a bar chart, it might be difficult to see potential patterns. When a trader has to evaluate many charts throughout the day, the complexity rises.

History of the Japanese Candlestick

As well as that, The length of the central line represents the day’s range. The difference between the high and low can be characterize as a range. The longer the line, the bigger the range; the shorter the line, the smaller the range.

Indeed, Even though the bar chart displays all four data points, it lacks visual attractiveness. This is most likely the most significant disadvantage of a bar chart. When looking at a bar chart, it might be difficult to see potential patterns. When a trader has to evaluate many charts throughout the day, the complexity rises.

Candlestick Anatomy

Clearly, In a bar chart, the open and close prices represent a tick on the left and right sides of the bar, respectively, but in a candlestick chart, the open and close prices represented a rectangular body.

Absolutely, Candles in a candlestick chart can be categorize as bullish or bearish and are often represented by blue/green/white and red/black candles. Needless to add, the colors can be change to any color of your choice using the technical analysis software. This module has chosen blue and red to represent bullish and bearish candles, respectively.

Besides, Consider the bullish candle. The candlestick, like the bar chart, made up of three parts.

The Central real body:-The real body rectangular connects the opening and closing price.

Upper Shadow:-Connects the high point to the close.

Lower Shadow:-Connects the low point to the open.

Last but not least, Have a look at the image below to understand how a bullish candlestick is form:

An example will help you understand this better. Assume the pricing is as follows.

Open = 68 High = 75 Low = 63 Close = 72

Similarly, the bearish candle has three components:

The Central real body:-The rectangular actual body that connects the opening and closing prices. However, the opening is at the top of the rectangle, and the closure is at the bottom.

Upper Shadow:-Connects the high point to the open.

Lower Shadow:-Connects the Low point to the close.

This is what a bearish candle would look like:

It should be noted, This is best understood with an example. Let us assume the prices as follows.

Open = 461 High = 475 Low = 425 Close = 440

On the other hand, Reading candlesticks to discover patterns becomes much easier once you understand how they are plot.

Also, If you plot the candlestick chart on a time series, it looks like this. The blue candle signifies bullishness, whereas the red candle shows bearishness.

Also, a long-bodied candle indicates intense buying or selling activity. A short-bodied candle indicates that there is less trading activity and thus less price change.

To summarise, candlestick charts are easier to comprehend than bar charts. Candlesticks allow you to rapidly visualize the link between the open and close price points as well as the high and low price points.

A note time in the frames

A time frame defines as the time spent studying a certain chart. Technical analysts frequently employ the following time frames:

Monthly Charts

Weekly Charts

Daily or end-of-day Charts

30-minute, 15-minute, and 5-minute intraday charts

The time frame can be change to suit the needs of the user. A high-frequency trader, for example, may prefer to use a 1-minute chart above any other time frame.

Here’s a basic tutorial on various time frames.

Time Frame	Monthly	Weekly	Daily or EOD	Intraday 30 minutes	Intraday 15 minutes	Intraday 5 minutes
Open	The opening price on the first day of the month	Monday’s Opening Price	The opening price of the day	The opening price at the beginning of the 1st minute	The opening price at the beginning of the 1st minute	The opening price at the beginning of the 1st minute
High	The highest price at which the stock traded during the entire month	The highest price at which the stock traded during the entire week	The highest price at which the stock traded during the day	The highest price at which the stock traded during the 30-minute duration	The highest price at which the stock traded during the 15-minute duration	The highest price at which the stock traded during the 5-minute duration
Low	The lowest price at which the stock traded during the entire month	The lowest price at which the stock traded during the entire week	The lowest price at which the stock traded during the entire day	The lowest price at which the stock traded during the 30-minute duration	The lowest price at which the stock traded during the 15-minute duration	The lowest price at which the stock traded during the 5-minute duration
Close	The closing price on the last day of the month	The closing price on Friday	The closing price of the day	The closing price as on the 30th minute	The closing price as on the 15th minute	The closing price as on the 5th minute
No of Candles	12 candles for the entire year	52 candles for the entire year	One candle per day, 252 candles for the entire year	Approximately 12 candles per day	25 candles per day	75 candles per day
Intraday 5 minutes	The opening price at the beginning of the 1st minute	The highest price at which the stock traded during the 5-minute duration	The lowest price at which the stock traded during the 5-minute duration	The closing price as on the 5th minute	75 candles per day

As shown in the table above, the number of candles (data points) rises when the time frame decreases. You must decide on the time frame you needed based on the type of trader you are.

