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Become a PRICE ACTION 'Beast'🔥 | 3+ Hours of 'Uninterrupted' Price action course for beginners💯😎 — Transcript

by Fortune Talks · 35,664 words · 4,978 segments · language en · Watch on YouTube

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0:00hey guys welcome back to the channel
0:03this video marks a beginning of a new
0:05course completely free of cost
0:07exclusively on the concept and
0:09application of price action trading the
0:12course is designed in an orderly manner
0:14from the very basic to the advanced
0:17level as we move up the ladder so I
0:20heartly welcome every aspiring Trader to
0:23take a ride with me throughout this
0:25course so let's get started
0:29[Music]
0:40at the heart and soul of it the stock
0:43market is all about buying and selling
0:45demand and Supply sometimes we buy a
0:48stock and sometimes we sell one but just
0:50by buying and selling based on our
0:53instincts will not do any good for our
0:55trading account chances are we end up in
0:58losses and a worst case scenario we blow
1:01up our trading account that is why
1:03almost all the Traders try to find an
1:06edge in the market to remain profitable
1:09depending on the type of Trader you are
1:11you can choose between technical
1:13analysis fundamental analysis
1:16quantitative analysis and finally price
1:19action analysis the technical analysis
1:22primarily involves using different
1:25categories of indicators to predict the
1:28future price movements fun fundamental
1:30analysis on the other hand relies on the
1:32fundamentals of the stock or the company
1:35primarily focusing on the financials
1:37earnings Etc to make a trade decision
1:40similarly quantitative analysis utilizes
1:43the use of statistical tools to analyze
1:46the market data but if you talk about
1:49technical analysis in particular which
1:51is followed by majority of Traders the
1:54interesting thing that can be identified
1:56is that the indicators used for the
1:58analysis are derived from some of the
2:02fundamental inputs of the market namely
2:05the price and the volume think about it
2:08for a while which is better a fruit from
2:11our own home Farm or one with a heavy
2:14pesticide usage the former may not be
2:17very good-look and won't stay fresh for
2:19many days but it's healthy while the
2:21latter may look appealing to the eyes
2:24and stays fresh longer but it's not even
2:27remotely good for our health likewise
2:30too many indicators for our trading is
2:33not very good for our trading account
2:35this is because the indicators are a
2:38result of so many intermediate
2:40processing of the basic price and volume
2:43so that the pure behavior of price and
2:46volume are lost and at the end of the
2:49day you make your own conclusion without
2:52listening to what the market has to say
2:54I'm not in any way concluding that
2:57technical analysis is not good or or
3:00that the indicators are instead
3:03what we have to understand is that we
3:05have with us a goal Mine by the name of
3:08price which if studied properly can help
3:12us identify what the market is doing
3:15this study of price and Its Behavior is
3:18known as price action so unlike
3:21indicators fundamentals or algorithm
3:24price action tells you what the market
3:27is doing and not what you think the
3:30market should do the price action
3:32focuses mainly on the recent and current
3:35prices it is also dependent on the
3:38overall Market Trend and finally on the
3:43price structure of the market we will
3:46talk about each one of them in our
3:48upcoming episodes now price action is
3:51not the Holy Grail or the mandra for
3:54ultimate success in stock markets
3:56because trading is mostly about your
3:58psychology and imp implementation and
4:00not about a single special strategy the
4:04goal for most Traders is to maximize the
4:06trading profits through a style that is
4:09compatible with their personalities
4:12without that
4:13compatibility I believe that it's
4:15virtually impossible to trade profitably
4:18for a long term but if you devote a good
4:21amount of time to learning price action
4:24trading you'll trade with cleaner charts
4:27without hell lot of indicators you'll
4:30also be able to pinpoint your trade
4:32entries and exits with better Precision
4:35now that's episode one for you it was
4:38just an introduction to price
4:52action this video will focus on how the
4:55market price moves or how the prices are
4:58made to move in a particular Way by some
5:01big players you might have heard people
5:03saying things like history repeats
5:05itself price memory and stuff like that
5:08what they really mean is how the market
5:10price moves in a specific pattern time
5:13and time again now the question is why
5:16does the price of a stock go up or down
5:19there can be different answers to this
5:21particular question like it could be the
5:24news or government passing some Bill a
5:27new monetary policy by the RBI some
5:29legal issues ETC but at the center of it
5:32all the one thing that makes the market
5:34movements are the earnings of a company
5:37even if a piece of very bad news related
5:39to a particular stock has come out but
5:41it has no direct impact on the earnings
5:43of the company then there might be a
5:46temporary noise in the stock for a short
5:48period but eventually the stock will
5:51recover but on the other hand stocks
5:54like vone idea yes Bank Etc are victims
5:57of the news that directly affects the
6:00earnings of the stock and thus resulting
6:02in their crash in the stock market there
6:06are mainly two players in general number
6:08one are the retailers and number two are
6:11the institutions 90% or more of all the
6:16trading in the markets is done by
6:18institutions which means that the market
6:21is simply a collection of Institutions
6:24the institutions includes mutual fund
6:26houses Banks brokerage houses insurance
6:29companies Pension funds hedge funds Etc
6:33these companies account for most of the
6:35trade volume and they mostly trade on
6:37the fundamentals of the stock but now
6:39they are eventually shifting to the
6:41algorithmic side of trading what I mean
6:44to say is that the trading done by these
6:47institutions controls the direction of
6:49the market on daily and weekly charts
6:52and a lot of the big intraday moves or
6:55swings are also controlled by the big
6:58institutions it is not very surprising
7:01to know that almost all these
7:03institutions are profitable over time so
7:06the institutions are generally
7:08considered to be the smart money meaning
7:11they are smart enough to make a living
7:13by trading and they trade a very large
7:16volume every day no trade can take place
7:19without one institution willing to take
7:22one side of the trade and the other
7:24willing to take the other side the small
7:27volume trades made by by the retailers
7:30can only take place if an institution is
7:33willing to take the same trade let me
7:36explain this if you want to buy at a
7:38certain price the market will not get to
7:41that price unless one or more
7:43institutions also want to buy at that
7:46price similarly you cannot sell at any
7:49price unless one or more institutions
7:52are willing to sell there because the
7:54market will only go to a price where the
7:57institutions are willing to buy and
7:59others are willing to sell I hope the
8:02point is clear most individual Traders
8:05or retailers have no ability to move the
8:09market the market will only test a
8:11particular price if one or more
8:14institution believes that it is
8:16financially sound to sell at that price
8:18on the other hand there are other
8:20institutions which believes that it is
8:22profitable to buy there so to be very
8:26precise at every tick in the stock
8:28market institutions are buying and other
8:32institutions are selling and all of them
8:35have proven systems that will make money
8:38by placing those trades so the main
8:41point to be noted or the main point that
8:44I want to convey is this you should
8:47always be trading in the direction of
8:50majority of the institution or like the
8:53professional say follow the footprints
8:56of these institutions because they
8:58control where the market is heading or
9:01simply they move the market now let us
9:05look at a new scenario you have found
9:08out a new trading strategy that makes
9:11money and it works perfectly but at some
9:14point it stops working after a while
9:17many of us might have gone through this
9:19situation the reason for this is simple
9:22the markets are changing it is never
9:24fixed but it is always in transition
9:27from one stage or one phase to the other
9:30this simply means that if you are using
9:32a trend trading strategy today and you
9:35continue to do that then at some point
9:37you will lose money in range markets and
9:41similarly if you are using a range
9:43trading strategy and continue using it
9:45for a while at some point you will end
9:47up losing the money in the trending
9:49markets the thing to understand is that
9:52the profitability of trading system
9:54moves in Cycles there are periods during
9:57which the trend following systems are
9:59highly successful and profitable then
10:01the market shifts from the trending to
10:04range price action that is when all the
10:06trend trading systems becomes
10:09unprofitable and the inexperienced
10:11Traders start making losses this is the
10:14reason why you see a lot of newb Traders
10:17boasting up their p&l during the
10:19trending markets while all of a sudden
10:21they disappear when the range Market
10:24arrives to sum it all up Market moves in
10:26three phases or three stages number one
10:30is the uptrend or the advancing stage
10:33number two is the downtrend or the
10:35declining stage and number three is
10:39consolidation stage so the consolidation
10:41stage can be further subdivided into
10:45accumulation phase and distribution
10:49phase so let us look at how the market
10:52transition from one phase to the other
10:55let us start with the accumulation phase
10:59the accumulation phase is when the big
11:02institutions start buying a particular
11:04store this institution deals in huge
11:08bulks of money therefore their order
11:10sizes are expected to be huge so think
11:14what happens if they buy such huge
11:16quantities in a single order the prices
11:19would react suddenly and the prices
11:22would just shoot
11:24up they will be able to purchase the
11:27stock at a specific price only if there
11:30is enough liquidity in the stock else
11:33the orders will be matched at higher
11:35prices which will in turn reduce the
11:37profitability of the institution but
11:39they will not allow this to happen so
11:42instead of placing a bulk order the
11:45institution places small orders secretly
11:48and this is called as position building
11:51in short we can conclude that during the
11:53accumulation phase the institutions are
11:56building up the position slowly and
11:59silently and during the accumulation
12:01phase the market tends to be in a range
12:04or it is range bound and the trend
12:06Traders would face losses if they don't
12:09adapt suddenly so how will you identify
12:13the accumulation phase generally the
12:16accumulation phase occurs after the
12:18price has fallen down or simply it
12:21happens after a downtrend the
12:24accumulation phase can also be viewed as
