Author: StockIsy Team

Reversal Candlestick Patterns
Change is the law of life. And those who look only to the past or the present are certain to miss the future.
– John F. Kennedy
What is the Reversal Candlestick Patterns?

Reversal patterns mean the formation of candlesticks which indicate the end of the existing trend (uptrend or downtrend). When such formation appears in a downtrend, it indicates a bullish reversal or end of selling spree and onset of buying spell. Steve Nison, the man who has who has created the popularity of candlestick patterns to the western world, has mentioned seven reversal patterns that are more influential than others. In his book Japanese Candlestick Charting Techniques, he mentioned a few distinct reversal patterns.

The Most Important Reversal Pattern:
Head and Shoulders & Inverse Head and Shoulders. Double Tops and Bottoms.

Below are the some example of Reversal Candlestick Patterns:

Long Days

The long day represents a large price move from open to close. Long represents the length of the candle body. What qualifies a candle body to be considered long? That is a question that has to be answered related to the chart being analyzed. The recent price action of a stock determines Whether a long candle has been formed. Analysis of the previous two or three weeks of trading should be a current representative sample of the price action.

Short Days

Short days can be interpreted by the same analytical process as used with the long candles. There is a large percentage of tradingdays that do not fall into either of these two categories.

Black Marubozu

The long black body with no shadows at either end is known as a Black Marubozu. It is considered a weak indicator. It is oftenidentified in a bearish continuation or bullish reversal pattern, especially ifit occurs during a downtrend. A long black candle could represent the final sell-off, making it an alert to a bullish reversal setting up. The Japanese often call it the Major Yin or Marubozu of Yin.

White Marubozu

The White Marubozu (shown in Figure 2.5) is a long white body with noshadows on either end. This is an extremely strong pattern. Consider howit is formed. It opens on the low and immediately heads up. It continues upward until it closes, on its high. Counter to the Black Marubozu, it is oftenthe first part of a bullish continuation pattern or bearish reversal pattern. Itis called a Major Yang or Marubozu of Yang.

Closing Marubozu

The Closing Marubozu has no shadow at its closing end. A white body does not have a shadow at the top. A black body doesnot have a shadow at the bottom. In both cases, these are strong signals correspondingto the direction that they each represent.

Opening Marubozu

The Opening Marubozu has no shadows extending from the open price end of the body. A white body would not have a shadow at the bottom end; the black candle would not have a shadow at its top end. Though these are strong signals, they are not as strong as the Closing Marubozu.
28 August, 2022
TIP’S OF INVESTORS FOR INVESTING
Today we are learning some strategies or techniques on how to deal with the share market and how to invest in the share market. Here, some legend investors share their knowledge & experience with us. These tips are more helpful for our trading/investing lifestyle.

Jack Schwager

Jack Schwager (born 1948) is an American trader and author. His books include Market Wizards (1989), The New Market Wizards (1992), Stock Market Wizards (2001).

Schwager is an eminent industry expert and author of a number of critically acclaimed financial books, including The Market Wizards series. He was one of the founders of Fund Seeder. Previously, he was a partner at a London-based hedge fund advisory firm, the Fortune Group (2001-2010). He has also been a Director of futures research for some of Wall Street’s leading firms.

Tips for individuals who want to trade:
1. Schwager advises individuals who want to pursue their career as traders to first do extensive reading. He doesn’t recommend any book in particular, but encourages individuals to just go and explore different books.
  Check on the web, go to a library or go to a bookstore, if you can still find one these days. However you do it, just pick up different things. Look at different things, See what they’re saying, Once you figure out where you’re gravitating to, read more on that,” he says.
1. He also advises traders to start thinking about ideas based on what they have read and how they could implement them in the market.
1. Then he recommends traders to evolve those ideas into some sort of a methodology for which they can define the rules and come up with risk management plans.
1. Traders can practise dummy trading to check whether their methodology has the required edge to become successful.
- Finally, once traders feel they have an edge, they can start trading with small amounts of money and implement their strategies.
Tobias Carlisle

Tobias Carlisle is the Chief Investment Officer at Acquirers Funds, and is best known as the author of the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations.

A graduate from the University of Queensland in Australia with degrees in Law and Business (Management), Carlisle has plenty of experience in investment management, business valuation, corporate governance and corporate law and has also worked as an analyst at an activist hedge fund.