Data can be either information or noise. As a trader, you should separate information from noise. A long-term investor would benefit from looking at weekly or monthly charts because they would provide information. An intraday trader performing 1 or 2 trades per day, on the other hand, are better off looking at end of the day (EOD) or at best 15 minute charts. Similarly, 1-minute charts can provide a lot of information to a high-frequency trader.

Conclusion

Because we need to plot four data points at the same time, traditional chart types cannot be use for technical analysis.

A line chart can be use to interpret trends, but it cannot provide any further information.

Bar charts lack aesthetic appeal and make it difficult to discern trends. As a result, bar charts are not often used.

Candlesticks classifies into two types: bullish and bearish. The structure of the candlestick, on the other hand, remains unchanged.

When close > open, the candle is bullish. When close = open, the candle is bearish.

Time frames are extremely important in determining trading performance. This must done with caution.

As the frequency rises, so does the amount of candles.

Appreciation

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Because we believe each student should be successful. Since our program is so powerful. So, we encourage and invite more applications, therefore. Of course, we feel proud to invite the differently abled students too. Moreover, the stock market does not care about any race, religion, family background, or religion also. Then, again, We are there to assist you with the best education. Finally, head over to our contact page to speak to our counselor. For one thing, we do not want our students to fail, which is why give regular and repeated classes too.

Overview In Technical Analysis

September 27, 2022July 19, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

We got a quick introduction to Technical Analysis in the previous chapter. This chapter will concentrate on the adaptability and assumptions of Technical Analysis.

Application on asset types

Technical analysis may learn about any asset class as long as it has historical time series data, which is one of its most adaptable features. In the context of technical analysis, time series data is information about price variables such as open high, low, close, volume, and so on

. Here’s an example that might help. Consider learning to drive a car. You can drive any car once you’ve learned how to drive. The same is true for technical analysis; it simply has to be re-master initially. After that, you can apply TA’s principle to any asset class, including stocks, commodities, foreign exchange, and fixed income. This is perhaps one of the most significant advantages of TA over other fields of study. When it comes to fundamental equity analysis, for example, one must examine the profit and loss, balance sheet, and cash flow statements

. The fundamental examination of commodities, on the other hand, is entirely different. If you are working with an agricultural product such as coffee or pepper, the fundamental analysis will include an examination of rainfall, harvest, demand, supply, inventory, and so on. The fundamentals of metal commodities, however, differ from those of energy commodities. As a result, the fundamentals vary every time you select a commodity. In each case, regardless of the item under consideration, the premise of technical analysis remains the same. An indicator like the Moving Average Convergence Divergence (MACD) or the Relative Strength Index (RSI), for example, is the same way when trading stocks, commodities, or currencies.

Assumption of Technical Analysis

Technical analysts are unconcern, unlike fundamental analysts whether a stock is overvalue. The only thing that matters is the stock’s previous trading data (price and volume) and the knowledge this data can provide regarding the security’s future movement.

A few key assumptions underpin technical analysis. To achieve the greatest results, one must be conscious of these assumptions.

1. Markets discount everything:-This theory presupposes that the latest stock price reflects all known and undiscovered information in the public domain. For example, an insider may be buying the company’s stock in big quantities in anticipation of a positive quarterly earnings announcement. While he is doing this covertly, the price reacts, revealing to the technical analyst that this could be a good buy.

2. The how is more important than why? :-This is a development of the initial assumption. Using the same scenario as before, the technical analyst isn’t interested in why the insider acquired the stock as long as he understands how the price reacted to the insider’s move.

3. Price moves in trend:-All major market movements are the result of a trend. The foundation of technical analysis is the idea of trends. For example, the recent rise in the NIFTY Index from 6400 to 7700 did not occur overnight. This transition occurred in stages over 11 months. The price will go in the direction of the trend after it has been forming due, to put it another way.

4. History tends to repeat itself:-The price tends to repeat itself in the context of technical analysis. This occurs when market participants regularly react in a surprisingly comparable manner to price fluctuations in a given direction. In up-trending markets, for example, market participants become greedy and want to buy regardless of the high price. Similarly, in a slump, market players desire to sell regardless of the low and unappealing pricing. The repetition of price history is ensuring by his human response.

The trade summary

From 9:15 a.m. to 3:30 p.m., the Indian stock exchange is open. Millions of trades take occur during the 6 hour 15 minute trading period. Take a look at a certain stock: on the exchange, trades have made every minute. Do we, as market participants, need to keep track of all the many price points at which a trade is going well?