12:26an area of low volatility or an area
12:29where there is a lack of interest
12:31between the Bulls and the Bears moving
12:34on to uptrend or the advancing phase
12:37this stage occurs usually after the
12:40price breaks out of the accumulation
12:42phase here's what happens in the uptrend
12:45or the advancing phase after building up
12:48the positions the institutions take the
12:51market higher so there is a bullish
12:53sentiment in the market all along the
12:56institutions will not book profits
12:59anytime soon so the uptrend can last
13:01anywhere from months to even years it is
13:05during this phase that the trend Traders
13:07make a lot of profit we will discuss on
13:11how to identify an uptrend and how to
13:14approach your trades during an uptrend
13:16in our upcoming videos but now let's
13:19move on to the third phase which is the
13:22distribution phase the distribution
13:24usually occurs after the prices have
13:27rised to a good extent
13:29and the distribution phase looks similar
13:32to an accumulation phase where the
13:34market remains in a Range here's what
13:37happens in the distribution phase the
13:41institutions begins to distribute or
13:43sell or Square off their positions after
13:47they have made a good chunk of profit on
13:49their initial Investments similar to the
13:52accumulation phase the institutions
13:54sells the shares secretly and slowly so
13:58that the market doesn't fall immediately
14:00creating a panic situation so they will
14:03sell at a range of Target prices and
14:06that is why the distribution phase is
14:09also range bound and the trend Traders
14:12don't stand a chance if they don't adapt
14:14suddenly in the distribution phase the
14:17volatility tends to be high due to the
14:19Panic of an imminent crash or fall in
14:22the prices the last and the Final Phase
14:25is the downtrend or the declining phase
14:29the declining phase happens when the
14:31price breaks down of the distribution
14:33phase during this phase the selling
14:36pressure is high and the Market Outlook
14:39is bearish most Traders try to cut their
14:42losses and those who don't well they
14:46remain as long-term investors in the
14:49hope that the price will come back up
14:51the volatility tends to be very high due
14:54to panic and fear in the market so this
14:57is a good time for Trend traders who can
15:00short the market and get hold of good
15:03profits this is how the faces look like
15:06in a chart and it is interesting to note
15:09that these stages continue to appear
15:12time and time again as cycles and if you
15:16could spot them early then you have an
15:19edge over the market and eventually you
15:22can use a suitable strategy that works
15:25in the situation we will talk about
15:28different trend trading and range
15:30trading strategies in detail in the
15:33upcoming videos and we will also
15:35understand how to design your trading
15:37strategy according to changing market
15:39conditions
15:40[Music]
15:51I in this age of social media we come
15:54across innumerable apps like Tik Tok
15:57Instagram Etc where the creators
15:59introduce a new idea every day and some
16:02becomes so hyped and popular that others
16:05begin to perform the act it becomes a
16:08trend or the ACT is said to be trending
16:11even YouTube has a trending section that
16:14features the most popular videos at a
16:16specific time this trend stays for a
16:19short duration that is for a few days to
16:23a few weeks so this is a short-term
16:25Trend similarly the stock markets also
16:29have trends that may range from
16:31shortterm Trends to medium-term Trends
16:33to even long-term trends depending on
16:36the duration is the trend persist in the
16:39market so in the stock market scenario a
16:42trend is the overall direction of the
16:45market during a specified period of time
16:48in the stock market there are mainly
16:51three types of Trends number one the
16:54uptrend number two downtrend and number
16:57three side way Trend there are different
17:00methods to identify the general trend of
17:03the market but the most popular ones are
17:05by using the trend lines for visualizing
17:08the price wings and the other method
17:10includes the use of indicators like
17:13moving averages average directional
17:15index Etc but we will limit our
17:18discussion to only the first method the
17:21simple reason being this is a price
17:23action course and we want to trade with
17:25cleaner charts and minimum confusion
17:28before moving on further let me talk
17:30about a situation where there are three
17:33stock market participants an investor a
17:36swing Trader and an intraday Trader if I
17:39ask them what is the present Market
17:42Trend do you think all of them will have
17:44the same answer not necessarily investor
17:47could say it's a bullish Market while
17:50the intraday Trader would say it's
17:52bearish Trend even the swing Trader can
17:55say there is no Trend at all or the
17:58market is sideways what is the reason
18:01for different opinions why do different
18:04people have different views on the
18:05market Trend given the same charts and
18:08same conditions at the same instance the
18:11simple and straightforward answer is the
18:14time period that each Trader use for
18:17their analysis the investor might
18:20conduct his analysis on the monthly or
18:22yearly time frames while the swing
18:24Trader might be using the weekly or
18:27daily time frames and for an intraday
18:29Trader the time frame might be 15
18:31minutes or 5 minutes therefore as the
18:35time frame changes the analysis changes
18:38so does the perspective on the market
18:41trends so this is my first conclusion
18:45that Trends are relative in nature that
18:48is Trends are dependent on time frames
18:51and it change with time frames there is
18:54a common saying in the market that trend
18:57is your friend I will try to bring
18:59clarity as to why this statement is
19:01relevant for our trade
19:04success in the last episode we have
19:07talked about the four different phases
19:09or stages of the stock market price mov
19:13now let us analyze in detail how the
19:16price
19:17moves for that let's take an example of
19:20a rubber ball for instance and let's
19:22bounce the ball once the ball would not
19:25just take off and go out to space right
19:28it will come back to the ground and
19:30bounce back up similarly in the stock
19:32market also the price does not move
19:34indefinitely up or down there will be
19:37Direction changes once in a while this
19:40nature of price oscillation is called as
19:43price swings a typical price swing will
19:45consist of an Impulse move and a
19:48corrective move the impulse move is the
19:50strong move with stronger price action
19:53candle while the corrective moves in a
19:55trend are generally weak or dull moves
19:58opposite to the direction of impulse
20:01move moving on let's understand this by
20:04taking up each of the trend types and
20:07learning how to draw the trend line for
20:09analysis by definition uptrends are
20:12marked by Rising data points such as
20:16higher swing highs and higher swing lows
20:18so here the price moves up in such a way
20:21that the swings also move up making a
20:23recognizable pattern during an uptrend
20:26the impulse move is a strong up move
20:29with a series of strong bullish candles
20:31which forms a higher price than the
20:34previously formed High the impulse move
20:37is followed by a corrective move in the
20:40opposite direction of the prevailing
20:42bullish Trend the corrective move
20:45usually includes a lesser number of
20:47weaker candlesticks that forms a lower
20:50price but this lower price is still
20:53higher than the previous lower price
20:56font the corrective moves are generally
20:58due to profit booking by some Traders as
21:01a rule of thumb a trend can be confirmed
21:04as an uptrend only when the price has
21:06made at least two swings on the upside
21:09after finding out all the higher lows
21:12all we have to do is to draw a line
21:15connecting all the swing lows or the
21:17higher lows that we have ploted this
21:19line connecting a series of higher lows
21:22creating a support level for future
21:25price movement is called as a trend line
21:28it is from the vicinity of this trend
21:30line that future price movements would
21:32reverse or break out and therefore it is
21:34a very important trading zone or an area
21:37of value the trend line is an area from
21:40which we can trade the impulse swing
21:42moves or simply we can place a buy order
21:45when the price reaches the trend line
21:48after identifying all the higher highs
21:50we can draw a line connecting the series
21:53of higher highs or swing highs that we
21:55have ploted and this line is called as
21:57the trend channel line which will act as
22:01an area of resistance for the prices and
22:04we can trade the corrective moves from
22:06the trend channel line or simply we can
22:09place a sell order when the price
22:11reaches the trend channel line coming to
22:14downtrends by definition these are
22:16marked by Falling data points such as
22:19lower swing lows and lower swing highs
22:22in a downtrend the price moves down in
22:25such a way that the swings also move
22:27down making a recognizable pattern so
22:31during a downtrend the impulse move is
22:34strong in the downward Direction with a
22:36series of strong bearish candlesticks
22:39which forms a lower price than the
22:41previously formed low the impulse move
22:44is followed by corrective moves in the
22:47direction opposite to the prevailing
22:50bearish Trend the corrective move
22:52usually includes a lesser number of
22:54weaker or dull candlesticks that forms a
22:57higher price but this higher price is
23:00still lower than the previous formed
23:02high so the corrective move is generally
23:04due to profit booking by some traders
23:07who took a short trade earlier in the
23:09trend so a trend can be confirmed as a
23:13downtrend only when the price has made
23:16at least two swings on the down side
23:19that is two impulse move and two
23:21corrective moves should be there now
23:23after plotting all those lower high
23:26points we can draw a trend line
23:28connecting all the swing highs or the
23:30lower highs that we have floated the
23:32trend line so formed acts as an area of
23:35resistance from which we can trade the
23:38impulse move to the downside or simply
23:41we can place a sell order when the price
23:43reaches the trend line as in the
23:46previous case if we plot the lower losss
23:50and then draw a line connecting all
23:52these lower lows we will get a trend
23:55channel line which will act as a support
23:58for the the future prices and it is from
24:00this trend channel line that we can
24:03place buy orders to trade the corrective
24:06move so by now you might have the
24:09realization that the corrective moves
24:11are weak moves opposite to the existing
24:14Trend while the impulse move happens in
24:17the direction of the trend and is
24:19generally a series of stronger candles
24:22this is the reason why we should trade
24:24the impulse move during trending market
24:27so that the probability of profit is
24:29high this is the reason why trend is
24:33your friend as we move on it is very
24:37important to understand when a trend
24:39will end and when the consolidation will
24:43start this can be identified by the use
