Traders, always grappling with the uncertainties of the share market, resort to a few methods to arrive at the optimum decision. "Moving averages" is one of them. It can be used quite effectively by traders to generate 'buy' or 'sell' signals.
A 'buy' signal is generated when the price of a share moves above the average. A 'sell' signal is generated when its price moves below the average. This is the most conspicuous utility of moving average.
A 'buy' signal is generated when the shorter average crosses the longer average. A 'sell' signal is generated when the shorter average falls below the longer.
MACD = Short Term Moving Avg - Longer Term Moving Avg
When the MACD is positive, it signals that the shorter term moving average is above the longer term moving average and suggests upward momentum. The opposite holds true when MACD is negative- this signals that it is in a downward momentum.
Center line Crossover
It is one of the most common MACD signals. A bullish centerline crossover occurs when the MACD line moves above the zero line (Positive). This happens when 12 day EMA moves above the 26 day EMA. A bearish centerline crossover happens when the MACD moves below the zero line. This happens when 12 day EMA moves below the 26 day EMA.
Signal Line Crossover
Signal Line crossover are also part of MACD signals. A bullish crossover occurs when the MACD crosses above the signal line. A bearish crossover happens when MACD turns down and crosses below the signal line.
SMA (SIMPLE MOVING AVERAGES)
An N-day Simple Moving Average is calculated by calculating the average of N most recent prices. It helps to smoothen the price movement and hence is more useful in identifying trends. A cross over of short term moving averages over the long indicates uptrend and vice versa.
Line Charts are formed by connecting the closing price of a stock or index over a given period of time. It is useful for a clear illustration regarding uptrend/ downtrend.
It is the most popular method traders use to see price action of a stock.
The 'Marubozu' indicates a long candle, which implies that the day's trading range has been large. And it should have no upper or lower wicks. In Japanese language it means 'Shaved'.
A 'green' or white Marubozu indicates strong buying interest amongst investors, while a red or black indicates dominance of sellers in the market.
The OBV is calculated by using the current period's volume to a cumulative OBC total when the trading instrument's price closes up and by subtracting the current period's volume from the cumulative obv total when the trading instrument's price closes down.
A rising OBV line indicates that the volume is heavier. If the price is likewise rising, then the OBV can serve as a confirmation of the price uptrend. In such a case, the rising price is the result of an increased demand for the security.
COMMODITY CHANNEL INDEX
Commodity Channel Index measures the variation of a security's price from its statistical mean. High values show that prices are usually high compared to average prices whereas low values indicate that prices are unusually low. It can be used to identify potential overbought and oversold position. A stock would be deemed oversold when the CCI dips below -100 and overbought when it exceeds +100. From the oversold position, a buy signal might be given when the CCI moves back above -100.
WILLIAM % R
William% R shows the relationship of the close relationship of the close relative to the high-low range over a period of time. A value of % R close to its zero line indicates that the closing price is near the top of the range over N âdays. It is used to identify overbought/ oversold position. The value above -20 are considered overbought.
It is a momentum indicator that shows the location of the current close relative to the high/low range over a range of past periods.
Reading below 20 are considered oversold and reading above 80 are considered overbought.
Buy or Sell signals can be given when % K crosses above or below % D.
Open Interest is the total number of outstanding contracts that are held by the market participants at the end of the day. When we say about Open Interest, it applies to futures market only. It measures the flow of money into the futures market. A seller and buyer combine to create only one contract. The open interest position that is reported each day represents the increase or decrease in the number of contracts for that day.
- If price is rising and Open Interest is rising, it means market is very strong.
- If price is rising and Open Interest is falling, it means market is weakening.
- If price is falling and open Interest is rising, it means Market is Weak.
- If price and Open Interest both are falling, it means market is strengthening.
MONEY FLOW INDEX
MFI is based on the concept of money flow. If typical price (High+ low+ close/3) today is higher than the previous day, then there is positive news for the stock/index.
High values of MFI indicates overbought levels, whereas low value indicates oversold levels.
RELATIVE STRENGTH INDEX
RSI is a momentum oscillator, whose value oscillates between 0-100, calculated based on relative strength- a measure of momentum. An N period relative strength is the ratio of gains in the price in last N days, divided by the losses in last N days.
Higher values of RSI indicate overbought markets, whereas lower values of RSI indicate oversold market. 30 and 70 are generally considered as an ideal for a buy and sell signal confirmation. When RSI crosses from bottom, it indicates bullish confirmation signal. When it crosses 70 from top it is a bearish condition.
- RSI tends to vary between 40 to 80 in a bullish market.
- RSI tends to vary between 20 to 60 in a bearish market.
- If the RSI value is fixed in a region for a prolonged period, it indicates excess momentum and henceinstead of taking a reversed position, the traders can consider initiating a trade in the same direction.
This works well with EOD, Weekly and Intraday chart frames for trading and gives very nice Entry Levels for both Longs and Shorts.
Whenever the trend line crosses ONE level coming from downside, or turns up from ONE level itself while coming down from upside, initiate the LONG TRADE .
- Whenever the trend line crosses the ONE level coming from upside, initiate LONG TRADE .
- Whenever the trend line crosses the ONE level coming up from downside, initiate SHORT TRADE
ADX (Directional Moving Average)
An indicator used in technical analysis as an objective value for the strength of the trend. It fluctuates between 0 and 100. Even though the scale is from 0 to 100, reading above 60 are relatively rare. Low reading below 20 indicates a week trend and above 40 indicates a strong trend. It can be used to identify potentially changes in a market from trending to non-trending.