7 principles of deep value investing

Carlisle lists out 7 simple principles for deep-value investing that one can follow to ensure solid returns in the long run.
1. Focus on cash flows: Carlisle feels a share of a company shouldn’t be considered a mere ticker symbol. When one invests in a stock, she becomes a partial owner of that business. This, Carlisle believes, has two important implications. First, a shareholder has rights and can exercise those rights by voting at meetings; and secondly, an owner pays attention to all that a company owns and owes, especially its cash.
1. Zig when the crowd zags: Carlisle encourages investors to follow a contrarian approach towards investing, and advises them to avoid following the herd. But he warns that before taking a contrarian approach, one should know the crowd’s consensus, which can be found in the difference between a stock price and its value.
1. Find a margin of safety: Deep value stocks have a built-in margin of safety, and they are undervalued because the possibility of a worst-case scenario is already priced in. That gives it a high upside/low downside bet, he says.
“The worst-case scenario provides a low downside. So you can’t lose much if you’re wrong. But if you’re right, the high upside can bring exceptional returns. So even if you’re right as often as you’re wrong, you do okay. Be more right than wrong, you will do great,” he says.
1. Be cautious of fast growing companies: Carlisle says fast-growing and profitable companies attract competition, leading to erosion of margins and profits. Although moats do help, strong and sustainable moats are hard to find, and it is tough to gauge whether a moat will remain strong and sustainable in the future, he says. Also, due to reversion to mean, over time, high growth and profit companies eventually become just average companies.
So Carlisle advises investors to look at companies that are currently facing difficulties and have prices that reflect those challenges.
1. Don’t have a concentrated portfolio: Carlisle believes a concentrated portfolio focuses only on a few high performing stocks for investment due to which it comes with two important trade-offs. First, a concentrated portfolio is more volatile than a diversified one, so a whole good year for the market can be a great year for the portfolio, but a bad year can turn out to be a terrible one.
1. Follow simple, concrete rules to avoid errors: Investors should follow simple concrete rules that can be both back-tested and battle-tested to avoid major errors. Back-testing checks the rules for theoretical strength, especially when tested in different countries and different stock markets. A battle-test can ensure the rules work in the real world. “No strategy has ever failed in theory. Almost all have failed in reality,” says he.
1. Have patience for long-term success: Carlisle says investors often misprice stocks of companies that are facing tough times. This, he feels, can be an opportunity for patient investors willing to put up with below-average results in the short term. Carlisle believes investors who follow a buy-and-hold strategy and wait for a turnaround to happen have an enduring edge as they are focused on the long-term gains.
Geraldine Weiss

Geraldine Weiss (born March 16, 1926) is the co-founder of Investment Quality Trends and is nicknamed “the Grande Dame of Dividends” and “The Dividend Detective” for her unconventional value approach investment style by focusing on a company’s dividends rather than earnings. Geraldine Weiss, known as the ‘blue chip stocks guru‘ is the founder of the advisory newsletter, Investment Quality Trends. She is also a co-author of two books.

Weiss says, she shortlists companies that meet six “blue chip” criteria:
1. The dividend must have been raised five times in the past 12 years
2. Have an “A” credit rating from S&P
3. At least five million shares must be outstanding
4. It must have at least 80 institutional investors
5. A total of 25 uninterrupted years of dividend payouts
6. Earnings improvements must have been recorded in at least seven of the past 12 years
Weiss’ 7 investing rules

Weiss came up with seven rules of investing from her years of experience in the investing world, which has helped investors of all ages from time to time to make better investment decisions.
1. Stocks must be undervalued as measured by its dividend yield on a historical basis
2. It must be a growth stock that has raised dividends at a compound annual rate of at least 10% over the past 12 years
3. It must be a stock that sells for two times its book value, or less
4. It must have a price-to-earnings ratio of 20 or less
5. It must have a dividend payout ratio of around 50% to ensure dividend safety plus room for growth
6. The company’s debt must be 50% or less of its market value
7. It must meet a total of six “blue chip” criteria
16 April, 2022
How to Identify Swing Highs and Swing Lows

I always pay strict attention to price formations when evaluating any market. Swing highs and lows are two of the most important formations to learn to identify.
Many traders use these areas as entry areas on pullbacks when trading with the trend. Because their orders will be there as a ‘buffer’ to slow the counter-trend rise or fall of price, I often hide my orders above swing highs and below swing lows.

But many traders, especially those just learning to read charts, have trouble understanding just what it takes to make a particular high a ‘swing high’ or a particular low a ‘swing low’.

The chart shows a more common method of charting swing highs and lows.

Looking at this chart, I have already marked a Swing High “A” and a Swing Low “B”. And note that price has now climbed above the price extreme labeled Swing High “A”. Does that make this new high in price a swing high? No, because I don’t yet know whether the new high is in place or if the price will continue to work its way higher.

In the back of my mind, I should be thinking that price is ‘working’ on a new swing high. But it is not a swing high until a price formation confirms it as an extreme high. It’s not as confusing as it sounds. Let me try to show a better example of extremes that are not yet confirmed by price formation extremes:

Looking at this chart, I see a series of lower lows and lower highs that came after prices made an extreme high. But note that price has not yet traded below the prior low [at the far left of this chart].

Nothing yet says to me: “The extreme low is in for this swing!” That means a true swing low has not been put in yet. Let’s look at another example:

At first glance, it looks as if price left an extreme high and then traded lower and most traders would be tempted to say a swing high had just occurred.