24:46of Swing transition during an uptrend
24:49whenever the price breaks the higher low
24:53for the first time then it is an
24:55indication that there is a transition in
24:57the uptrend
24:59similarly when a price breaks the lower
25:02highs in a downtrend it indicates in the
25:06transition from downtrend to a sideways
25:09Trend or even an uptrend the final type
25:13of trend is not actually a trend but it
25:16is a situation where there is no clear
25:19Trend in the market where the market
25:21stays inside a range we have talked
25:24about ranging stages of the market as
25:26accumulation phase and distribution
25:28phase so the price movement between two
25:31price levels is called as sideways
25:33Trends there are three types of sideways
25:36Trends number one is the range
25:39contraction number two is the range
25:41expansion and the last one is the
25:44Triangular range let's talk about range
25:47contraction first during range
25:50contraction the levels shrink and the
25:53price action becomes almost neutral or
25:56flat this shows the lack of any interest
25:59between buyers and sellers the
26:02volatility in the market also drops so
26:05range contraction happens when there is
26:07a shortening of the price bars or simply
26:10the Candlestick sizes reduces the high
26:14and low range or levels get narrower or
26:18closer to each other and this is a
26:20strong indication that a trend reversal
26:23is coming soon that is if there was a
26:25prior downtrend now the trend might
26:28change to an uptrend but it is just an
26:31indication it is not for sure during a
26:34range expansion as the name suggest the
26:38levels will expand and the price action
26:40starts becoming visible so range
26:43expansion is associated with lengthening
26:45of the price bar or the size of the
26:47candlesticks becomes larger and the high
26:50and low range or the levels gets wider
26:54so range expansion usually indicates a
26:57continuation in the price pattern that
26:59is if there was a prior uptrend it is an
27:03indication that the uptrend might
27:05continue in the future but it is not for
27:08sure now the final type of sideways
27:11trend is the Triangular range where the
27:14price shrinks or expand not between two
27:17fixed horizontal levels but rather an
27:20expanding or converging level this is a
27:22topic which needs broader discussion so
27:25we'll talk about triangle patterns and
27:27how to trade them further forward in
27:30this course even though the trend lines
27:33do a good job of showing overall Market
27:35Direction one issue with trend line is
27:38that they often need to be redrawn for
27:41example during an uptrend the price may
27:43fall below the trend line but this does
27:45not necessarily mean that the trend is
27:47over or there is a break down the price
27:51may move below the trend line and then
27:53continue Rising so in such an event we
27:56have to adapt ourselves
27:58and the trend line needs to be redrawn
28:01to reflect the new price
28:04action drawing the trend lines is easy
28:07but there can be errors in drawing the
28:10trend line so that is why just using
28:13trend lines exclusively to determine the
28:15trend is not really advised because most
28:19professional Traders also tend to look
28:21at other indicators like moving averages
28:24or average directional index to confirm
28:27the market trend
28:28because the more the confirmations the
28:31better the
28:32analysis so it's finally time for the
28:35most important part of the video that is
28:37identifying the strength of a trend so
28:41generally Trends can be categorized into
28:43two types depending on the strength that
28:47is there can be a strong Trend or there
28:49can be a dull or weak
28:51Trend the main parameters to keep in
28:54mind while categorizing the trends based
28:57on their strength
28:58includes a few parameters number one is
29:02at least two or more swings has to be
29:05there or there should be two or more
29:07points of contact in the trend line then
29:11only a trend is considered to be valid
29:14number two is the slope so the slope of
29:17a trend indicates how much the price
29:20should move each day so steeper the
29:23slope the better the trend the slope is
29:25simply the angle between the critical
29:28price level during a consolidation and
29:31the trend line so if it was an
29:33accumulation phase and the price breaks
29:36out to an uptrend if we take the angle
29:39between the trend line and the top price
29:42level of the accumulation phase then we
29:44can easily find out the slope of the
29:46trend so if the trend is too flat
29:49strength is considered to be weak or
29:52dull the third parameter is the time of
29:55the trend it is actually about the time
29:58required to form a trend if the trend
30:01took months to form then it is
30:03considered to be more stronger than a
30:06trend which took just weeks or days to
30:08form so more the time a trend takes to
30:11form the more stronger it is we can also
30:14categorize the trend based on the
30:16duration like it could be a short-term
30:18Trend an intermediate Trend or a
30:21long-term Trend the longer the trend
30:24Remains the stronger it is so these are
30:27a few param to identify the strength or
30:31the weightage of a particular
30:34[Music]
30:46Trend in this video you will learn how
30:49to rate Candlestick patterns like a
30:51professional Trader this is even if you
30:53have no experience beforehand and here's
30:56the good thing I will explain a simple
30:58method to read the Candlestick patterns
31:01without memorizing a single pattern
31:03that's right you don't need to by heart
31:06any of these patterns so let's get
31:09started candlesticks are a way to show
31:12the market prices of a security on your
31:14chart it's not the only way to represent
31:17it we have other ways of plotting them
31:19like bar chart line chart Etc but the
31:22candlesticks are one of the more popular
31:25approaches the Candlestick usually
31:27consist of two parts a real body and
31:31shadows or Wick also when you're are
31:35dealing with candlesticks you must be
31:37aware that there is a four price point
31:40for every candle on the chart these
31:43price points are the opening price the
31:46high price the low price and the closing
31:48price for the same period or simply we
31:51call them as o
31:52hlc the real body of the Candlestick
31:55shows the open and close price prices
31:58while the Shadows on the top and the
32:00bottom of the body shows the high and
32:03low prices for that particular period
32:06the Shadows looks like Wicks and hence
32:08they are called as
32:10candlesticks the upper wig signifies the
32:14high of the period and the lower wig
32:16signifies the low of the period the high
32:20is the highest price point of the candle
32:22at a particular time and the low is the
32:24lower price point of the candle at a
32:26particular time depending upon the time
32:29frame you're trading on candlesticks
32:31generally have two popular colors green
32:34and red sometimes it might be white and
32:37black depending on the settings that you
32:39use but most commonly it's green and red
32:43and a very important feature is that for
32:45green and red bars or candles their
32:48opening and closing prices are at
32:50different
32:52locations the color of the body of the
32:54candlesticks determines if the
32:56Candlestick is is showing a bullish or
32:59bearish Price
33:00movement that is if the opening price is
33:03less than the closing price then the
33:06body of the Candlestick is green or
33:09white similarly if the opening price is
33:13more than the closing price then the
33:15body of the Candlestick is red or black
33:19the longer the real body the more
33:22bullish or bearish the candle is there
33:25are so many Candlestick patterns out
33:27there
33:28ranging from engulfing candlesticks
33:30shooting stars hammers spinning tops
33:33dois Etc to name a very few so if you
33:37were to learn all these patterns it
33:39would seem very hard and confusing but
33:42don't worry because we have got an
33:44easier way to understand what each
33:46Candlestick means and identify the
33:48strength or priority of each of them to
33:51learn this Method All you have to
33:54understand is just two little things
33:56number one is the open high low close or
33:59the ohlc of the candles and number two
34:03is to figure out who is more dominant in
34:06the market whether it is the Bulls or
34:08the beers or simply the buyers or the
34:10sellers at a particular time period
34:12let's start our discussion on the first
34:15category of candlesticks these
34:17candlesticks are called as mosus let's
34:21look at the first type since the candle
34:23is a green one it is a bullish candle it
34:26has a big real body but has has no Wicks
34:28or Shadows on either the upper or the
34:31lower end so we know that the longer the
34:33real body the more bullish the candle is
34:36the ohlc of the candle is as follows
34:39since it is a bullish candle the buyers
34:41are under control so the closing price
34:44is greater or higher than the opening
34:46price since there are no weeks on either
34:49side the high and low prices coincides
34:51with the close and open prices
34:54respectively as a rule of thumb the wick
34:57of a candle indicates price rejection or
35:00opposition by the opposite party in case
35:03of a bullish marabu the open and low
35:06prices coincides and similarly the high
35:09and close price coincides which means
35:11that there is no selling pressure from
35:13the Bears that brings us to the
35:16conclusion that bullish marusos are the
35:19strongest bullish candles we can find on
35:22a chart but we have to be flexible with
35:25patterns that is we have to first
35:27quantify and verify because in the
35:30market the patterns generally don't
35:32occur exclusively the same way as it is
35:35mentioned in those textbooks so let's
35:37look at this green Candlestick pattern
35:40where the price has closed higher for
35:42the period it has opened lower and
35:44closed higher which means it is a
35:46bullish Candlestick and there is a small
35:48lower Wick and a small upper Wick but
35:51the high and low prices are so close to
35:54the open and close prices which means
35:56there is a very weak big selling
35:58pressure from the Bears so in real
36:00market conditions we can actually
36:02consider these scandles as bullish maros
36:05because even though there was a slight
36:07selling pressure it is still a strong
36:09bullish candle now moving on to bearish
36:12marabu which is similar to the bullish
36:14maribus but this pattern is a strongest
36:18bearish pattern for a bearish candle the
36:20open prices are higher than the closing
36:23prices this is because the sellers are
36:26willing to sell at all the available
36:28prices a bearish marabu also indicates
36:31that there is so much selling pressure
36:32in the that the participants actually
36:35sold at every price point during the day
36:38so much so that the stock close near the
36:41low point of the day in case of a
36:43bearish marabu the high price and the
36:46open price coincides while the low and
36:49closing prices coincides the candle has
36:51a big rail body with no wick on either
36:54end indicating a strong selling and a
36:58complete lack of buying or opposition
37:00from the Bulls as mentioned earlier we