ADX below 20 indicates absence of trend and similarly, above 25 indicates strong trend. ADX above 40 indicates extremely strong trend and low risk.
- When ADX is above 20 and +Di crossover âDi then it's a Buy.
- When ADX is above 20 and âDi crossover +Di, then it's Sell.
Chaikin Money Flow
It measures the amount of Money Flow Volume over a specific period. Money Flow forms the basis for the Accumulation Distribution Line. Instead of a cumulative total of Money Flow Volume, Chaikin Money Flow simply sums Money Flow Volume for a specific period, typically 20 or 21 days.
Chartists weigh the balance of buying or selling pressure with the absolute level of Chaikin Money Flow. Traders also look for crosses above or below zero line to identify changes on Money flow.
It is an oscillator that measures the accumulation distribution line of the MACD. The Chaikin Oscillator is calculated by subtracting a 10- day from a 3 day EMA of the accumulation distribution line.
It is developed by Donald Dorsey. It is used to identify trend reversals based on range expansions. In this case, it is a volatility indicator that does not have a directional bias.
It is a technical indicator used to signal the acceleration or deceleration of the current market driving force. It is fluctuating around zero level which corresponds to a relative balance of the market driving force. Positive values signal a growing bullish trend, whereas negative values may be qualified as a bearish trend development. Two consecutive green columns above the zero level would suggest to enter the market with a long position while at least two red columns below the zero level indicates to go for a short.
Engulfing (Bullish& Bearish)
An engulfing pattern signals a reversal, and can be bullish or bearish. It comprises two candles. The body of the second must engulf the body of the first, and must be opposite colour to the first.
For a bullish engulfing candle, a smaller red candle is followed by a green candlestick, the body of which is greater than the previous candle.
For a bearish engulfing candle, the first candle is small and green, followed by a red candle, the body of which engulfs in the previous candle.
Harami (Bullish and Bearish)
It is one of the most common patterns. It is made up of two candlesticks and implies that the price is about to turn. The bullish harami shows the sellers beginning to dominate as they come back to the market.
The bearish harami has a shadow that extends beyond the body of the previous candle. The psychology behind a harami is that a possible change in sentiment may happen.
It is found in a downtrend, and signals a bullish reversal. The long lower wick shows a period in which sellers were in control of the market, but the body shows buyers coming back in. From this we can tell that there is a strong buying by bulls.
It is the same shape as a hammer, but found in an uptrend. We don't expect to see strong selling pressure in an uptrend.
There is no hard and fast rule about what colour a hammer or a hanging man should be- the fact is that they have a short body already indicating that there is indecision in the market.
It is a candle with a small body and a long up ward wick, signally a reversal trend. An inverted hammer forms after a downtrend or bottom of the period of consolidation.
A shooting star forms after an uptrend or at the period of consolidation.
Inverted Hammers and Shooting Stars can have green or red candles- what is important here is that the body is small and the upper wick is at least twice the length of the body, and the lower wick is negligible.
Morning Star (Bullish)
A morning star is a three-candle pattern, beginning with a candle that is strongly down. The second candle's real body should be small and should not touch previous candle's real body. The third candle should be strongly up.
Evening Star (Bearish)
It is the same idea, just the reverse. Therefore, the first candle should be strongly up. The second candle's real body should be small and should not touch first candle's real body. And the third candle should be strongly down.
Three White Soldiers (White)
Three strong green or white candles within a downtrend. There is a bullish signal of strong buying action of work.
Three Black Soldier (Black)
Three consecutive sessions of selling will worry bulls and may snowball in to a sell off.
A piercing line pattern occurs in a downtrend. A strong red candlestick is followed by a candlestick that opens below its close, which perpetuates
Dark Cloud Cover
Dark Cloud Cover occurs in an uptrend, when a red candle opens above the previous candle's closing price, but then the price retreats to below the midpoint of the previous candle.
The Doji is a candlestick where the opening and closing prices are the same or almost the same. It can take many forms, depending on what the trading activity was in that period.
A good trick is to look out for a Doji near the edge of price channel (i.e. if a Doji appears at the top of a channel it could indicate a bearish correction).
Average True Range
The value returned by the average true range is simply an indication as to how much a stock has moved either up or down on average over the defined period. High Values indicate that prices are changing a large amount during the day. Low values mean prices are staying relatively constant.
A support level is a price point where we see demand coming in exceeding supply for the stock/ Index.
This is one critical technical point, where market participants look for a falling market.
A resistance level is a level where we can see supply coming in exceeding demand for the stock/ index. This is a critical point where market participants look for a rising market.
MONEY FLOW INDEX (MFI)
MFI is based on the concept of money flow. If (High+ low+ close/3) today is higher than the previous day. At a particular price a substantial amount of money has flown into the security and vice versa.
It is an oscillator whose value is calculated using the ratio of total positive money flow in the last N days.
High values of MFI indicates overbought levels, where as low values indicate oversold levels.
FULL STOCHASTIC (FS)
Stochastic is a momentum indicator that shows the location of the current close relative to the high/ low range over a range of past periods.
- Readings below 20 are considered oversold and readings above 80 are considered overbought.
- Buy and Sell signals can be given when %K crosses above or below % D.
Bullish Signal- Stocks for which the Stochastic Oscillator (14,3) has just moved above the 20 level and %K line is greater than % D line.
Bearish Signal-Stocks for which the Stochastic Oscillator (14,3) has just moved below the 80 level and %K line is less than % D line.
WILLIAM % R
William % R shows the relationship of the close relative to the high-low range over a set period of time. A value of %R close to zero indicates that the closing price is near the top of the range over N period, where as a value close to -100 indicates that the closing price is near the bottom of the range. Basically it is a momentum indicator used to identify overbought/ oversold levels.