But is it a swing high? In this case, price made a new high and then came down and is now re-testing the prior low—In fact, at the moment the last bar is part of “double bottoms”, which is an important price formation but cannot be used to confirm a swing high or low. Only a low lower than Swing Low ‘A’ can ‘confirm’ the high that price made two bars earlier as a true swing high.

Price breaks below the double bottoms and the low of Swing Low ‘A’ and that confirms the high three bars earlier as Swing High ‘B’.

It takes new lows to confirm Swing Highs and new highs to confirm Swing Lows. Trading these back and forth motions in the market is swing trading. Once you learn to identify swing highs and swing lows, you can begin to anticipate what it will take to make the next price extreme a swing high or low and how to use that in your trading.

Swing High ‘B’ is confirmed when price breaks below the prior low that formed Swing Low ‘A’ and note that price is now making a series of lower lows and lower highs. Has the price made a swing low yet? Remember, only a new swing high above a price extreme can confirm a swing low. There is nothing yet to even hint that price has made an extreme low.

After the sharp fall, price consolidates, forming an Energy Coil [an area of tight congestion]. Energy Coils is generally a sign that price is re-storing energy, taking a break after an extreme move. Note that they are often followed by a series of false breakouts, so it can be dangerous to blindly buy or sell breakouts from these areas. Did the price just make a new swing low? Let’s take a closer look:

I view the Energy Coil and the engulfing bar before it as a price formation. Now that price has climbed back above both the Energy Coil and the engulfing bar before it, the double bottoms below the Energy Coil are confirmed as Swing Low ‘B’.

This is a classic bottoming formation, by the way, and unless price quickly ‘zooms’ through this area to the down side, this area should provide very good support. Note that we cannot identify a new swing high yet.

24 March, 2022
20 Important Terms in Stock Market
Today we are discussing the most important stock market terms which are essential for each & every beginner of the share market to know about it. When I entered the world of stock market then I search lots of words on google which consume plenty of my time. So, here we thought of explaining some of the important terms of the stock market.

https://www.youtube.com/watch?v=tHOssUgrkQA

Here are some stock market terms :
1. Buy – Buy is a term used to describe the purchase or acquisition of an item or service that’s typically paid for via an exchange of money or another asset. When buyers look to acquire something of value, they assign a monetary value to that product or service.
1. Sell – The term sell refers to the process of liquidating an asset in exchange for cash. In investment research, sell refers to an analyst’s recommendation to close out a long position in a stock because of the risk of a price decline.
1. The Bid Price – The bid price is the price that an investor is willing to pay for the security.
For example if an investor wanted to sell a stock, he or she would need to determine how much someone is willing to pay for it. This can be done by looking at the bid price. It represents the highest price that someone is willing to pay for the stock.
1. The Ask Price – The ask price is the price that an investor is willing to sell the security for.
For example if an investor wants to buy a stock, they need to determine how much someone is willing to sell it for. They look at the ask price, the lowest price someone is willing to sell the stock for.
1. Bid-Ask Spread – Bid-Ask spread is typically the difference between ask (offer/sell) price and bid (purchase/buy) price of security. Ask price is the value point at which the seller is ready to sell & bid price is the point at which a buyer is ready to buy.
  When the two value points match in a marketplace, i.e. when a buyer and a seller agree to the prices being offered by each other, a trade takes place. These prices are determined by two market forces – demand & supply, and the gap between these two forces defines the spread between buy-sell prices.
1. Bull Market – A bull market is the condition of a financial market in which prices are rising or are expected to rise. The term bull market is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities.
1. Bear Market – A bear market is a situation when the stock market experiences price declines over a period of time. Generally, a bear market is declared when the price of an investment falls at least 20% from its high.
In other words, a trend of falling stock prices for an extended period is considered a bear market.
1. Stop Loss – Stop Loss can be defined as an advance order to sell an asset when it reaches a particular price point. It is used to limit loss or gain in trade. The concept can be used for short-term as well as long-term trading. This is an automatic order that an investor places with the broker/agent by paying a certain amount of brokerage. Stop Loss is also known as ‘stop order’ or ‘stop market order’.
1. Lot Size – Lot size refers to the quantity of an item ordered for delivery on a specific date or manufactured in a single production run. In other words, lot size basically refers to the total quantity of a product ordered for manufacturing .
For Example When we buy a pack of six chocolates, it refers to buying a single lot of chocolate.
1. Market Order – A market order is an order to buy or sell a stock at the market’s current best available price. A market order typically ensures an execution, but it doesn’t guarantee a specified price. Market orders are optimal when the primary goal is to execute the trade immediately. A market order is generally appropriate when you think a stock is priced right, when you are sure you want a fill on your order, or when you want an immediate execution.
1. Limit Order – A limit order is an order to buy or sell a stock with a restriction on the maximum price to be paid or the minimum price to be received (the limit price). If the order is filled, it will only be at the specified limit price or better. However, there is no assurance of execution. A limit order may be appropriate when you think you can buy at a price lower than—- or sell at aprice higher than—– the current quote.
1. Day Order – A day order is defined as an instruction from a trader to their broker, to buy or sell a certain asset. Setting a day order means that the deal has to be executed if an asset hits a specified price at any point during the trading day on which the order is made. The day order will expire if the price specified in the order is not met by time the market closes.
1. Volatility – Volatility measures the risk of a security. It is used in option pricing formulas to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.
1. Averaging Down – When a trader purchases an asset, the asset’s price drops, and if the trader purchases more,it is referred to as averaging down. It is called averaging down because the average cost of the asset or financial instrument has been lowered. Because of this, the point at which a trade can become profitable has also been lowered.
15. Capitalization – Market capitalization is one of the most important characteristics that helps the investor determine the returns and the risk in the share. It also helps the investors choose the diversification criterion.