Consider this particular stock with several trades to further explain this point. Take a look at the image below. Each point reflects a transaction that was finish at a particular moment. A graph with every second from 9:15 AM to 3:30 PM included will have numerous points. As a result, for clarity, I’ve drawn a limited time scale period in the chart below: The market began at 9:15 a.m. and closed at 3:30 p.m., with several trading taking place.

Keeping track of all these distinct price points will be next to impossible. In actuality, what is a summary of the trading activity rather than data on -The highest price at which market players were willing to transact on a given day. . The closing acts as a guide for intraday strength.

The day is consider positive if the close is higher than the open; otherwise, it is referring to as negative. Of course, as we move through the module, we will go over this in greater depth.

Introduction TECHNICAL ANALYSIS

September 27, 2022July 19, 2022 by Deepanshu

Technical analysis

• Technical analysis
• Introduction
• Types of charts
• Candlesticks
• Candle sticks patterns
• Multiple candlestick Patterns
• Trading – get started
• Trading view

• Support & resistance
• Volume trading
• News and Events
• Moving averages
• Indicators
• Fibonacci Retracements
• Notes

Firstly, The previous session got us started on the right foot by providing us with a basic knowledge of the stock market. Using the prior session as a guide, we now understand that creating a well-researched perspective is important for stock market success.

A good point of view should have a directed perspective and contain information like:

First, the Price at which stocks should be purchased and sold
Second, There is risk involved.
Third, the Anticipated reward
At last, the Typical holding period

Importantly, Technical Analysis (commonly known as TA) is a popular approach for doing that. Besides, It assists you in developing a point of view on a certain stock or index and in defining the trade while keeping the entry, exit, and risk in mind.

Undoubtedly, Technical Analysis, like other research approaches, has its own set of characteristics, some of which can be rather complicated. However, technological advancements have made it simple to explain. As we progress through this subject, we will find these characteristics.

What is Technical Analysis?

Consider the following analogy.

Furthermore, Consider yourself on vacation in a distant nation where you are unfamiliar with the language, culture, climate, and food. On the first day, you conduct typical tourist activities, and by the evening, you are starving. You want to end your day with a delicious meal. You inquire about an excellent restaurant and are told about a fantastic food street nearby. You decide to give it a shot.

Unexpectedly, several vendors are selling various types of food. Everything appears to be unique and intriguing. You have no idea what you’re going to have for dinner. To make this situation worse, you can’t ask around because you don’t speak the language. So, given all of this, how will you choose what to eat?

You have two alternatives option for deciding what to eat.

Option 1

For example, You go to a vendor and find out what they are cooking/selling. Examine the ingredients, and cooking style, and probably taste a little to see if you enjoy the food. As well as, You repeat this process with a few vendors, and you’ll most likely end up eating at the restaurant that satisfies you the best. The benefit of this method is that you know exactly what you’re eating because you researched it independently. On the other hand, the technique you used is not truly scalable. Especially, There could be around 100 vendors, and with limited time, you can probably cover about 4 or 5 of them. As a result, there’s a strong chance you missed the best-tasting food on the street!

Option 2

Another, You stand in a corner and watch the sellers. You strive to discover a merchant who is drawing the most attention. When you encounter such a vendor, you make a simple assumption: ‘The seller has so many customers, so he must be providing the best cuisine!’ ‘You decide to go to that particular vendor for dinner based on your assumption and the crowd’s desire. Never, you may be eating the best-tasting food available on the street.

The accessibility of this method is an advantage. You must find the seller with the most customers and bet that it is good based on the preferences of the crowd. On the other hand, the crowd does not always have to be correct.

Option 1 is fairly similar to Fundamental Analysis in that you thoroughly research a few firms. In the following module, we will go over the Fundamental Analysis in greater depth.

Option 2 is similar to Technical Analysis in that it looks for opportunities based on the current trend, also known as the market’s preference.

Technical analysis is a study technique used to find trading opportunities in the market based on the activities of market participants. A stock chart can be used to display market players’ activity. Patterns evolve inside these charts throughout time, and each pattern offers a different message. A technical analyst’s task is to identify these patterns and form an opinion.

Technical analysis, like any other research technique, is based on several assumptions. As a technical analyst, you must trade the markets while keeping these assumptions in mind. Of course, as we go along, we’ll get a better understanding of these assumptions.

Also, at this time, it is appropriate to shed some light on an issue involving FA and TA. People frequently argue over whether a certain research strategy is a better approach to the market. However, there is no such thing as the best research strategy. Every study method has advantages and disadvantages. It would be pointless to compare TA with FA to determine which is the superior approach.