Volume is simply a barometer of future activity and direction. It measures the number of contracts that exchanged hands during the trading session.
- If the prices are up and volume is rising, the market is strong.
- If the prices are up and volume is declining, the market is weak.
- If the prices are down and volume is rising, the market is weak.
- If the prices are down and volume is declining, the market is strong.
Additionally, the bars are color-coded to indicate market activity for the day.
When price is unchanged compared to previous price, Volume will show as a blue bar.
- An up day (where the price is greater than the previous price) will show a green bar.
- A down day (where the price is less than the previous price) will show a red bar.
William Accumulation/ Distribution Line
The William Accumulation/ Distribution is a momentum indicator that associates changes in price with the daily range. Divergences between the Williams Accumulation/ Distribution and the security's price imply a change is anticipated. When a divergence goes occur, prices usually change to confirm the Williams Accumulation/Distribution.
For Example, if the indicator is moving up and the security price is going down, prices will probably reverse and start going up. If the day's price change is positive then the difference in the daily high and low price is added to the total, and conversely if the daily changes is negative then the daily range is subtracted from the total.
Weighted Moving Average (WMA)
WMA helps to smooth the price curve for better trend identification. It places even greater importance on recent data.
Balance of Power
It measures the market strength of buyers against sellers by assessing the ability of each side to drive prices to an extreme level. Traders use this indicator to identify the direction of the trend and to take advantage of overbought and oversold condition.
This is one of the most popular technical analysis techniques. It adjusts itself to market conditions. When market is more volatile, the band widen and during less volatile periods, the band contracts. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to lower band, the more over sold the market.
It is an economic indicator which measures the standard deviation of the price from a simple moving average. It is generally calculated using a 9 - day moving averages. A signal to buy would be when BOS is below -2. A signal to sell a share would be when the BOS is above 2.
Chaikin's Volatility indicator compares the spread between a security's high and low prices. It is calculated by subtracting a 10 â day from a 3- day EMA of the accumulation distribution line.
- A Chaikin Volatility peak accures as the market retreats from a new high and enters a trading range.
- Volatility starts to rise as price rises above the recent high.
Chande Momentum Osciliator
The Commodity Momentum Oscillator invented by Tushar Chande is similar to the Relative Strength INDEX momentum oscillator. The scale is bounded between +100 and â 100 with the zero level being the equilibrium point between periods with positive momentum (>0) and periods with negative momentum (<0).
Detrended Price Oscillator (DPO)
It is an indicator that attempts to eliminate the long term trends in prices by using a displaced moving average so it does not react to the current market price. This allows the indicator to show intermediate overbought and oversold levels. The advantages of the Detrended Price Oscillator are that it can lead price and expose the weakness within a long- term or intermediate term trend before the correction commences. It works in all the index as well as individual stock.
Displaced Moving Averages
It is useful for trend following purposes. It generates signals when the price crosses the moving averages.
- Go long when price crosses to above Displaced Moving Averages from below.
- Go short when price crosses to below the Displaced Moving Average from above.
The Ease of Movement
The Ease of Movement indicator shows the relationship between volume and price change. It was developed by Richard W Arms. High Ease of Movement values occurs when prices are moving upward on light volume. Low Ease of Movement values occur when prices are moving downward on light volume. If prices are not moving, or if heavy volume is required to move prices, then the indicator will also be near zero.
The Ease of Movement indicator produces a buy signal when it crosses above zero indicating prices are moving upward more easily. A sell signal is given when the indicator crosses below zero, indicating prices are moving downward more easily.
Elder Ray Indicator
This indicator was developed by Dr Alexander Elder. It consists of three components: Bear Power, Bull Power, and a 13 âDay EMA.
According to Elder, Bull Power should normally remain positive and Bear Power should remain negative. However, if Bull Power turns negative, it means that the bears have gained control of the market and if Bear Power turns positive it means that the bulls have gained control of the market.
- Go long if Bear Power is below zero and there is a bullish divergence.
- Go short if Bull Power is above zero and there is a bearish divergence.
Elder also mentions that if you want to increase your position, you should:
- Increase your long position whenever Bear Power declines below zero and then rises back into positive territory.
- Increase your short position whenever Bull Power rises above zero and falls back into negative territory.
Fast D, Fast K, Slow K
There are three versions of the Stochastic Oscillator. The Fast Stochastic Oscillator is based on Lane's original formulas for %K and % D. %K in the fast version appears to be choppy. % D is the 3- day SMA OF % K. Lane used % D to generate buy or sell signals based on bullish or bearish divergences.
The main difference between the fast and slow stochastic is summed up in one word: sensitivity. The fast stochastic is more sensitive than the slow stochastic to changes in the price of the underlying security.
Negative Volume Index
It is a cumulative indicator that uses the change in volume to decide when smart money is active. It was discovered by Paul Dysart in 1930. It works under the assumption that the smart money is active on days when volume decreases and the not-so-smart money is active on days when volume decreases.
Exponential Moving Averages
An EMA scales the data according to its newness. Recent data gets the maximum weightage and the oldest gets the least weight age. For all practical purposes, an EMA is opposed to SMA. This is because the EMA gives more weightage to the most recent data. The outlook is bullish when the current market price is greater than the EMA. The outlook remains bearish when the current market price turns lesser than the EMA.
In a non trending market, moving averages may result in whipsaws thereby causing frequent losses.