16. IPO – Initial Public Offering is the process by which a private company can go public by sale of its stocks to the general public. It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public.

17. Portfolio – A collection of investments owned by the investor is called a portfolio. An investor may have just one stock or multiple securities in a portfolio. It contains a diverse range of financial instruments like shares, bonds, futures, options, etc.

18. Dividends – Dividend is a part of profit distributed by a corporation among its shareholders. When a company earns profit during a financial year, a part of that profit is usually distributed as dividend among its shareholders.

19. Agent – An agent is a stock brokerage firm which does the buying/selling of shares on behalf of the investor in the stock market.

20. SEBI – SECURITIES And EXCHANGE BOARD OF INDIA is the regulator that oversees the stock market in India. It provides a platform for investors and traders to trade efficiently, and for companies to raise capital fairly. It protects the interests of the investor and ensures accurate information is provided to the investors.

Also Read | What is RSI in Stock Market
6 February, 2022
Most Important Questions To Ask Before Taking a Trade
Before taking any positions in markets, it is a must to find your “why?” Once we find the answer to why and sort it, losing or winning does not matter much. Moreover, if we find the answers to 6 significant questions before having taken a position, irrespective of long or short and investing or trading, the clear picture of “why” is found and addressed.
Thus, the trade can be considered as completely planned and structured. This is an inspiration from the book named Trend Following by Michael Covel.

1. What to Buy or Sell?

This is the most significant question to be asked in a trading system – what one is going to trade or invest in, among the equities, options, commodities, currency and agri Commodities. Generally, one should trade in the following:

1. Highly Liquid – Index, Commodities, ATM (At The Money) Options.
Index – NIFTY, Bank Nifty Options – At the Money Options.
For Instance, generally I am more focussed on trading in index and commodities, so I prefer trading in NIFTY, BANK NIFTY, SILVER, LEAD and CRUDE, as they are back tested and their volatility matches my personality.

2. Highly Cyclical – Sectors like Real estate, Banks, Oil, Metals, etc.
One should invest in stocks which are defensive and more on consumption themes. It all depends on what market one trades in and what his risk appetite is. My trades are in:
Commodities – Crude Oil, Lead and Silver Equities – 7 Different cyclical sectors such as capital goods, banks, infrastructure, real estate, diversified, finance and pharma.

2. When to Buy or Sell?

Once it has been decided what to buy, the second question is – when to buy? ‘What’ would be set as the technical or fundamental indicators, based on which the buying and selling decisions will be generated.

For example:
1. All-time fresh high, that is done after at least 10 years – the longer the years, the better is the breakout, while keeping the Happy Loss as the previous month’s low
2. Closing above or below 50 days Exponential Moving Average
3. Closing above or below 200 Days Simple Moving Average
Please note: Do the proper back testing before executing the system, considering your risk appetite. These are very simple type of trading strategies, to begin with, and I assure you, these systems hold the potential of delivering returns beyond one’s expectations; they have the power to give much more consistent returns than one usually expects to attain.

3. When to Exit?

There are no Guarantees in this business, but “The only thing that is guaranteed is that there will be losing trades.” As one holds an entry plan, planning the exit point is equally important; we trade with a desire that we will not go wrong anywhere, but this is the major myth; we have all the right to go wrong, and we surely will.

The exit is a decision that is undertaken when the trade of either long or short did not go as per the expectations, and thus, one desires to take the opposite position. Let me explain it in a simple manner: All of us buy Insurance policies –Health Insurance, Life Insurance, Office Insurance and Home Insurances. Why? Do we want to Die or get sick? NO, but we take the probability of any misfortune happening in future and thus, insurance can prove to be a savior.

The Complete Trader always considers stop loss as an insurance for the trading so as to save the destruction of the capital in case of any unexpected market volatility. Thus, the incurred loss, even after exiting at the stop loss, can be considered as the “Premium,” i.e., paid to attain an insurance policy. Through such a mind-set, trust me, one will not face issues associated with losses.

4. When to Book Profits?

This is a question which totally depends on system to system or trader to trader. The Complete Trader doesn’t book profits till the time the trend changes, irrespective of a short term, positional or a long-term trend. Profit booking is for Amateurs; riding Profits is for Professionals. As Mr. Jesse Livermore quotes, “Profit Takes care of itself; Losses never do.”