Both strategies are distinct and incomparable. A wise trader would spend time learning both approaches for identifying exceptional trading or investing chances.

Setting Expectations

Technical analysis is frequently viewed by market participants as a quick and easy technique to make a windfall profit in the markets. Technical analysis, on the other hand, is everything but quick and easy. Yes, a windfall gain is feasible if done correctly, but to get there, one must put in the necessary effort to understand the technique.

The trading crisis is unavoidable if you regard TA as a quick and easy strategy to make money in markets. When a trading disaster occurs, the responsibility is sometimes placed on technical analysis rather than the trader’s inability to apply Technical Analysis to markets. As a result, before digging deeper into technical analysis, it is critical to establish expectations about what technical analysis can and cannot do.

Traders:-Short-term trades are best identified using TA. Use TA to find long-term investment opportunities. Fundamental analysis is the best tool for identifying long-term investment opportunities. If you are a fundamental analyst, you may also apply TA to calibrate the entry and exit locations.
Return per trade:-TA-based trades is often of short duration. Expecting large returns in a short period is unrealistic. The key to success with TA is to uncover numerous short-term trading chances that can provide you with small but regular returns.
Holding period:-Technical analysis trades can last anywhere from a few minutes to a few weeks, and usually not longer. This will be covered further when we consider periods.
Risk:-Traders frequently initiate a trade for a specific reason; nevertheless, if the stock suffers a negative movement, the trade begins to lose money. In such cases, traders typically cling on to their losing detox recouping their losses. Remember that TA-based trades are short-term; if the deal goes bad, remember to reduce your losses and move on to find another chance.

Technical analysis

We learned about entry and stop loss points while analyzing candlestick patterns. However, the goal price was not discussed. This topic will be covered in this chapter.

Traders can utilize S&R to discover trading entry points on their own.

Resistance, as the name implies, is something that prevents the price from growing further. The resistance level is a price point on the chart where traders expect the stock/index to have the most supply (in terms of selling). The resistance level is always higher than the market price.

The chances of the price increase to the resistance level, consolidating, absorbing all supply, and then falling are considerable. In a rising market, one of the essential technical analysis tools that market players look at is resistance. Resistance is frequently used as a sell trigger.

Ambuja Cements Limited’s chart is shown below. The horizontal line on the chart, which coincides with Rs.215, is Ambuja Cements’ resistance level.

I purposefully compressed the chart to contain more data points, for reasons I will explain momentarily. But first, there are two things you should keep in mind while looking at the following chart:

A horizontal line indicates that the resistance level is greater than the current market price.

The current candle is at 206.75, while the resistance level is at 215. For your convenience, the current candle and its matching price level are surrounded.

Consider Ambuja cement at Rs.206 making a bullish marubuzo with a low of 202. We know this is a signal to start a long trade and that the stop loss for this trade is set at 202. With our newfound resistance knowledge, we can now set 215 as a feasible objective for this deal!

You may be wondering why 215? The reasons are straightforward: –

The resistance of 215 indicates that there is a possibility of excess supply.

Excess supply adds to the selling pressure.

Prices tend to fall as a result of selling pressure.

As a result, when a trader is long, he can look for resistance points to create targets and exit points for the transaction.

Furthermore, now that the resistance has been identified, the long trade may be completely designed as follows:

206 is the entry point, 202 is the stop loss, and 215 is the target.

Because the approach is the same, let us begin by understanding’ support,’ and then proceed to the procedure for identifying S&R.

The price could decrease until it reaches support, then consolidate and absorb all of the demand before beginning to rise. In a declining market, one of the crucial technical levels that market players seek is support. The support is frequently used as a buy trigger.

Cipla Limited’s chart is shown below. Cipla’s support level is marked on the chart by the horizontal line at 435.

A few things to take note of in the chart above:

The horizontal line represents a support level that is lower than the current market price.

The current candle is at 442.5, while the support level is at 435. For your convenience, the current candle and its matching price level are surrounded.

As we did with resistance, imagine a bearish pattern forming – possibly a shooting star at 442 with a high of 446. With a shooting star, the call is overly short Cipla at 442, with a stop loss of 446.

We can set the aim at 435 because we know 435 is the immediate support.

A few things to take note of in the chart above:

The horizontal line represents a support level that is lower than the current market price.

The current candle is at 442.5, while the support level is at 435. For your convenience, the current candle and its matching price level are surrounded.