37:04can be a little bit flexible when
37:06trading in real markets now let's look
37:09at the second category of candlesticks
37:12the pin bars the first category of pin
37:15bars are the Hammers and hanging man
37:17talking about hammers a pin bar is said
37:20to be a hammer when it appears at the
37:23bottom of a downtrend the hammer consist
37:26of a small real body at the upper end of
37:29the trading range with a long lower
37:31Shadow the longer the lower Shadow the
37:34more bullish the pattern is generally
37:36the prior trend for a hammer should be a
37:39downtrend as mentioned we should
37:41visualize the hammer pattern in the
37:44following manner the market is in a
37:46downtrend so bearers are in absolute
37:49control over the markets when a hammer
37:51forms the price goes even lower and it
37:55forms a new low price the price action
37:57of hammer formation indicates that the
38:00Bulls attempted to break the prices from
38:02falling further down which simply means
38:05that the Bayers tried to bring the
38:07market lower but they did not succeed in
38:10their attempt to do so because the Bulls
38:12generated a lot of buying pressure so
38:15much so that the price closed near the
38:18open of the candle this action by the
38:20bulls has a potential to change the
38:22sentiment in the stock so we can say
38:24that hammer is a reversal pattern and a
38:27Hammer pattern could indicate a bullish
38:30reversal in the market now moving on to
38:32the hanging man a pin bar is said to be
38:35a hanging man when it appears at the top
38:38of a trend similar to the Hammer pattern
38:40the hanging man is also a reversal
38:43pattern except the fact that it is a
38:45bearish reversal pattern a hanging man
38:48signals the market High here's how you
38:51should visualize the hanging man pattern
38:53the market is in an uptrend hence the
38:55Bulls are in absolute control over the
38:57market a hanging man at the top of the
39:00trend indicates that the Bayers have
39:02managed to make an entry this is
39:05emphasized by the long lower shadow of
39:07the hanging man which signifies that
39:09bears have tried to break the stronghold
39:12of the Bulls because the Bulls tried to
39:14push the prices higher but the bearers
39:16managed to bring in so much selling
39:19pressure that the price closed closer to
39:21the open price creating a small real
39:24body and there is a high probability
39:26that the Market Trend would reverse and
39:29the hanging man pattern is a good
39:31indication that bearish sentiment is
39:33about to Prevail in the market and it is
39:35a good time to short the stocks now the
39:39second category of pin bars goes by the
39:41name of shooting stars or inverted
39:44hammers depending on where it is formed
39:46on the chart talking about an inverted
39:49Hammer generally occurs at the end of a
39:51downtrend this is the weakest bullish
39:54candle that you can find in the market
39:56we can see that the the range of the
39:58candle or the real body is very small
40:01also the open and closing prices are
40:03close to each other the long Wick
40:05suggest that the Bulls tried to take the
40:08price higher but there was a big selling
40:10pressure by the Bears so it indicates
40:13that the weak buyers are in control of
40:15the market and there can be a shift in
40:18the sentiment so we can say that even
40:21though a green candle was formed the
40:24sellers are actually in control of the
40:27market Market the inverted Hammer is
40:29generally accepted as a price reversal
40:31Candlestick pattern just like the hammer
40:34where the trend shifts from a downtrend
40:36to an uptrend but if you were to ask me
40:39which signal would you trade the hammer
40:41or the inverted Hammer I would
40:43definitely go for the hammer pattern
40:45because the hammer pattern gives a much
40:47stronger indication of a trend reversal
40:50than an inverted Hammer pattern this is
40:52also due to the difference in selling
40:54pressures in both these cases now moving
40:57on a pin bar is said to be a shooting
40:59star when it occurs at the end of an
41:02uptrend indicating a price reversal
41:04similar to an inverted hammer it also
41:07has a real body with the open and close
41:09prices close to one another it also has
41:12a large wick on the upside indicating
41:14that the Bulls tried to bring the price
41:17up but they were overpowered by the
41:19bearers who push the price below the
41:22open price so the shooting star is a
41:24strong bearish pattern it is stronger
41:26than the hanging man pattern that is
41:28formed in the uptrend this is because
41:30the sellers were more in control when
41:33the shooting star was formed rather than
41:35during a hanging man pattern now let's
41:38move to the third category of
41:40candlesticks we can clearly see that the
41:42candles have a small real body a small
41:45real body indicates the open and close
41:47prices are quite close as we have
41:49discussed so far the upper and the lower
41:52Shadows are almost equal in length since
41:55the open and close prices are close to
41:58one another the color of the candle
42:00doesn't really matter now talking about
42:01the upper Shadow the presence of the
42:03upper Shadow tells us that the Bulls did
42:06make an attempt to take the market
42:08higher however they were not successful
42:10in their attempt if Bulls were truly
42:12successful then the real body would have
42:14been a long green candle as seen before
42:17in case of maribus hence this can be
42:20treated as an attempt by Bulls to take
42:22the market higher but they were not
42:24successful at it similarly the Press of
42:27lower Shadow tells us that the Bayers
42:30did attempt to take the market lower
42:32however they were not successful in
42:34their effort if they were really
42:36successful then the real body would have
42:38been a long red candle as in case of a
42:41bearish marabu hence the Bay's attempt
42:44to take the market lower can also be
42:46treated as an attempt which was not
42:49successful so here neither the Bulls nor
42:52the Bears could establish an influence
42:54or a superiority in the market which is
42:57evident from the small real bodying what
43:00this means is that there is an
43:02indecision between bulls and bears they
43:05are not able to clearly influence the
43:07market Direction so this type of
43:10candlesticks is called as spinning tops
43:13which are actually indecision
43:15candlesticks now let us consider two
43:17situations where spinning tops can be
43:20formed and let us discuss what the
43:22outcomes are now what if the spinning
43:25tops were to occur in a downtrend so
43:27during a downtrend the Bayers are in
43:30absolute control as they are able to
43:32take the prices lower a spinning top in
43:35the downtrend indicates that the Bayers
43:38could be consolidating their position
43:40before resuming the trend it can also be
43:42seen as an attempt by the Bulls to
43:44arrest any further price fall but are
43:47they really successful because if the
43:49Bulls were to be really successful it
43:51would have resulted in a strong bullish
43:53candle rather than a spinning top so
43:55clearly there are two foreseeable
43:57situations or outcomes with equal
44:00probability in this case number one
44:02either there will be another round of
44:04selling and the market will continue
44:06with its flow or number two the markets
44:08could reverse its directions and the
44:10prices would increase as a Trader you
44:12need to be prepared for both the
44:14situations that is for either a reversal
44:17or a continuation an obvious situation
44:19persist in the uptrend also now lastly
44:23let's talk about the dois so does are
44:25similar to spinning tops except that it
44:29does not have a real body this means the
44:31open and closing prices are equal so DOI
44:34is an important Candlestick pattern as
44:37it provides very crucial informations
44:39regarding the market sentiment by a
44:41textbook definition dogee suggest that
44:43the open price should be equal to the
44:46close price which indicates that the
44:48real body does not exist the upper and
44:51the lower wigs can be of any length and
44:53the color of the candle does not really
44:55matter because the prices are are very
44:57close to each other the dois have
44:59similar implications as spinning tops as
45:02we have discussed just now so whatever
45:04we have learned from spinning tops
45:07applies to dois as well so doy also
45:10conveys indecision in the market meaning
45:13that the bulls and bears are confused
45:15whether to take a trade both dois and
45:18spinning tops ask the trader to remain
45:20cautious in the market there are a lot
45:23of other candlesticks but those
45:25mentioned so far is enough to understand
45:28the idea of similar candlesticks that
45:30forms in the chart now let us arrange
45:33the candlesticks from strongest to the
45:36weakest so first of all we'll consider
45:38the bullish candles and arrange them in
45:41the order of their strength
45:50[Music]
45:58moving on let us arrange the bearish
46:00candlesticks in the order of their
46:02strength from strongest to
46:13[Music]
46:17weakest a gentle reminder at the end of
46:20the video would be not to trade these
46:22candlesticks in isolation because more
46:25the confirmations the better the key
46:28thing that I'm trying to bring across is
46:30that you understand what each individual
46:33Candlestick pattern mean and afterwards
46:35you can use these tools and techniques
46:37that you have learned and make it a part
46:40of your trading plan when you consider
46:42different elements of price action which
46:44we are going to learn in the upcoming
46:46episodes of this training
46:48[Music]
47:00the support and resistance are one of
47:02the key factors that distinguish between
47:05your success and failure in trading
47:08starting off the support and resistance
47:10are specific price points on a chart
47:14which is expected to attract maximum
47:16amount of either buying or selling the
47:20support price is a price at which one
47:22expect more number of buyers than
47:25sellers likewise the resistance is a
47:27price at which one expect more sellers
47:30than buyers so as the name suggest the
47:34resistance is something that stops the
47:36price from pricing further this is a
47:39textbook definition that you can find in
47:41any standard trading book Let's dig
47:44deeper into this topic let us understand
47:47why some price points behave in this
47:50particular manner we have talked about
47:52the fact that stock market runs on
47:55demand and supply this very concept is
47:58what causes some price levels to behave
48:01as a barrier or some as a booster for
48:03the prices take an example of a stock
48:07trading at 125 rupees let us say that an
48:11institution thinks that the stock will
48:13do good in the upcoming quarters but the
48:16fair price is 100 rupees and not 125
48:19rupees in order to achieve the fair
48:22price they take the market down to 100
48:24rupees where they slowly steadily build
48:27their positions the price seems to
48:30respect the price level of 100 rupees
48:33this level where the demand for the
48:35stock is met and from where the prices
48:37will start to rise is called as the
48:40support level the support level can also
48:43be seen as a price level which holds the
48:46prices from falling further down it is
48:49also an area where the big buyers will