”There are 2 Animals in the Jungle – a Sheep and a Lion. Sheep eats every day and is able to gather food easily, whereas, a Lion waits for the prey and takes 5–10 sheep together and feasts only once or twice a week. Now, it’s the same in the markets; Sheep is the trader who books profits here and there, whereas Lions are the traders who earn the profit equivalent to 5–10 Sheep- like traders and once in many months.”

5. How much to Buy/Sell?

This is a very crucial question as the sustainability of the traders lies in this question. Different type of risk takers and their leverage systems are:

Defensive Traders: Those who don’t like more ups and downs in markets and are happy with decent returns should not take leverage at all. For instance, if someone is trading 1000 NIFTY with a price of 8000 INR, he or she should have 80,00,000 INR as an investment and trade, i.e., total Contract size or 0 leverage, as per the rules of SEBI with PMS, no leverage.

Moderate Traders: One is open for “Calculated Risk” that can go for 1, 2 or 3 times leverage, if someone is trading NIFTY 1000 with price of INR 8000, he is required to have INR 40,00,000 or 30,00,000, i.e., 30% to 50% of total Contract size; this means that taking calculated risk surely depends on the calculation of your system’s drawdowns as well.

Risky Trader: One should not trade in this category.

The Complete Trader, but here are some areas such as commodities or currency, where the overall age of the asset is not that wide, so considerably, one can take leverage accordingly. However, doing this with equities is not recommended, and in the remaining cases, 1:5 is the maximum leverage that is recommended to any trader.

I believe there are 2 things which can kill a trader:

1. Leverage 2. Lack of Patience

6. When to Scale up?

Generally, this question depends on the designed trading/ Investing system; the first 5 questions can be known through books or other sources, but this question is unfamiliar to masses and should be given huge emphasis in order to excel in trading, i.e., When to add up? When does a system hit a drawdown of 15%? There are chances of systems giving the best reversal, or maybe, when the stocks clear a specific level, that is the point when one should add up in a stock or Commodity.
Similar to how we generally add up when Draw Down (DD) is at its nervous level, whenever one starts feeling that there is no ray of hope, that is the time when a new trend is coming.

7. When to STOP?

Since we have decided that we will give any system 999 days to perform, if it fails to perform the way it had been back tested, we will review whether the system is the problem or the market has reacted in an adverse manner. Only through reviewing, we will be able to make out whether to continue or terminate the trade. Like how we were Trading in Nickel. For the previous 3 years, it was dragging the portfolio down. In the third year, we decided to exit from it, and on today’s date, we realize it to be a wise decision. This is the Card I follow before taking any positions. If all the questions in this card below are not answered, it’s very risky to take a Trade/Invest.

It is a rule to answer these questions and then only take the trade.
24 July, 2021
Continuation Candlestick Pattern
UPSIDE TASUKI GAP

The Upside Tasuki Gap is a bullish continuation candlestick pattern formed in an ongoing uptrend. The Upside Tasuki Gap is found in a rising trend. A Green candle forms after gapping up from the previous Green candle. The next day opens lower and closes lower than the previous day. If the gap is not filled, the bulls have maintained control. And If the gap was filled, then the bullish momentum has come to an end. If the gap is not filled, it is time to go long if not long already.

Criteria:
1. An uptrend is in progress. A gap occurs between two candles of the same color.
2. The color of the first two candles is the same as the prevailing trend.
3. The third day, an opposite color candlestick opens within the previous candle and closes below the previous open.
https://www.youtube.com/watch?v=GGp6orHVdI0

DOWNSIDE TASUKI GAP

The Downside Tasuki Gap is found during a declining trend. A Red candle forms after gapping down from the previous Red candle. The next day opens higher and closes higher than the previous day’s open. If the gap is not filled, the bears have maintained control. And If the gap was filled, then the bearish momentum has come to an end. If the gap is not filled, it is time to go short if not short already. You will find the Tasuki pattern more often in the Upside pattern than the Downside pattern.

Criteria:
1. A downtrend is in progress. A gap occurs between two candles of the same color.
2. The color of the first two candles is the same as the prevailing trend.
3. The third day, an opposite color Candlestick opens within the previous candle and closes below the previous open.
4. The third day close does not fill the gap between the two black candles.
5. The last two candles, opposite colors, are usually about the same size.
ON NECK LINE

The On Neck pattern is almost a Meeting Line pattern, but the critical term is almost. The On Neck pattern does not reach the previous day’s close; it only reaches the previous day’s low.

Criteria:
1. A long Red candle forms in a downtrend.
2. The next day gaps down from the previous day’s close; however, the body is usually smaller than one seen in the Meeting Line pattern.
3. The second day closes at the low of the previous day.
THRUSTING

The Thrusting pattern is almost an On Neck or an In Neck pattern and also resembles the Meeting Line pattern. It has the same description as the On Neck pattern except that it closes near, but slightly below, the midpoint of the previous day’s black body.