As we did with resistance, imagine a bearish pattern forming – possibly a shooting star at 442 with a high of 446. With a shooting star, the call is overly short Cipla at 442, with a stop loss of 446. We can set the aim at 435 because we know 435 is the immediate support.

So, what makes the Rs.435 target worthwhile? The decision is supported by the following reasons:

Support at 435 indicates that excess demand is most likely to emerge.

Excess demand increases purchasing pressure.

Buying demand tends to drive up the price.

As a result of the foregoing, when a trader is short, he can use support levels to define targets and exit points for the transaction.

Furthermore, with the identification of the support, the short trade is now fully designed.

442 is the entry point, 446 is the stop loss, and 435 is the goal.

Here is a four-step approach to help you locate and build the support and resistance lines.

Swing trading can benefit from long-term S&R.

S&R short term – beneficial for intraday and BTST trading.

I’ve imported 12 months of data points onto this chart.

Step3) Align the price action zones. Many price action zones can be seen when looking at a 12-month chart. The secret, though, is to find at least three price action zones at the same price level.

Here’s an example of a chart with two price action zones that aren’t at the same price point.

Step 4) Draw a horizontal line connecting the three price activity zones. Based on where this line falls about the current market price, it becomes either support or resistance.

Analyze this graph.

From left to right:

The first circle denotes a price action zone with a sharp price reversal.

The second circle denotes a price action zone in which the price is sticky.

The third circle denotes a price action zone with a sharp price reversal.

The fourth circle denotes a price action zone in which the price is sticky.

The fifth circle represents Cipla’s current market price of 442.5.

In the above chart, all four price movement zones are located near the same price point, 429. The horizontal line is well below the current market price of 442.5, indicating that 429 is an immediate support price for Cipla.

Following the argument outlined above, I would be content to view a price range of 426 to 432 as a support region for Cipla. There is no set guideline for this range; I simply deducted and added 3 points to 429 to achieve my support price range!

Here is another chart for Ambuja Cements Limited that shows both S&R.

There are at least three price action zones identified at the price level at both the support and resistance levels, all of which are well-spaced in time.

The support and resistance lines are just indicators of a probable price reversal. They should never be taken for granted. Like anything else in technical analysis, the potential of an event occurring (based on patterns) should be weighed in terms of probability.

For example, according to the Ambuja Cements –

204 is the current market price.

214 = resistance

S&R points that are effectively constructed are usually well respected in my trading experience.

In general, optimization is a strategy for fine-tuning a process to achieve the best potential results. In this case, the procedure is about identifying transactions.

Let us return to candlestick patterns, perhaps to the very first one we learned – bullish marubuzo. A bullish marubuzo indicates a long trade near the marubuzo’s close, with the low of the marubuzo acting as the stop loss.

Assume the bullish marubuzo has the following credentials:

Close = 448, Open = 432, High = 449, Low = 430

As a result, the entry point for the long trade is around 448, with 430 as the stop loss.

What if the marubuzo’s low also corresponds with reliable time-verified support? Do you notice a surprising intersection of two technical notions here?

To go far, we have a double confirmation. Consider it in the following terms:

A recognized candlestick pattern (bullish marubuzo) indicates that the trader should begin a long transaction.

Support at the stop loss price indicates to the trader that there is substantial buying demand near the bottom.

A well-crafted trading setup is essential when dealing with a fairly unpredictable environment such as the markets. The occurrence of the two conditions mentioned above (marubuzo + support at the low) implies the same action, which is to begin a long trade in this case.

They claim that discipline accounts for 80% of a trader’s performance. The checklist, in my opinion, forces you to be disciplined; it helps you avoid making rash and foolish trading decisions.

To begin with, we have the checklist’s first two important factors:

The stock should have a distinct candlestick pattern. a) In this subject, we learned some of the most prominent patterns. To begin, you can only use these patterns to complete the checklist.

S&R should confirm the transaction. The stop-loss price should be in the vicinity of S&R.

The low of the pattern should be near the support for a long trade.

For a short trade, the pattern’s high should be near the resistance.

S&R are price points on the chart

Support is a price point below the current market price that indicates buying interest.

Resistance is a price point above the current market price that indicates selling interest.

To identify S&R, place a horizontal line in such a way that it connects at least 3 price action zones, well-spaced in time. The more number of price action zones (well spaced in time) the horizontal line connects, the stronger is S&R

S&R can be used to identify targets for the trade. For a long trade, look for the immediate resistance level as the target. For a short trade, look for the immediate support level as the target.