Traders want to buy when the two- day of EMA force index is negative and when it is positive. These traders, however, should always keep in mind the overarching principle of trading in the direction of the 13- day EMA of prices. The 13 â day EMA of force index is a longer term indicator, and when it crosses above the centerline, the bulls are expecting the greatest force. When it is negative, the bears have control of the market.
INTRA DAY MOMENTUM INDEX
This indicator was created by Tushar S Chande and Stanley Kroll. The construction of this Index is very similar to RSI. When RSI compares the gains and losses as per close- Close prices, IMI does the same for close- Open prices.
It is constructed by averaging N day's worth of upward price changes to N day's worth of upward price changes (close is greater than open) to N day's worth of downward price changes.
Level above 70 are considered as overbought while levels under 30 are considered as oversold.
The parabolic SAR is a technical indicator that is used by many traders to determine the direction of an asset's momentum and the point in time when the momentum has a higher- than- normal probability of switching direction.
Pivot Points are significant levels chartists can use to determine directional movement, support and resistance. Pivot Point's use the prior period's high, low and close to formulate future support and resistance. These are leading indicators. It was originally used by floor traders to set key levels. At the beginning of the trading day, floor traders would look at previous day's high, low and close to calculate a Pivot Point for the current trading day.
Positive Volume Index- PVI
PVI focuses on days where the volume increased from the previous day. Interpretation of the PVI assumes that on days when volume increases, the uninformed investors are in the market. On the other hand, on days' volume decreases, the smart money investors are in the market.
Percentage Volume Oscillator
A volume oscillator measures volume by measuring the relationship between two moving averages. The volume oscillator indicator calculates a fast and slow volume moving average. The difference between the two (fast volume and slow volume moving average) is then plotted as a histogram. The fast volume is usually over a period of 14 days or weeks.
It is the difference between two moving averages of a security's price. The difference between the moving averages can be expressed in either points or percentages. It is almost identical to the MACD, except that the Price Oscillator can use any two user- specified moving averages.
Moving average analysis typically generates buy signals when a short- term moving average rises above a longer- term moving average. On the contrary, sell signals are generated when a shorter term moving average falls below a longer- term moving average. Price Oscillator illustrates the cyclical and often profitable signals generated by these one or two moving averages.
Q Stick Indicator
This indicator was developed by Tushar Chande to numerically identify trends in candlestick charting. It is calculated by taking an N period moving average of the difference between the open and closing prices. A Q stick value greater than zero indicates that the majority of the last N days have been up, indicating buying pressure has been up.
Relative Volatility Index
This indicator was developed by Donald Dorsey. It is identical to the RSI, except it measures the standard deviation of the high and low prices over a defined range of periods. RVI can range from 0 to 100 and unlike many indicators that measure price movement.
- Buy if RVI>50
- Sell if RVI < 50
- Close a long position when RVI falls below 40
- Close a short position when RVI rises above 60
It is a technical indicator introduced by Larry Williams that uses weighted average of three different time periods to reduce the volatility and false transaction signals that are associated with many other indicators that mainly rely on a single time period. This is a range â bound indicator which means the value fluctuates between 0 and 100. Levels below 30 are considered to be oversold, and levels above 70 are deemed to be overbought.
This indicator is designed to measure the price change. It is used by traders and analysts to mark existing price ranges and to watch for trading signals generated by breakouts from the price range. It is calculated on a current true price range and a previously existing true price range.
It identifies trends in volume using a two moving averages system.
- If the fast MA is above the slow MA the oscillator will be positive.
- If the fast MA is below the slow MA then he oscillator will be negative.
- The Volume Oscillator will be zero when the two MA's cross.
- Rising volume signals a strong trend.
- Falling volume indicates weakness in trend.
Open Interest is the total number of outstanding contracts that are held by market participants at the end of the day. It can also be defined as the total number of futures contracts or option contracts that have not yet been squared off. It applies primarily to the futures market. It measures the flow of money into the futures market.
Upside Tasuki Gap Bullish
It is a candlestick pattern that acts in reality as it supposed to work in theory.
Abandoned Baby Bullish
It is a reversal pattern having three candles. It forms at the bottom of a trend. In this pattern, the first candle is long and bearish candle. The second candle is a small and bearish candle â or a Doji. The second candle does not overlap the first or the third.
Abandoned Baby Bearish
It is a reversal pattern. The pattern has three candles. It forms at the peak of a trend. In this pattern, the first candle is long and bullish. The second candle is a small and bullish candle â or a Doji. The second candle does not overlap the first or the third candle. The third candle is long and bearish. This pattern forms when the investors anticipate a trend change due to psychological or fundamental reason.
Both these patterns are useful for trend identification. The Bullish Abandoned Baby pattern can be used as an entry point. The Bearish Baby pattern can be used as an exit point.
Advance Block Bearish
The Advance Block Bearish Pattern is not normally a strong reversal pattern., but it can potentially predict a price decline. This pattern's signal is stronger when a previous uptrend has pushed prices to new highs. The pattern suggests that buy positions liquidate their positions, though it is not clear that an opportunity to short exists.
- Three consecutive blue days, each with a higher close than the previous day.
- For each new day the body is significantly smaller than the previous day's body.
- The second and third days should also show long upper wicks.
Belt Hold Bullish
A trend in candlestick charting that occurs during a downward movement. The opening price which becomes the low of the day, is significantly lower than the closing price. This results in a long white candlestick with a short upper shadow and no lower shadow.
Belt Hold Bearish
A candlestick pattern that forms during an upward trend. This pattern often signals a reversal in investor sentiment from Bullish to bearish. However, the bearish belt hold is not considered very reliable as it occurs frequently.