48:52buy the stock due to a large number of
48:54buy orders at the support level and the
48:57lack of sellers to match all the orders
48:59the price starts rising from the support
49:02level a price level is set to be a
49:05support level when it is below the
49:08current market price now moving on with
49:11the same example the price rallied from
49:14100 rupees to 200 rupees in a matter of
49:17months this is when the institution
49:19thinks of squaring of their position or
49:22selling the stock to make a profit they
49:25do this by placing a large number of
49:27small sell orders so that the supply
49:29meets the demand or in other words they
49:32ensure that there are enough buy orders
49:35at the same price at which they want to
49:37sell so that the profits are not reduced
49:40this particular price level will look
49:43like it is stopping the prices from
49:45moving further up so this level is known
49:48as the resistance level the number of
49:51sell orders in this price level is
49:54higher than the number of buy orders or
49:57the supply is higher than the demand due
50:00to which the prices start to fall from
50:02this level a price level is set to be a
50:05resistance level when it is above the
50:08current market price as a Trader working
50:12in any time frame it is important to
50:14figure out the critical levels where
50:17there was some price action by
50:18identifying the important price levels
50:21you can make more successful trades
50:23using the price action technique let us
50:26learn how to draw supports and
50:28resistance in our chart by a simple
50:30four-step process in short these four
50:33steps are loading the data points and
50:36zooming out identifying the obvious
50:38price action zones aligning the zones
50:43and fitting a horizontal line now we can
50:46take a look at each of them step one is
50:49to load the data points and zoom out
50:52after selecting your preferred time
50:54period for the trades you want to zoom
50:56zoom out your charts this is because we
50:58want to see the bigger picture once you
51:01can see the big picture it is much more
51:03obvious to your rise which key levels
51:06should you be paying attention to so if
51:08your objective is to identify the
51:10shortterm support and resistance for
51:13intraday trading then you must load at
51:16least 3 to 6 months of data points and
51:20if you want to identify the long-term
51:22support and resistance for swing or
51:24positional trades load at least 12 to 18
51:28months of data points so when you load
51:31more number of data points the chart
51:33looks more compressed moving on to the
51:36second step we have to identify the
51:39obvious price action zones a price
51:42action Zone can be described as sticky
51:45points on this chart this is because the
51:47level sticks out or is easily visible to
51:50your naked I so if the level sticks out
51:53the level matters or it is a level of
51:56importance
51:57but if you are doubting your eyes and
51:59asking if it is a level or not then it's
52:02better to ignore it because it is not an
52:04important level just to give you better
52:06Clarity you can identify a critical
52:09level when the price has displayed at
52:11least one of the following behaviors
52:14that is number one the price hesitates
52:17to move up further after a brief up move
52:20and number two the price hesitates to
52:23move down further after a brief down
52:26move and finally number three when sharp
52:29reversals occurs at a particular price
52:32point these are some of the ways you can
52:34figure out the price action zones now
52:36moving on to step number three aligning
52:39the price action zones now when you look
52:41at a 12 to 18 month chart it is very
52:45common to spot many price action zones
52:48by the method that we have just
52:49discussed but we don't have to track
52:51down all these price levels the trick is
52:54to identify at least three price action
52:56zones at the same price level but a
52:59critical point to note while identifying
53:02these price action zones is to make sure
53:04that these price zones are well spaced
53:07in time meaning there should be a good
53:09time difference between the two levels
53:12sported the more the distance between
53:14the two price action zones the more
53:16powerful the support resistance
53:18identification or we can say the support
53:21or resistance is a major price level now
53:24after identifying an align in your price
53:27action zones we move on to the step
53:29number four that is fitting a horizontal
53:32line connect the price action zones that
53:34we have identified with the horizontal
53:37line after Drawing the Line you have to
53:39adjust your level to get the maximum
53:42number of touches the more touches the
53:45better because the more number of
53:46touches the stronger the price level
53:48will act as a major support or
53:51resistance so how do you tell that you
53:54have drawn a support or you have drawn
53:57resistance as we have discussed if the
54:00market price stays above the level that
54:03we have drawn it acts as a support
54:06similarly if the market price is below
54:10the level that we have drawn then it
54:12will act as a resistance here's an
54:15important mistake that most Traders make
54:17while plotting the support resistance
54:19levels the approximation risk generally
54:23when identifying the support resistance
54:25you r into approximation risk the thing
54:29to understand is that the market will
54:31not respect just a single price level
54:34but rather a group of corresponding
54:37price levels or an area of prices so
54:40hence we have to give a room for error
54:43which means that the price level should
54:45be depicted in a range and not just as a
54:49single price point which simply means
54:51that rather than drawing a single line
54:54to plot the support resistance we should
54:56represent it as a zone or an area where
55:00there is a price action happening so
55:02this is a very important idea to
55:04remember when you are placing the
55:06targets and stop- losses while trading
55:09the support resistance levels especially
55:11if you are keeping stop losses with
55:14respect to a single support or
55:15resistance line you might end up hitting
55:18your stop losses
55:19often let us talk briefly about how
55:23reliable the support resistance are the
55:25support and resistance lines are only
55:28indicative of possible price reversals
55:31that is by no means we can be certain
55:34that a reversal is going to happen which
55:36implies that the support and resistance
55:39alone are not the Holy Grail to success
55:42in price action trading rather a few
55:45optimization techniques will help us
55:47identify high quality trades remember
55:50the fact that when you see quality the
55:52quantity will always be compromised but
55:55this compromis is worth taking the idea
55:58is to identify quality trading signals
56:01as opposed to identifying plenty of
56:04worthless trades and ending up bursting
56:06your pockets this leads to an important
56:10idea so what if we have a checklist or a
56:13framework for every trade that we
56:15consider the checklist would act as a
56:18guiding principle before we initiate the
56:20trade the trade should comply with the
56:23conditions specified in the checklist if
56:25it does
56:26we take the trade else we drop it and
56:29look for another trade opportunity that
56:31complies with the checklist not only
56:34that we should not make a habit of just
56:37trading with a single confirmation that
56:39is if the price reaches a support or
56:42resistance we should not jump into the
56:44conclusion that the price would reverse
56:46the direction and we should enter the
56:48trade does not work like that instead
56:50what we should do is that we should look
56:52for confirmations in the previous
56:55episode we have talked about price
56:57action candles which are very important
56:59it is generally a very good idea to use
57:02some of these price action candles along
57:04with the supports and resistance to
57:06actually make a trading system that is a
57:08Confluence trading system which is much
57:11more efficient than using a single
57:13indication or a single confirmation so
57:16make your own system and create a
57:18checklist because the checklist has
57:20another Advantage it helps you to be
57:23disciplined because discipline as they
57:25say makes up 80% of the Traders success
57:29so in my opinion the checklist forces
57:32you to be disciplined it will also help
57:34you to avoid taking an Abrupt and
57:37Reckless trading decision so we will
57:39continue this discussion on support
57:42resistance in the upcoming episodes
57:44because it is an extensive topic
57:46requiring a deeper understanding I will
58:00in the previous episode we have
58:01discussed the basic stuff regarding
58:04supports and resistances in this video
58:06we will go a step further seeking the
58:09depths of support and resistance levels
58:11we will talk about how to identify if a
58:14level will break or not how to approach
58:17our trades using supports and
58:19resistances that is if we should trade a
58:21breakout or should we trade a reversal
58:24and finally we will learn to find trades
58:27that other Traders fail to notice let's
58:29get started right away without wasting
58:31any
58:32time the first and foremost question is
58:36how to identify when a support or
58:38resistance will break to get started
58:41when you see a series of higher lows
58:44into a resistance you want to avoid
58:46selling at the resistance the reason is
58:49very simple let me give you an example
58:51let's say you have a huge hammer in your
58:53hands and it's really powerful and right
58:55in front of you there is a brick wall
58:57now you take the hammer and smash
58:59against the wall many times over and
59:02over again now let me ask you will the
59:05brick wall hold or is it likely to break
59:07well Common Sense tell you that the
59:09brick wall is likely to break and this
59:12is exactly the same concept when a
59:14resistance level is tested multiple
59:17times within a short period of time the
59:19chances are the resistance will break
59:22now I'm not 100% sure that it is going
59:25to break because no one can be 100% sure
59:28in trading but the odds of resistance
59:31breaking are high and likewise when you
59:34see a series of lower highs into the
59:36support the chances are the support
59:39level is going to break this is because
59:42the prices hit the support level
59:44multiple times in a short duration of
59:47time we will expand this idea further in
59:50this video when we will talk about
59:52breakout rades moving on to the most
59:55important question how to find the best
59:57support and resistance areas to trade we
1:00:00can approach this question with two
1:00:02trade ideas the breakouts or the
1:00:05reversals we will understand when one
1:00:07should take a breakout trade and when to
1:00:10take a reversal trade now let's start
1:00:13with the idea of trading reversals the
1:00:16most important question associated with
1:00:18this type of reversal trade is how do
1:00:20you know that a particular level is
1:00:23likely to hold only if the support or
1:00:26resistance level holds can you enter a
1:00:29reversal trade otherwise you will end up
1:00:31in the wrong side of the trade and you
1:00:33will incur losses in order to trade