Criteria:
1. A long Red candle forms in a downtrend.
2. The next day gaps down from the previous day’s close; however, the body is usually bigger than the ones found in the On Neck and In Neck patterns.
3. The second day closes just slightly below the midpoint of the previous day’s candle.
RISING THREE METHOD

The Rising Three Method is an easy pattern to see during uptrends. A long Green candle forms. It is then followed by a series of small candles, each consecutively getting lower. The optimal number of pullback days should be three. Two or four or five pullback days can also be observed. The important factor is that they do not close below the open of the big Green candle. It is also preferred that the shadows do not go below the Green candle’s open. The final day of the formation should open up in the body of the last pullback day and close higher than the first big Green candle.

Criteria:
1. An uptrend is in progress. A long Green candle forms.
2. A group of small-bodied candles follow, preferably Red bodies.
3. The close of any of the pullback days does not close lower than the open of the big Green candle.
4. The final day opens up into the body of the last pullback day and proceeds to close above the close of the first big Green candle day.
FALLING THREE METHOD

The Falling Three Method is basically the opposite of the Rising Three Method. The market has been in a downtrend. A long Red candle forms. It is then followed by a series of small candles, each consecutively getting higher. The optimal number of uptrending days should be three. Again, two or four or five counter trend days can be observed. The important factors are that they do not close above the open of the big Red candle and that the shadows do not go above the Red candle’s open. The final day of the formation should open down in the body of the last uptrend day and close lower than the first big Red candle’s close.

Criteria:
1. A downtrend is in progress. A long Red candle forms.
2. A group of small-bodied candles follows, preferably white bodied.
3. The close of any of the uptrend days does not close higher than the open of the big Red candle.
4. The final day opens up into the body of the last uptrend day and proceeds to close below the close of the first big Red candle day.
SIDE-BY-SIDE WHITE LINES

Side-by-Side White Lines are found in uptrends. Two white candles form side-by-side after gapping up from the previous white candle. Narabi in Japanese means “in a row.” Narabi aka means “whites in a row.” Sideby-Side Lines, black or white, indicate a pause or stalemate when they are observed by themselves. In this case, they have a different meaning because they occur after a gap in the trend’s direction.

Criteria:
1. An uptrend is in progress. A gap occurs between two candles of the same color.
2. The color of the first two candles is the same as the prevailing trend.
3. The third day, a candle opens at the same or near the open price of the previous day.
4. The third day closes near the close of the previous day.
SEPARATING LINES

“lines that move in opposite directions.” The market is in an uptrend when there is a pullback, exhibited by a long Red candle. However, the next day opens at the level that it opened the prior day. The Separating Line Pattern has the same open and are the opposite colors. This is the exact reverse of the Meeting Line Pattern. In other Japanese circles, this is also known as Furiwake or Dividing Lines.

Criteria:
1. An uptrend is in progress. Then a day occurs that is the opposite color of the current trend.
2. The second day opens at the open of the previous day.
3. The second day should open on its low for the day and proceed higher.
MAT HOLD

The Mat Hold Pattern is similar to the Rising Three Method. It has the look of the Upside Gap Two Crows except that the second Red body (third day) dips into the body of the large Green candle. It is followed by another small Red body that dips a little further into the Green candle body. The final day gaps to the upside. It continues its upward move to close higher than the trading range of any of the previous days. The implication is that the trend has not stalled. This is a good point to add to positions. The Mat Hold pattern is a stronger continuation pattern than the Rising Three Method. During the days of “rest,” unlike the Rising Three Method, the price stays close to the top of the Green candle’s upper range.

Criteria:
1. An uptrend is in progress. A long Green candle forms.
2. A gap up day that closes lower than its open creates a small Red candle.
3. The next two days form small candles somewhat like the Rising Three Method.
4. The final day gaps up and closes above the trading ranges of the previous four days.
THREE-LINE STRIKE

Three-Line Strike, also known as the Fooling Three Soldiers, is a four-lin pattern that occurs during a defined trend. This pattern represents a resting period, but unlike most resting periods, this one occurs all in one day. It ends up as an extended Three Green Soldiers pattern.

Criteria
1. Three White Soldiers, three white candles, are continuing an uptrend.
2. The fourth day opens higher, but then pulls back to close below the open of the first Green candle.
26 May, 2021
Day Trading Styles

There are a number of day trading styles that make money in the market. This article provides an overview of multiple day trading strategies that professionals use to make money on a consistent basis. This article will contain the pros and cons of the following day trading styles: (1) breakouts, (2) scalp trading, (3) counters, and (4) trend following:

https://www.youtube.com/playlist?list=PLTpU1h8Ij5Q-rIJqENZmMmr9DJGTQNP–

Day Trading Breakouts

Breakouts are the most common form of day trading styles. It involves identifying the pivot points for a stock and then buying or selling short those pivots in hopes of reaping quick rewards as the stock exceeds a new price level. Breakouts is generally the starting place for newbie traders as it provides a clear entry level and it is a trend following system.