Break away bearish
The breakaway pattern occurs in both bull and bear market. The breakaway pattern consists of five candles, where the current trend is beginning to slow, followed by fillip of an opening gap.
The bearish breakaway is a rare candlestick pattern. The first candlestick is the formation of a long green candle that closes near its high. The second candlestick is a green candlestick that gaps up and the body of the candlestick is in the direction of the trend. The third and fourth candle continue in the direction of the trend, but they have smaller bodies as compared to recent candles. The fifth and final candle is a long red candle. Traders should wait for the low of the fifth candle to be broken to take any short position.
Break away Bullish
It is a rare candlestick pattern. The first candlestick is the formation of a long red candle, that closes near its low. The second candlestick is a red candle that gaps down and it is in the direction. The third and fourth candle are in the direction of the trend. The fifth and final candle is a long green candle that closes inside the gap between the first and second candle. Traders should wait for the high of the fifth candle to take any Long position.
The shooting star is made up of one candlestick with a small body, long upper shadow and small or nonexistent lower shadow. The size of the upper shadow should be at least twice the length of the body and high/ low range should be relatively large.
The Shooting formation is created when the open, low and close are roughly the same price. When the low and the close are the same, a bearish Shooting Star candlestick is formed and it is considered a strong formation because the bears were able to reject the bulls completely and the bears were able to push the prices even more by closing below the opening price.
The long upper shadow of the Shooting star implies that the market tested to find where the resistance and supply was located. When the market found the area of resistance, the highs of the day, bears began to push prices lower, ending the day near the opening price.
Downside Tasuki Gap
It is a continuation pattern with a long, red body followed by another red body that has gapped below the first one. The third day is a green and opens within the body of the second day, then closes the gap between the first two days, but does not close the gap.
A Doji where the open and close prices are at the high of the day. Like other Doji days, this one normally appears at market turning points.
Evening Doji Star
A three-day bearish reversal pattern similar to the Evening Star. The uptrend continues with a large green candle. The next day opens higher, trades in a small range, then closes at its open(Doji). The next day closes below the midpoint of the body of the first day.
A bearish reversal pattern that continues an uptrend with a long green candle followed by a gapped up small body day, then a down close with the close below the midpoint f the first day.
A doji line that develops when the Doji is at, or very near, the low of the day.
Hammer-OR Dragonfly Doji Bullish
It forms when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.
A two-day pattern similar to the Har-a-mi. The difference is that the last day is a Doji.
This candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during an advance, then it is called a Hanging Man.
This pattern is a one-day bullish reversal pattern. In a down ward, the open is lower, then it trades higher, but closes near its open, therefore looking like an inverted lollipop.
Long Legged Doji
This candlestick has a long upper and lower shadows with the Doji in the middle of the day's trading range, clearly signifying indecision amongst traders.
Morning Doji Star
A three-day bullish reversal pattern that is very similar to the Morning Star. The first day is a downtrend with a long black body. The next day opens lower with a Doji that has a small trading range. The last day closes above the midpoint of the first day.
These Candlestick lines that have small bodies with upper and lower shadows that exceed the length of the body. It signals indecision.
A bullish reversal pattern who two black bodies surrounded a white body. The closing prices of the two black bodies must be equal. A support price is apparent and the opportunity for the prices to reverse is quite good.
Upside Gap Two Crows
A three-day bearish pattern that only happens in an uptrend. The first day is a long white body followed by a gapped open with the small red body remaining gapped over he first body.
Upside Tasuki Gap
It is a continuance pattern with a long green body followed by another green body that has gapped above the first one. The third day is red and opens with a body of the second day, then closes in the gap between the first two days, but does not close the gap.
Fractals are indicators on candlesticks charts that identify reversal points in the market. Traders often use fractals to get an idea about the direction in which the price will develop. A fractal will form when a particular price pattern appears in a chart. Fractals are indicators on candlesticks charts that identify reversal points in the market. It comprises of five candles and the pattern indicates where the price has struggled to go higher, in which case an up fractal appears or lower, in which case a down fractal appears. Traders often use fractals to decide where to place stop loss order. For example, when entering a short position, you can use the most recent up fractal to place your stop loss.
- It is an indicator that shows a potential reversal point in the market.
- They form when a particular price action happens on a chart.
- It is composed of five candlesticks.
- An up fractal forms over a candle that has two candles to the left and right with lower highs.
- A down fractal forms under a candles with two candles to the left and right that have high lows.
- Fractal indicators can be used to determine the direction of the market when the price breaks through the highest highs or the lowest low of the pattern.
- It can be used to place stop loss orders.
It is a very simple indicator. The Buy and Sell signal changes as soon as the indicator flips over the closing price. When the Super Trend closes below the Price, a Buy signal is generated, and when the Super Trend closes above the Price, a Sell signal is generated. Green line specifies Buy whereas Red line signifies Sell. It is a trending indicator, and like all trending indicator it works well in trending market.
It is constructed with two parameters â The most commonly used parameters are 10,3. The 2nd parameter can be reduced if you want Super trend to react more rapidly to price changes. It was developed by Oliver Seban.
This chart looks like the candlestick chart, but the method of calculation and plotting of the candles on the HeikinAshi is different from the candlestick charts.
Heikin Ahi candles are different and each candle is calculated and plotted using some information from the previous candle.
- Open Price- The open price in a HeikinAshi candle is the average of the open and close of the previous candle.
- Close Price- The close price in a Heikin Ashis the average of the open, close, high and low prices.
- High Price- The high price in a Heikin Ashi candle is chosen from one of the high, open and close price of which has the highest value.
- Low price- The low price in a Heikin Ashi candle is chosen from one of the low, open and close price of which has the lowest values.