1:00:35reversals I want to share with you a few
1:00:38tips to bear in mind the first and
1:00:40foremost thing is that you want to see a
1:00:42power move or a momentum move or a
1:00:45strong move into the market structure
1:00:48now what this means is that if you have
1:00:50drawn a area of support or resistance
1:00:53you want to see a strong move into the
1:00:56level by strong move I mean big or large
1:00:59bodied candles which in turn means that
1:01:02for an area of resistance you want to
1:01:05see a strong bullish candle coming into
1:01:07the area of resistance and in case of a
1:01:09support level you want to see a strong
1:01:12bearish candle coming into the support
1:01:14now this is what I mean by a power move
1:01:17or a momentum move I know this sounds
1:01:19counterintuitive as to why one should
1:01:21trade a reversal when there is a strong
1:01:24momentum move so you can ask ask me why
1:01:26do you want to sell when there is such a
1:01:29strong bullish momentum into the
1:01:31resistance and also why do you want to
1:01:33buy when there is such a strong bearish
1:01:36momentum into the support level right
1:01:38now don't worry because as we move on we
1:01:41will find clarity as to why I'm talking
1:01:43about this now the second tip that I
1:01:46have to give you is that you want to see
1:01:47a strong price rejection at the area of
1:01:51value that is the area of support or
1:01:53resistance you want to see a strong
1:01:55price price rejection the price
1:01:57rejection can be in form of a pin bar
1:02:00the pin bar may be a shooting star or a
1:02:02hammer Etc the idea is to see a long
1:02:05Wick where the price gets rejected from
1:02:08the particular level that we are
1:02:10considering let's say this in case of
1:02:12resistance a big bullish candle comes
1:02:15into the resistance and suddenly it gets
1:02:17rejected and the stronger the rejection
1:02:20the better and that is exactly what you
1:02:22want to see let's take our discussion a
1:02:24little deeper and and understand it
1:02:27closely initially I have told that you
1:02:29need to see a strong momentum move or
1:02:32power move into the area of support or
1:02:35resistance let me explain why you want
1:02:37to see large bodied candles into an area
1:02:40of support or resistance now let's say
1:02:42when you look at a resistance and when
1:02:45you have a strong move coming to the
1:02:47resistance level at this point ask
1:02:49yourself what exactly a resistance is so
1:02:52in the previous video we told that
1:02:55resistance is a price level which stops
1:02:58the price from moving up or simply it is
1:03:01a level where the supply is high now
1:03:04also think about the fact that where
1:03:06exactly will you face an opposing
1:03:09pressure or simply where do you think
1:03:11will the buyers come in so that they
1:03:13could buy at good prices so if you think
1:03:16about a good price that the buyers would
1:03:18come in and if you look at the chart the
1:03:21chances are that buyers would always
1:03:24love to buy at an area of support so it
1:03:27is obvious from the market structure
1:03:29that the buyers would wait for the price
1:03:32to retest or reverse to the particular
1:03:34support level so that they can buy or
1:03:37they can go long further the price
1:03:39rejection at the resistance indicates
1:03:42that the buyers are not willing to buy
1:03:45at higher prices and this is exactly the
1:03:48best place to initiate a short trade the
1:03:50other reason being the only place where
1:03:53you have to be afraid of the buyers
1:03:55coming back into the market is the
1:03:57support level the advantage of taking a
1:04:00short trade at the resistance is that
1:04:02you can leverage the difference between
1:04:04the support and resistance level so as
1:04:07to obtain a higher reward to risk ratio
1:04:10however on the downside if you don't get
1:04:12a strong move or a momentum move into
1:04:15the particular level instead what you
1:04:17get is a choppy move with a lot of
1:04:19swings like this then it is not a good
1:04:21idea to short on the resistance we can
1:04:24ask the same question here also where
1:04:27will the opposing pressure come in that
1:04:29is where will the buyers come in so as
1:04:31to get a good buying price well this
1:04:33time around the bias could potentially
1:04:36be at these swing lows what this means
1:04:39to a Trader who is looking to short at
1:04:41the resistance is that as the price
1:04:43approaches to these swing low levels you
1:04:46will be facing opposing pressure that
1:04:48could turn the tide against you and you
1:04:51would not get a good reward to risk
1:04:53trade that is exactly why you don't want
1:04:55to go short when there is a type of
1:04:57stair stepping price action or a swing
1:04:59price action into your levels the reason
1:05:02being all these swing low levels are
1:05:04opposing pressures where the buyers
1:05:06could potentially come in and push the
1:05:08price against your trade now another
1:05:11reason why you want to see large candles
1:05:14or larger momentum candles into a
1:05:16particular level is a very simple idea
1:05:19often when there is a strong price move
1:05:21for example there is a strong bullish
1:05:23move into a resistance level most
1:05:25Traders just look to buy the breakouts
1:05:29I'm pretty sure that you have done it
1:05:30yourselves right so when there is a
1:05:32strong mov up you might be thinking
1:05:34let's buy the breakout the market is
1:05:36rallying and it will continue to Rally
1:05:38so the simple decision at that point of
1:05:40time is to buy now this is where the
1:05:43twist in the plot comes where will you
1:05:45put your stop- loss now because you are
1:05:47taking a breakout trade it is pretty
1:05:50obvious that you will put your stop loss
1:05:53under the resistance or maybe in the
1:05:55middle of the range or somewhere in that
1:05:57close vicinity what is the importance of
1:06:00this now what this means is that if the
1:06:02breakout fails it is going to hit all
1:06:05these clusters of stop-loss orders that
1:06:08is placed under the resistance and what
1:06:11exactly are these clusters of stop-loss
1:06:13orders that are waiting under the
1:06:15resistance level they are simply orders
1:06:18to exit the market or Square of the
1:06:20positions which were kept by those
1:06:22breakout traders who went long on the
1:06:24stock this in turn means that these are
1:06:27actually sell stoploss orders which will
1:06:30induce further selling pressure in the
1:06:32market now more stronger the bullish
1:06:35move is into the market structure more
1:06:37breakout Traders will enter the trade
1:06:39and there is more buying and more buying
1:06:41in turn means more selling stop-loss
1:06:44order behind the resistance and if there
1:06:46happens to be a price reversal or if the
1:06:49price reverses towards the downside it
1:06:51will hit all the sell stop-loss orders
1:06:53of these breakout Traders and another
1:06:55key thing to remember is that the longer
1:06:58the price is away from the particular
1:07:00level the better the trade is and why is
1:07:02it so the thing is the longer the price
1:07:05is away from a particular level the more
1:07:07it would attract the attention from
1:07:09higher time frame Traders for example if
1:07:12a price has not retested to rupees 150
1:07:16level on a daily time frame for let's
1:07:18say 3 months or 6 months or even one
1:07:20year then you can be sure that this
1:07:22particular level can be seen on the
1:07:24weekly time frame or even the monthly
1:07:26time frame and because of this reason it
1:07:28will attract more Traders from the
1:07:30higher time frame to pay attention to
1:07:32these particular levels and that is why
1:07:35you get a strong price rejection or a
1:07:38reversal at a level which has not been
1:07:40tested for a long period of time all
1:07:43right now let's learn to identify
1:07:45breakout trades most newbie Traders
1:07:48trade more breakout than reversals when
1:07:50they see a strong move they think that
1:07:53the market is going out to the space and
1:07:55they jump into buying the breakouts in
1:07:57The Next Movement there is a price
1:07:59rejection and there is a strong reversal
1:08:01in the opposite direction and all these
1:08:04Traders get caught on the wrong side of
1:08:06the trade which in turn results in
1:08:08hitting their stop losses which forces
1:08:11the price to go even lower now when do
1:08:13you trade breakouts at supports and
1:08:16resistance this concept is actually
1:08:18pretty much the opposite of what we have
1:08:20just learned earlier in case of
1:08:22reversals so you know that price is
1:08:24likely to at a support or a resistance
1:08:27when you have a strong power move or a
1:08:30strong momentum move into a market
1:08:32structure with a price rejection when
1:08:34you're looking at it from a breakout
1:08:36standpoint you don't want to see a
1:08:39strong momentum move into the market in
1:08:41this case what you want to look for is a
1:08:43price action that we have discussed
1:08:45right at the beginning of this video we
1:08:47have to look for higher lows into a
1:08:50resistance which somewhat look like an
1:08:52ascending triangle or we should look for
1:08:55lower highs into the support which
1:08:57somewhat looks like a descending
1:08:59triangle or even a third type where
1:09:01there is a price buildup which is
1:09:03supported by a moving average now let me
1:09:05cover each one of them starting off
1:09:07higher lows into a resistance looks
1:09:10something like this and you can see the
1:09:12price looks somewhat like an ascending
1:09:14triangle pattern this is significant
1:09:16because it's telling me that the buyers
1:09:18are willing to buy it higher prices and
1:09:20the sellers are not interested or they
1:09:23are weaker the ascending triangle
1:09:25pattern tells me that the sellers in
1:09:27terms of their strength are getting
1:09:30weaker or they are getting feeble the
1:09:32thing is that the first time the sellers
1:09:33managed to push down the price by a good
1:09:36margin and in the consecutive times it
1:09:38got weaker and weaker and this is a sign
1:09:41of bullish strength that the market
1:09:43could possibly break out higher now at
1:09:46this instance you don't want to be
1:09:47shorting at the resistance because
1:09:49number one you don't have a momentum
1:09:51move into the resistance structure and
1:09:53number two if you were to go short into
1:09:56the resistance there are swing levels
1:09:59which have been formed where the buyers
1:10:01could potentially come in and result is
1:10:03that you will hit your stop- loss now
1:10:05similarly let's look at lower highs into
1:10:08the supports which are the same thing
1:10:10and it tells me that the sellers are in
1:10:12control and they are willing to sell
1:10:14even at lower prices on top of it from a
1:10:17price action standpoint it is telling
1:10:19you that the buyers are also getting
1:10:21weaker because this is a condition where
1:10:23the buyers barely pushed the price
1:10:26higher and the subsequent times it only
1:10:28moved smaller and smaller they were not
1:10:30able to push it any higher similar to
1:10:33the previous case you should not be
1:10:35going long in this case as the sellers
1:10:37are the dominant force and there is a
1:10:40higher probability that the market will