Pros of Breakout Trading

Breakout trading has the potential for quick gains. When key price levels are exceeded it will trigger stop order which gives that initial burst. The key component of a valid breakout is that volume and price accompany the move. This will increase the odds of the trade continuing in the desired direction. Breakouts are also easy to identify. Most trading platforms provide methods for tracking volatile stocks and how close they are to their daily highs or lows.

Cons of Breakout Trading

Breakout trading is by far the most challenging form of day trading. For starters, the levels where trades are placed are the most obvious to everyone regardless of their trading style. Think about it, no matter what system you use on a daily basis, every day trading system factors in the highs and lows of the day. Secondly, the vast majority of intraday breakouts fail. This doesn’t mean they don’t head higher a day or two later, but if your day trading and there is no instant follow through, odds are you are in a losing trade. Day trading breakouts require the most discipline as you have very little time to make the call as to whether you are wrong or right. The inability to pull the trigger fast and consistently will mount into huge losses.

Scalp Trading

Scalp trading is a day trading style where a trader looks to make small gains throughout the trading day. This day trading style suits people who love “action” in the market.

Pros of Scalp Trading

The obvious benefit of scalp trading is the fact you are looking for very little from the market. Another plus is that stop losses are very tight. This will allow the day trader to avoid the monthly “blunder” trade that we all have put on one time or another.

Cons of Scalp Trading

Scalp trading like any other form of trading requires discipline, but due to the large number of trades one will put on during the day, it requires an enormous amount of focus. This “all day focus” can make the trading day a tense situation and can lead to high anxiety for the trader. Also, people go into the business of trading for unlimited earning potential and the idea that you do not have to slave away at a desk all day. Well if you plan on scalp trading, keep a bottle next to your desk, because bathroom breaks are considered a luxury.

Counter Trading

Counter trading is when a trader looks for a pivot point, waits for that pivot point to be tested and trades in the opposite direction. This type of trader has a personality where he or she enjoys going against the grain.

Pros of Counter Trading

Counter trading has a high success rate for day trading. Ask any seasoned trader and they will tell you that intraday trading is nothing more than constant zig zags and head fakes. So, the counter trader is already up in the odds department, because they are going against what the market is telling them. Another plus for counter trading is that when the market fails it often fails hard. Day traders who are able to play morning reversals can make a great living only trading the first hour of the day.

Cons of Counter Trading

While counter trading has a high win percentage, the losers can bring destruction to an account. Even if you win on 4 counter trades, if you do not cut the loser fast, a breakout could run away from you in a hurry. Another downside to trading counters is the next pivot level is too far from your entry, so you will have to set some arbitrary stop limit. Since your stop is not based on an actual price point on the stock, it could get hit quite often. Lastly, setting your price target is also a challenge. Stocks will often appear to make a double top, only to change course just as fast and reclaim the recent highs.

Trend Following

When most people think of trend following, the first thing that comes to mind is a long-term hold buy and hold strategy like the Turtle System. Believe it or not, there are day traders who utilize trend trading systems. The basic method is to look for stocks that are up big in the news and then buy the pullback on these stocks after the first reaction in the morning. Lastly, the trader will place a longer moving average (i.e. 20) and sell the stock if it breaks the line.

Pros of Trend Trading

Trend trading allows the trader to ride a stock for big gains. The day trader will have a limited number of stocks to trade per day, so the commissions are low for this kind of day trading style.

Cons of Trend Trading

If every trader was able to determine which stocks are going to trend all day, there would be a new millionaire created every 30 minutes. No one knows at 10 am, which stocks are going to trend all day long. This means that at best, a trend following day trader can hope to be right 20% of the time. While this trader could still make a killing with such a low win rate there are very few traders that can stick to their trading plan with such a low win rate.

1 May, 2021
The Basic for investing in stocks
“Anyone can get lucky for a short period of time. But consistent outperformance over long periods is probably evidence of skill.” – Bill Miller

You don’t have to beat the market to be successful over time. There is risk involved, as there is in all investments, but the important thing is to balance the amount of risk you’re willing to take with the return you’re aiming for.

Different Kinds Of Stocks – First it’s important to understand what is a stock. When investors talk about stocks, they usually mean common stocks. A share of common stock represents a share of ownership in the company that issues it. The price of the stock goes up & down, depending on how the company performs & how investors think the company will perform in the future. The stock may or may not pay dividends, which usually come from profits. If profits fall, dividend payments may be cut or eliminated.

There are lots of reasons to own stocks & there are several different categories of stocks to fit your goals.

Growth Stocks – Growth stocks are companies that increase their revenue and earnings at a faster rate than the average business in their industry or the market as a whole. Growth investing, however, involves more than picking stocks that are going up. Often a growth company has developed an innovative product or service that is gaining share in existing markets, entering new markets, or even creating entirely new industries. Businesses that can grow faster than average for long periods tend to be rewarded by the market, delivering handsome returns to shareholders in the process. And, the faster they grow, the bigger the returns can be.