Some traders only use Heikin Ashi to trade. It is a good idea specially for those who are impatient and indiscipline enough and for those who lose because of entering too early and exiting too late. It helps to follow the trending markets, because it keeps one wait for a longer time, and it informs you when you are at the beginning of a strong trend. It was developed by Munehisa Homma in the 1700 in Japan. Its purpose is to filter noise and provide a clearer visual representation of the trend.
It is an arithmetic chart with equal vertical distances between each unit of price. For example, a price movement from 10 to 20 is a 100 % move. A move from 20 to 40 is also a 100 % move. Technical analyst uses their technical research on index charts to decide whether the current market is a BULL MARKET or a BEAR MARKET.
A trend reflects the average rate of change in a stock's price over time. Trend exist in all time frames and in all markets. Trend can be classified in three ways; UP, DOWN, or RANGEBOUND.
In an uptrend, a stock rallies often with intermediate periods of consolidation or movement against the trend. In doing so, it draws a series of higher highs and higher lows on the stock chart. In an uptrend, there will be positive rate of price change over time.
In a down trend, a stock declines often with intermediate periods of consolidation or movement against the trend. In doing so, it draws a series of lower highs and lower lows on the stock charts.
The Unique Three river bottom candlestick
This unique candlestick appears red on daily charts. The first candle is a red candle with a tall body, then comes another red candle whose body is remains inside the body of the first candle but it has a lower low. The last candle is a green one with a short body that is below the body of the second candle in the pattern.
Upside Gap two crows bullish
The chart shows an upside gap two crows candle pattern in red on the daily candle. Price trends upward leading to start of the candle. Then a tall white candle appears. The next day, a black candle gaps higher and the body remains above the green candle's body. The last day is a red candle that engulfs the body of the prior trend.
Ladder Bottom Bullish
In a downtrend and after moving solidly down from three consecutive days, the bears feel in control. The 4th day prices trade near the open of the previous day, but close to another new low. This draws attention to bears who realize that markets do not go down forever. If the next day opens higher, then the sorts will lock in profits. If the volume is high, then a reversal has probably occurred.
Kicker Bullish/ bearish
A kicker is sometimes referred to as the most powerful candlestick pattern. Like most candlestick pattern, there is a bullish and bearish version. In the bullish version the stock is moving down and the last red candle closes at the bottom of the rage. Then on the next day, the stock gaps open above the previous day's highs and close. This forces short sellers to cover and brings in new traders on the log side.
Bearish in Neck
it is an undeveloped version of the Bullish Piercing Line Pattern. But the close here is much lower. The green body on Day 2 closes near the close of the red of Day 1.
Homing Pegion Bullish
This pattern is a small red body contained by a prior relatively long red body. It looks like Harami pattern, except both bodies are red.
- The market is characterized by a prevailing downtrend.
- A red body is observed on the first day.
- On the second day, again a red candle is seen which completely engulfed by the body of the first day.
Concealing Baby swallow bullish
The bears are in control for the 1st two days of this formation. However, the high on the 3rd day trades above the close of the previous day. And, a strong upward opening gap appears the last day. Since the last day closes at a new low, then this is the perfect opportunity for shorts to cover their positions. Strong short covering should propel the price upward in the coming days.
This pattern consists of three consecutive white candles with consecutively higher closes on an uptrend.
- Market is characterized by a prevailing uptrend.
- A white candlestick appears on the first day.
- The next day is another white candlestick, which opens within the range of the previous day's body and closes above the previous day's close.
- The final day is a short green candlestick, a spinning top or a Doji that gaps up above the second day.
Downside gap Three method bearish
This pattern signals a potential trend continuance. 1st two days are long red days with a gap between them. The third day is a green day that fills the gap of the 1st two days.
Falling three methods bearish
It is a bearish candlestick pattern that is used to predict the continuance of the current downtrend. This pattern is formed when the candlestick follows the below mentioned features.
- The first candle in the pattern is a long red candlestick within a defined down trend.
- A series of ascending small bodied candlestick that trade within a range of first candlestick.
- A long red candlestick creates a new low, which suggests that sellers are back in control of the direction.
Tri Star Bullish
This pattern signals a potential trend reversal
This formation is rare and not reliable also with low volume. The indecision is created by these dojis must not be ignored by traders. This level of indecision strongly suggests that the trend is about to change.
- All three days are doji days.
- 2nd day gaps below the 1st and 3rd days.
Tri Star Bearish
It is a three candle reversal pattern, consisting of three consecutive Dojis. It occurs generally after an uptrend. The second Doji candlestick gaps above the first and third. The succession of Dojis reflect indecisiveness in market.
This pattern appears in a market that is on a long term up trend. When the trend starts to show weakness, we see smaller real bodies. The first candle is a Doji. The second shows that market has lost its direction. The third signals the end of the trend since it shows indecision which leads to reversal of position.
- Market is in down trend.
- There are 3 Dojis on 3 consecutive days and
- The Day 2 Doji has a gap above the first and third.
Advance Block Bearish
This pattern signals a potential trend reversal.
This formation is similar to Bullish Three White Soldiers formation. However, The Bearish Advance Block chart alerts traders to the weakness of the upside price action since the close of the second and third days are significantly less than their highs.
- Three consecutive white days with higher closes each day.
- Each day opens within previous body.
Thrusting Bearish/ Bullish
It acts as a continuance indicator, adding evidence that a stock will continue its current price trend. iT says the second day of the trading closing the opposite direction of the first, but failing to break through the midpoint of the real body.