1:10:42break down and in case if you go long
1:10:44there are swing levels which were formed
1:10:47during the ascending triangle formation
1:10:49where there's a possibility that the
1:10:51buyers can come in which will in turn
1:10:53result in hitting your stop loss now you
1:10:56see the price action is quite
1:10:57interesting right where one side is
1:10:59getting stronger and stronger while the
1:11:01other side is getting weaker and weaker
1:11:03now let's discuss the third type where a
1:11:05buildup is supported by a moving average
1:11:08in this case the price could just come
1:11:10to a key support or resistance level and
1:11:12it just consolidates there now if you
1:11:14bring up the moving average like a 20
1:11:17period or 50 period moving average
1:11:19you'll notice that the moving average
1:11:21supports the price and vice versa pretty
1:11:24nicely it's like the Market is really
1:11:26respecting the moving average and it is
1:11:28getting ready to break out so if you
1:11:30find a buildup or a slight consolidation
1:11:33when the price reaches the support or
1:11:35resistance it is always an indication
1:11:38that the price is about to break down or
1:11:40break out now let's hop onto the final
1:11:43question how to find support resistance
1:11:46trading opportunity that most Traders
1:11:48fail to notice now it's very simple if
1:11:51you are a Trader who Enders at a daily
1:11:54time frame then then you have to go to a
1:11:56higher time frame like a weekly time
1:11:58frame and then you have to look for
1:12:00buildup or a tight consolidation this is
1:12:03because when a higher time frame is
1:12:05forming a tight consolidation there are
1:12:07chances that you will be able to find
1:12:09support resistance trading opportunities
1:12:12on a lower time frame like a daily time
1:12:14frame in this case now taking another
1:12:16example if your trading time frame is a
1:12:181 hour time frame you should spot a
1:12:21tight consolidation on a higher time
1:12:23frame which in this case could be a
1:12:25daily time frame and if you are able to
1:12:27find a tight consolidation in your daily
1:12:30time frame then it is likely that you
1:12:32will find a support and resistance
1:12:34trading opportunity in the lower time
1:12:37frame which is a 1H hour time frame this
1:12:39is a pretty good technique that you can
1:12:41use to find support and resistance
1:12:43trading opportunities in the market you
1:12:45can also use it for even shorter time
1:12:47frames like 15 minutes or even 10
1:12:49minutes time frames the only thing to
1:12:51keep in mind is to appropriately select
1:12:54a higher time frame and find a tight
1:12:56consolidation in the higher time frame
1:12:58so that you can find the support and
1:13:00resistance trading opportunity in the
1:13:02lower time
1:13:15frame this price action course will not
1:13:17be complete if I don't talk about the
1:13:19market volumes throughout this course
1:13:22our Focus was strictly on prices for the
1:13:25success of price action in Market volume
1:13:28plays a very pivotal role be it the
1:13:30identification of Trends or patterns be
1:13:33it finding out the breakouts and false
1:13:36breakouts be it the entry or exit from
1:13:38the trade volume is a necessity as you
1:13:41may know volume is a leading indicator
1:13:44which means that it precedes the prices
1:13:46or simply before something happens in
1:13:49the price the volume will show the
1:13:50changes beforehand so our duty as a
1:13:53Trader is to find the relation ship
1:13:55between the price and volume so as to
1:13:57get an edge over the market or even to
1:13:59predict the market moves beforehand so
1:14:02let's hope in right away without wasting
1:14:04any time basically volumes indicate how
1:14:07many shares are bought and sold over a
1:14:10given period of time so the more active
1:14:12the share the higher would be its War
1:14:14for example you decide to buy 100 shares
1:14:17of tataa Motors at rupees 485 at the
1:14:20same time I decided to sell 100 shares
1:14:22of tataa Motors at 485 or it can be
1:14:25different people who want to sell a
1:14:27smaller quantity at the same price that
1:14:29is $485 which are accumulated together
1:14:32to give you 100 shares that is let's say
1:14:34one of them has 50 shares the other one
1:14:37has 30 shares and the third person has
1:14:3920 shares to sell at the same price of
1:14:42rupees 485 which will be matched with
1:14:45the buyer so basically there is a price
1:14:48and quantity match which results in a
1:14:50trade this means that you and I have
1:14:53together created a volume of 100 shares
1:14:56or you and the other three sellers which
1:14:59we have talked about created a volume of
1:15:02100 shares because if you notice overall
1:15:04100 shares were transferred from the
1:15:07seller to the buyer now many people tend
1:15:10to assume the volume and count it as 200
1:15:13because 100 were bought and 100 were
1:15:15sold but this is not the right way to
1:15:17look at volumes because only 100 shares
1:15:19transferred hands from one person to the
1:15:22other with that being said the volume
1:15:24information on its own is quite useless
1:15:27for example we know from the nsse
1:15:29website that volumes on Reliance India
1:15:32for this particular day is 16700 shares
1:15:36so tell me how useful is this
1:15:38information when read in isolation so if
1:15:40you think about it it has no merit when
1:15:42used individually and hence it would
1:15:44actually mean nothing for our analysis
1:15:47however when you associate today's
1:15:49volume information with the preceding
1:15:52Trend in the price and the preceding
1:15:54Trend in the volumes then the volume
1:15:56information becomes more meaningful now
1:15:58I will show you a table that consist of
1:16:01four price to volume relations for
1:16:03different conditions and the related
1:16:06outcome that is expected under such
1:16:08conditions now before going ahead don't
1:16:10fall into the conclusion that if you
1:16:13understand the relations provided here
1:16:15you can trade right away it doesn't work
1:16:17like that in order to use this idea and
1:16:19market conditions you should have a fair
1:16:21idea about the market structure and the
1:16:23participants the Market of which you
1:16:26need to understand how the big players
1:16:28or institutions work and number two you
1:16:31need to have a good understanding of the
1:16:33candlesticks and their relevance at
1:16:36different price areas if you know these
1:16:38two things spot on then this will just
1:16:40be a walk in the park for those who
1:16:42don't have an idea I recommend you to
1:16:44watch these two videos beforehand that
1:16:47we have already discussed earlier in our
1:16:49course before we understand the price
1:16:51volume Trend table in detail think about
1:16:54this SC when we are talking about an
1:16:56increase in the volume what does this
1:16:59actually mean to a Trader what is the
1:17:01reference point or what is the metric to
1:17:04say if the volume is high or the volume
1:17:06is low should it be an increase over the
1:17:09previous day volume or the previous
1:17:11week's aggregate volume what is the
1:17:13reference point as a practice Traders
1:17:16usually compare today's volume over the
1:17:19average of either last 3 days or last 5
1:17:22days or last 10 days or even last 20
1:17:25days volume depending on the type of
1:17:28Trader they are and what exactly is
1:17:30their time frame for analysis generally
1:17:33the rule of thumb is that higher the
1:17:35time frame and higher the number of
1:17:37volume bars or data taken to calculate
1:17:40the volume the more reliable the
1:17:42analysis is for the sake of this video
1:17:45let me consider the volumes from a swing
1:17:47Traders perspective that is a 1 day time
1:17:50frame and 10 days of volume data for the
1:17:53average volume measurement after the
1:17:55average volume measurement is done we
1:17:58can use it for the comparison of today's
1:18:01volume now today's volume is set to be
1:18:03the average volume if it is equal to the
1:18:06last 10 days average volume now if
1:18:09today's volume is set to be higher
1:18:11volume or is said to be an increasing
1:18:14volume then it is greater than the last
1:18:1710 days average volume and finally if
1:18:19today's volume is said to be a low
1:18:21volume or a decreasing volume then it is
1:18:24less stand the last 10 days average
1:18:26volume in order to get the last 10 days
1:18:29average all you need to draw is a moving
1:18:32average line on the volume bars and the
1:18:34job is done this feature is available on
1:18:36most charting platforms for free so you
1:18:39don't have to calculate it by yourself
1:18:41every time as you can see in this chart
1:18:44the volume bars are represented as red
1:18:47and green bars and is placed at the
1:18:50bottom of the price chart the blue line
1:18:52that is overlaid on the volume bars in
1:18:54indicate the 10day average volume as you
1:18:57notice all the volume bars that are over
1:18:59and above the 10day average volume can
1:19:02be considered as increased volume now
1:19:04the question is what does increased
1:19:06volume necessarily mean and why is it
1:19:08important well increasing volume means
1:19:11higher trading activity than usual which
1:19:13means more shares are being exchanged
1:19:16hand now who do you think will be
1:19:18responsible for this can retail Traders
1:19:21by themselves contribute to such high
1:19:23volumes single single-handedly Common
1:19:26Sense tells you that it is not possible
1:19:28and it's obvious that there is some
1:19:30institutional activity or large
1:19:33participation by some big players has
1:19:35taken place on the same note what does a
1:19:38lower than average volume mean to a
1:19:40Trader it means that big institutions or
1:19:43big players are not interested in the
1:19:45particular stock at that period of time
1:19:47and the major volume is contributed by
1:19:50the retail participants and speculators
1:19:53so the simple logic in stock market is
1:19:55to follow the big institutions if you
1:19:57want to be successful we have discussed
1:19:59this in the market structure episode
1:20:02okay then let's look at the thought
1:20:04process behind the volume Trend table
1:20:07when institutional investors buy or sell
1:20:10they do not transact in small chunks or
1:20:12small quantities for example think about
1:20:15LIC or Life Insurance Corporation of
1:20:17India which is one of the biggest di or
1:20:20domestic Institutional Investor now if
1:20:23they were to buy the share of TCS would
1:20:26you think they would buy 500 shares or
1:20:28th000 shares obviously not they would
1:20:31probably buy 5 lakh or even 50 lakh or
1:20:34even more shares so what happens if they
1:20:36were to buy 5 lakh shares from the open
1:20:39market all in one go yes it would
1:20:42definitely start reflecting in the
1:20:44volumes and besides besides this because
1:20:46they are buying large chunk of shares
1:20:49the share price also tends to go up now
1:20:51this is where I have to remind you that
1:20:54instit institutional money is referred
1:20:56to as smart money it is perceived that
1:20:58smart money always make wiser moves in
1:21:00the market than most retail Traders so
1:21:03being smart or wise they would not just
1:21:06buy all at once rather they would