Unlike value stocks, high-growth stocks tend to be more expensive than the average stock in terms of metrics like price-to-earnings, price-to-sales, and price-to-free-cash-flow ratios. Investors buy them because of their record of earning growth & the expectation that they will continue generating capital gains over the long term.

Blue Chip Stock – Blue chip stocks are shares of very large and well-recognised companies with a long history of sound financial performance. These stocks are known to have capabilities to endure tough market conditions and give high returns in good market conditions. Blue chip stocks generally cost high, as they have good reputation and are often market leaders in their respective industries.

Income Stock – Income Stock is a form of security which provides regular dividends to the investors. This dividend steadily grows over time to adjust for dividend to inflation. Such stocks are mostly issued by companies with stable cash flow and well-established financial infrastructure. These companies have large market capitalization and usually operate at a mature stage in their growth graph.

Value Stock – Value Stocks earn the name when they are considered underpriced according to several measures of value described later in this booklet. A stock with an unusually low price in relation to the company’s earnings may be dubbed a value stock if it exhibits other signs of good health. Risk here can vary greatly.
- A Smart Way To Buy Stocks – Choosing good or right stocks there is no secret to it. Information is the key. Having information or Knowledge about companies is more important than other factors. Information is even more important than timing. Good stocks tend to stay good, so you can take the time to investigate before invest.
There is Some Factors We Analysis Before Investing In Stocks:

Earning Per Share – Earnings per share or EPS is an important financial measure, which indicates the profitability of a company. It is calculated by dividing the company’s net income with its total number of outstanding shares. It is a tool that market participants use frequently to gauge the profitability of a company before buying its shares.

Price Earning Ratio – The Price Earnings Ratio (P/E Ratio) is the relationship between a company’s stock price and earnings per share (EPS). It is a popular ratio that gives investors a better sense of the value of the company. The P/E ratio shows the expectations of the market and is the price you must pay per unit of current earnings (or future earnings, as the case may be). Look for companies with P/E ratios lower than other companies in the same industry.

Dividend Yield –Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders relative to the market value per share. It is computed by dividing the dividend per share by the market price per share and multiplying the result by 100. A company with a high dividend yield pays a substantial share of its profits in the form of dividends. Dividend yield of a company is always compared with the average of the industry to which the company belongs. For Long Term Investment. Look for a dividend to generate income to reinvest in the company. The target: a pattern of rising dividends supported by rising earnings.

Return On Equity – Look for a return on equity that is consistently high, compared with the return for other companies in the same industry, if that shows a strong pattern of growth. A steady return on equity of more than 15% may be a sign of a company that knows how to manage itself well.
- More Clues To Value In a Stocks – The company’s industry is on the rise. Even though you can make money in a declining industry, you’re more likely to succeed in big & growing markets than in small or shrinking ones. Exciting young industries offer potential, but the staying power of any particular company is hard to predict.
The company is a leader in its industry. Being number one or two in its primary industry gives a company several advantages. As an industry leader it can influence pricing, rather than merely react to what others do. It has a bigger presence in the market. When the company introduces new products, those products stand a better chance of being accepted. Also the company can afford the research necessary to create those new products.
- Reinvesting Your Dividends – Dividend reinvestment is using the cash dividend paid by a company or fund to buy more shares of that same investment. Any investor can use this strategy since most brokerage accounts have automatic dividend reinvestment programs that automate the purchase of new shares in that same stock, exchange-traded fund (ETF), or mutual fund. Similarly, many dividend-paying companies offer investors the opportunity to participate in a dividend reinvestment plan (also known as a DRIP). Meanwhile, even if a broker or company doesn’t provide an automatic dividend reinvestment plan, an investor can manually reinvest their payments. You can pocket the cash or reinvest the dividends to buy more shares of the company or fund. With dividend reinvestment, you are buying more shares with the dividend you’re paid, rather than pocketing the cash. Reinvesting can help you build wealth, but it may not be the right choice for every investor.
When To Sell Stocks –
- Sometimes, there’s absolutely nothing wrong with a company or its stock. There are simply better investment opportunities elsewhere that would yield higher returns. Investors can then consider selling a less attractive stock (even at a loss!) if they believe they can get better returns by investing elsewhere.
- Investors should seriously consider selling a stock if it so happens that their rationale for buying it was flawed, if the valuation was too optimistic, or if there are any additional risks associated with it.
- If an investment’s price has plunged in a way that it causes investors to lose sleep over it, it is a signal for them to move their money elsewhere.
- One tends to invest for the long term in India. However, one should consider selling if the stock price escalates to a point where it no longer reflects the underlying value of the business. Additionally, one should re-examine his/her evaluation of a company’s fundamentals when the stock suffers an unusual decline in its price. When bubble bursts, stock prices will not rise to the previous level until the fundamentals improve again. There will be no immediate rebound, as the drop is a correction of the previous mispricing.
20 April, 2021