Three Outside Up Bullish
This three outside up candlestick acts as a bullish reversal both in theory and in reality. It has high frequency number. Its performance is also quite good. It is a confirmed Bullish Engulfing pattern. The first candle is a red candle closing at its low, second candle engulfs completely in the previous candle and closes near its high. The third candle breaks the high of the first candle and closes even higher.
The high of the third candle should be broken successfully for initiating any log position.
Bearish Three Outside Down
This pattern signals a potential trend reversal.
This is a confirmation of the engulfing pattern.
- Bearish Engulfing formation occurs making up the 1st two days.
- The third day closes lower than the 2nd day.
Three Star in The South Bullish
It is a bullish reversal signal. The formation is comprised of three candlesticks and it shows up near the end of a long downtrend. This pattern displays how the selling pressure is vanishing rapidly, thus providing signs of bullishness. The first candle is a red candlestick that has a very little upper shadow, but has a long lower shadow. The second is a smaller version of the first candlestick. The third candlestick is a black marubozu and completely engulfed in the first candle.
It is a technical analysis method that combines both leading and lagging indicators with traditional candlestick charts. This indicator was developed by a Japanese journalist Goichi Hosada in 1960. It can be displayed as separate indicator in Minute, Hourly, Daily, Weekly or Monthly time frames.
It is often referred as the Conversion line. It is simply the midpoint of the latest 9 trading days- the average of a 9 â day High and 9-day low on a daily chart.
It is referred as a Base Line. It is the midpoint of the latest 26 trading days. The two lines (Tenkan Sen and Kijun Sen) are used in a similar way to fast and slow moving averages.
It is the mid- point between the first two lines, Tenkan Sen and Kijun Sen, but plotted 26 days ahead of the current period.
It is the midpoint between a 52 period High AND a 52 PERIOD Low and is also plotted 26 days in future ahead of the current day.
It is simply the Closing Price, but plotted 26 days in the past.
The main focus of this cloud is crossover. That is, four of the five components that comprises the system are comprised of short term and long term moving averages. Two establish Support and Resistance levels and are represented by the Cloud. Two others (Tenken Sen AND Kijun Sen) establish trend. The fifth component known as Chikau Span measures the momentum.
Weekly Pivot Points
Before computers and charts became a key tool that traders use so effectively, floor traders determined key buying and selling levels using calculations based on the data from the previous day. Adding to that lot of buying/ selling orders are kept pending at this area and hence the price reacts heavily at this point which produces number of trading opportunities. Irrespective of the direction the trend, be it Up/ Down, WPP holds a great importance. Pivot points are support and resistance lines that are automatically plotted in the chart.
The candlestick technique used by modern traders originated by the Japanese for over 100 years, by a trader named Homma, who used to be a trader in future market. He discovered that although there was a link between price and supply; markets are strongly influenced by the emotions of the traders. The principles set up by Homma are the basis for the candlestick chart analysis, which measure the market emotions of the stock represented through a candle.
If a stock is being traded, for example, if you see the open price of the stock, then it must have a close price. This is the price at which the stock last changed hands from the seller to buyer.
52 Week Range
It is the value between which the stock price has moved within the last 52 weeks. If you see the price of a particular stock moves in between 80 to 150, then this is the range for the stock.
This is the range within which the stock price moved up or down for the current trading day.
This is how many shares have changed hands during the current trading day.
This is the last traded price of a particular stock of a particular trading day.
This is the price of the last transaction of the previous trading of a stock/ index.
Gap Up Down Analysis
A break between the prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. It can be created by several factors such as earning announcements, bonus issues, bad news release, bad corporate announcement etc.
Gaps occur because of underlying fundamental or technical factors. If a company's earnings are much more than the expected, then the stock may gap up the next day. There are many ways to take advantage of these gaps, with a few more popular strategies. Some traders will buy when fundamental or technical factors favor a gap on the next trading day.
It is a measurement of trading activity that represents the size of the Contract. It is different from the regular volume measurement in equity. Price volume occur in relation to trading activity and therefore it can give intensity of a given price movement.
The cost of purchasing a security on an exchange. It can be affected by a number of factors like volatility in the market, company brand name, economic factors , corporate action.
Technical Analyst use different types of candle to know the trend of the market. There are different types of candles to analyze the trend/ strength of the stock/ index.
High/ low Analysis
It is a market barometer to provide confirmation of a market trend by comparing the daily number of stocks reaching new 52 Week highs with the number reaching new 52 week lows on a broad equity index.
52 Week High/ low Analysis
The highest and lowest prices that a stock has traded at during the previous year. Many traders and investors view the 52 week high and low as an important to determine a stock's current value and predicting its future price. When a stock trades within its 52 weeks high or low, investors shows interest as price nears the high/ low prices. Many traders used 52 Week High to buy a stock, while others sell when price falls below 52 weeks' price.
Plus/ Minus Di
If the price has moved up, the distance between present high and previous high is taken as +DI. Similarly, if the price has moved down, the distance between the present low and previous low is taken as - DI
Both +DI and âDI are positive numbers. When the trend is going up the +DI keeps increasing and - DI keeps decreasing. When the trend is going down the +DI keeps decreasing and âDI keeps increasing. When an uptrend changes to down trend -DI crosses above +DI and when the down trend changes to uptrend + DI crosses above -Di
It is the ownership of a company. It represents a claim on the company's assets and earnings. When one acquires more and more stock of a company, your ownership becomes more. Shares/ Equities/ Stocks all are the same.
There are different sectors of stocks listed in the Stock exchanges depending up on its nature of work. For Example, there are sectors like IT, Finance, Banking, Telecommunication, Cement, engineering etc.
It is a trend following indicator. It does not predict price direction, but define the current direction. This is a lagging indicator because they are based on past prices. It helps to smooth price action and filter out noise. The longer the moving average, the more the lag. It can be used to quickly identify whether a security is moving in an uptrend or a downtrend depending upon the direction of the trend.
It is the aggregate valuation of the company based on its CMP (Current Market price) and the total number of outstanding stocks. It is calculated by multiplying the current market price and the total number of outstanding shares. It is one of the important characteristics that helps the investor determine the risks and returns associated with a share.
It accounts for those volumes in the stock/ share/ script which were not squared off on the same trading day. It means that suppose an investor buys a share with a long term or short term view of holding it rather than squaring off that particular day. Sudden increase in a stock signifies Accumulation/ Distribution of the stock, i.e. Strong hands are accumulating or selling the stock.
It is the movement of a particular stock/ index. It is defined by day traders as the average difference between a stocks daily high and low. If a stock is priced at Rs 90 and moves 10 rupees per day, then it is more volatile than a stock which priced at Rs 1000 and moves only Rs 20 per day. Finding a volatile stock is not complex, but it requires constant research. Volume is also an important factor while trading in a volatile stock. In a layman's language â Higher volatility means that the share price range is likely to be wider than the range of a lower volatile stock. Indirectly, it is a measure of risk. To make a profitable trade some amount of volatility is required. For this reason, professional traders seek more volatile stocks to trade.
B.Band Vs Price
Bollinger Bands reflect direction with the 20 â period SMA and volatility with the Upper/ lower bands. They can be used to determine if prices are relatively high or low. Generally, prices are relatively high when it is above the upper band and low when it is below the lower band. However, relatively high should not be regarded as bearish or as a sell signal. Similarly, relatively low should not be considered bullish or buy signals.
It is the most basic form represents daily changes in stock prices. When certain cash flows from selling a security are needed at a specific future date, higher volatility means greater chances of shortfall.
Volume by Price
It is an indicator that shows the amount of volume for a particular price range which is based on closing prices. These bars are horizontal and can be seen left side of the chart to correspond with these price changes. By combining volume and closing prices, this indicator can be used to identify support or resistance. The indicator marks potential support when prices are above a long bar and potential resistance when prices are below a long abr. Analyst enhance their analysis by looking at the positive (Green) and negative (red) volume with the Volume- Price â bars. Long green portions reflect more demand (Support). Red long bars reflect more Sellers. (resistance)
Relative Volume Indicator
It is always wise to analyze volume at the end of the day by reviewing the daily volume bars on any end of the day chart. Trading volumes are typically highest during the first and last hours of trading session.
This indicator, which is updates in real time, shows the stock's current volume along with-
- yesterday's traded volume at the same point
- Average weekly volume normally traded at this point of time.
- Average monthly volume normally traded at this point of time.
Side by Side white line Bullish
This occurs during an Uptrend. The 1st candle is white, then there is a Gap Up between the First and Second Candle.
The Second and Third Candle are green, their real Bodies have the same length;
Side BY side White Line Bearish
This occurs during a down trend. The First Candle Is black. Then there is a Gap Down between the First and Second Candle. The Second and Third candles are white, their real bodies have the same length.
INVERTED HAMMER/ OR GRAVESTONE DOJI BEARISH
The upper shadow should be at least two times the length of the body. The real l body is at the lower end of the trading range. There should be no lower shadow or a very small lower shadow. After a downtrend has been in effect, the atmosphere is Bearish. The price opens and trades lower but before the end of the day. The Bulls step in and pushes the prices up.
Dark Cloud Cover
It is a two candle pattern, the body of the first candle is green and the body of the second candle is red. The red opens higher and above the trading range of the previous day. The price closes below the 50 % level of the green body.
Bullish Harami Cross
This is a major bullish reversal pattern, which is more significant than a regular Bullish Harami. Basically, the pattern is characterized by a red body followed by a Doji that is completely inside the range of the body.
Mat hold Bulish
This is a potential trend continuance pattern, the 1st day is a long green candle, the 2 nd day is a red day that gaps above the 1st day. The next two days are small body which trend lower and stay within the upper range of the 1st day. The last day is a green candle that closes above the previous four day's range. This is a resisting pattern for the bulls. The Bullish trend continues on the 5th day too.
Meeting Line Bearish
This pattern occurs during an uptrend, the first day's green candle is followed by a red candlestick that opens sharply higher and closes at the same level. It is almost similar to the Dark Cloud Cover, however the amount the second day drops are different. The Dark Cloud 's second day closes below the midpoint of the first day's body, while the Bearish Second Line closes the same as the first day.
Upside Three River Bottom Bullish
Market is on an uptrend.
- On the first two days, two long green candles are seen with a gap between them.
- On the first two days, two long green candles are seen with a gap between them.
- Day 3 has a red candle which opens within the body of the Day 2 and the red stick of the Day 3 fills the gap between the first two days.
In a 20 â day moving average, the last 20 closing prices are added together and then divided by 20
In a 50 âDay moving averages, the last 50 closing prices are added together and then divided by 50.
In a 200 â Day moving averages, the last 200 days closing prices are added together and then divided by 200.
It is a candlestick pattern that gaps away from the previous candlestick is said to be in Star position. Depending upon the previous candlestick, appears isolated from previous price action.
Morning Doji Star
It is a three-day bullish reversal pattern that is very similar to Morning Star. The first day is in a downtrend with a long red candle, the next day opens lower with a Doji that has a small trading range.
Divergences indicate something is changing. It appears when a technical indicator begins to establish a trend.