1:21:08accumulate the shares in small
1:21:10quantities over a period of days or
1:21:12weeks or even months so as to get the
1:21:15descided price that they want to buy now
1:21:18most Traders have a misconception that
1:21:20when the volume is high the price will
1:21:22also move up or down with larger candles
1:21:25depending on the color and size of the
1:21:27volume bars but this is a wrong way to
1:21:30understand the price volume relation the
1:21:32thing is that volume is the number of
1:21:34shares that has traded hands which can
1:21:36also mean that the orders can also be at
1:21:39a single price point for example let's
1:21:42say there are 10,000 buy orders and
1:21:4410,000 sell orders all at rupe 400 of a
1:21:48stock and let us say that the average
1:21:50volume of the stock is 8,000 for the
1:21:53last 10 days even though the 10,000
1:21:56shares were exchange resulting in a
1:21:58higher than average volume for the
1:22:00particular day the price will not move
1:22:02up the simple reason being all the
1:22:04orders are placed at the same price that
1:22:07is rupe 400 on the other hand if the
1:22:10price where to move up with a increase
1:22:12in volume then there should have been
1:22:14more buy orders at higher prices that is
1:22:17buyers should be willing to buy at even
1:22:19higher prices and a similar case if the
1:22:22price were to go down then the the
1:22:24sellers should be willing to sell at
1:22:26even lower prices and it is at these
1:22:28instances we can leverage an increase in
1:22:31the volume for our trade decisions and
1:22:33not otherwise the case is the same when
1:22:36the volume is low the low volume does
1:22:38not necessarily mean the price would not
1:22:40do anything this just that the number of
1:22:43shares exchanged hands are a lower
1:22:45number but there is still a possibility
1:22:48of buying or selling interest where the
1:22:50orders can be placed at higher or lower
1:22:53prices by the buyers or sellers
1:22:55respectively then there is a definite
1:22:57chance that the prices can do something
1:23:00but on the downside the big players are
1:23:02not interested in this particular stock
1:23:05and it leads us to the conclusion that
1:23:07the price move was supported by retail
1:23:09Traders which is actually evident from
1:23:11the lower volumes and hence following
1:23:14the smart money is the wisest idea that
1:23:17you can have as a Trader well then we
1:23:20shall discuss each of the four cases in
1:23:22detail if both price and volume are
1:23:25increasing this only means one thing
1:23:28that a big player is showing interest in
1:23:30the stock now going by that assumption
1:23:33the smart money always makes smart
1:23:35choices and the expectation of the
1:23:37market turns bullish the institution
1:23:40build their positions slowly and
1:23:42gradually but sometimes there won't be
1:23:44enough liquidity at a price where they
1:23:47want to buy or simply there are not many
1:23:49sellers who want to sell at the price
1:23:52that the institution wants to buy what
1:23:54this does is that it will in turn push
1:23:56the price higher keep in mind the fact
1:23:58that the quantity that these big players
1:24:01take for delivery is huge and therefore
1:24:03every rupee is worth LHS for them due to
1:24:06this reason the institution starts to
1:24:09sell some quantity which will in turn
1:24:11bring the prices down to where they want
1:24:13to buy and because of this the Panic
1:24:15sellers would sell off the stock at the
1:24:17former price that the institution want
1:24:19and this phase of position buildup will
1:24:22look similar to an accumulation or
1:24:24consolidation in the chart once the
1:24:26institution finishes placing all the
1:24:28orders that is when the market actually
1:24:31starts to move higher and this is the
1:24:34time when the retail Traders actually
1:24:36start to notice that the market is
1:24:38starting to go higher and even they will
1:24:40start to join the party by buying the
1:24:42stock which will push the price even
1:24:44higher so this is the reason why one
1:24:46should look for buying opportunities in
1:24:48the stock because the expectation turns
1:24:50bullish when both the price and volume
1:24:53increases
1:24:54now whenever you decide to buy ensure
1:24:57that the volumes are substantial this
1:24:59means that you should be buying along
1:25:01with the smart money also also you have
1:25:03to look for bullish Candlestick patterns
1:25:05like hammers or engulfing candles to
1:25:08confirm your trade entry you will find
1:25:09more details regarding this on my
1:25:11Candlestick video now all is well if you
1:25:14are an intraday Trader but if you are a
1:25:16swing Trader or an investor you will
1:25:18have to keep an eye on a third parameter
1:25:21which is either the delivery volume or
1:25:23the delivery percentage now delivery
1:25:25volume is the volume of the stock
1:25:27delivered to actual buyer out of the
1:25:30total traded volume or in simple terms
1:25:33the shares which were taken as delivery
1:25:35for the particular day an year ago we
1:25:38need to go through both these parameters
1:25:40because the delivery volume would also
1:25:42include the btst trade that is buy today
1:25:45sell tomorrow trades which will not give
1:25:47the correct picture so we also had to
1:25:50keep an eye on the delivery percentage
1:25:52but now since the BTS trades are stopped
1:25:55we can consider any one of them you will
1:25:57get the delivery volume details on the
1:25:59nsse website I will put a link to it in
1:26:02the description box now the importance
1:26:04of delivery volume is that it gives you
1:26:06the real picture of the interest of big
1:26:09players or big institutions if the big
1:26:11institutions start buying they will take
1:26:13the shares for delivery if you can see a
1:26:16rise in the delivery volume or delivery
1:26:18percentage for a few days you will
1:26:20understand that there is a real buying
1:26:22intent in the market also Al understand
1:26:25that even if the overall traded volume
1:26:27is very high does not necessarily
1:26:29guarantee that the delivery volume will
1:26:31also be high or simply it does not
1:26:34straight away mean that there is an
1:26:35interest from the investors it can be
1:26:38seen as a heavily traded Daye and
1:26:40nothing else moving on to the second
1:26:43case what do you think will happen when
1:26:45the price increases but the volume
1:26:47decreases think about the situation in
1:26:49the following terms number one why is
1:26:52the price increasing simple answer
1:26:54answer because the market participants
1:26:56are buying easy right are there any
1:26:59institutional buyers associated with
1:27:01this Rising price the simple answer is
1:27:04it is not necessary that there should be
1:27:06institutional buyers associated with the
1:27:08price rise now the critical question how
1:27:11would you know that there is no
1:27:13meaningful purchase by the institution
1:27:15investors or the big players Now using
1:27:17the basic rule if they were buying then
1:27:20the volumes would have increased and not
1:27:22decreased in this case the price PR
1:27:24increased but the volume has decreased
1:27:27now what does price increase associated
1:27:29with the decreasing volume indicate it
1:27:31means that the price is increasing
1:27:33because of small retail participation
1:27:35and not really the influential buying by
1:27:38the big pryers hence what this price
1:27:41volume relation is telling you is to
1:27:43stay cautious in the market because it
1:27:45would be a potential bull track that is
1:27:47if you have taken a long trade there are
1:27:50every chances that the market can
1:27:52reverse and go in the opposite Direction
1:27:54resulting in your loss so when it comes
1:27:57to decreasing volume but with increasing
1:28:00prices we should be cautious and not to
1:28:02take any long-term trades because the
1:28:04market is run by the retailers and there
1:28:07is no investor participation or investor
1:28:10interest in the stock going forward the
1:28:13third type is a decrease in price along
1:28:15with an increase in the volume this
1:28:17particular relation between price and
1:28:19volume sets a bearish expectation in the
1:28:22market we will discuss why first
1:28:24question to ask yourself what does a
1:28:27price decrease indicate a price decrease
1:28:29indicates that the market participants
1:28:31are selling the stock but on the
1:28:33positive note an increase in the volume
1:28:35indicates the presence of smart money or
1:28:38the big institutions now clubbing both
1:28:40events together that is decrease in the
1:28:42price and increase in the volume it
1:28:44simply implies that the smart money is
1:28:47selling the stocks they do this
1:28:49gradually so that the market
1:28:51participants won't Panic think about it
1:28:54what would have happened if they Place
1:28:55Large sell orders all at once it would
1:28:58definitely be shown in both volum and
1:29:00price that is the prices would drop and
1:29:03the volumes would increase this will
1:29:05further induce panic in the retailers
1:29:08who will further start selling and
1:29:10because of this extensive selling the
1:29:11prices would even drop further and the
1:29:14institutions will not be able to sell at
1:29:16the desired price that they want and
1:29:18this would directly affect their profits
1:29:21really badly being smart they would sell
1:29:23the shares in small quantities slowly
1:29:26and gradually and generate the ample
1:29:28liquidity to sell at the descided price
1:29:30that they want now going by the
1:29:32assumption that smart money always makes
1:29:35smart choices the expectation in the
1:29:37market is bearish and we should look for
1:29:40selling opportunities in the stock now
1:29:42whenever you decide to sell Ensure that
1:29:44the volumes are good this also means
1:29:46that you should be selling with the
1:29:48smart money and also use bearish
1:29:51Candlestick patterns for your trade
1:29:53entry and confirmation if you are a
1:29:55swing Trader or an investor it is a good
1:29:58practice to look at the delivery volume
1:30:00or delivery percentage which in this
1:30:03case would be decreasing since the
1:30:04investors are selling their shares now
1:30:06an increase in the volume does not
1:30:08necessarily mean an increase in delivery
1:30:11volumes moving forward to the final case
1:30:14where both the volume and price
1:30:16decreases ask the questions number one
1:30:18why is the price decreasing simply
1:30:21because the market participants are
1:30:22selling question number number two are
1:30:24there institutional sellers associated
1:30:27with this price decrease simple answer
1:30:30we can't be sure about it now the most
1:30:31critical question how do you know that
1:30:33there was no meaningful sell orders by
1:30:36the institutional investors
1:30:37straightforward answer if they were
1:30:39selling then the volume would have
1:30:41increased but in this case the volume
1:30:43decreased and what does a price decrease
1:30:46and a decreasing volume indicate it
1:30:48means that the retail participation is
1:30:51the reason for the decrease in prices
1:30:53and not really the influential seller so
1:30:56this is a case where you have to be
1:30:58cautious if you are planning to sell the
1:31:00stock as it could lead to a possible be
1:31:03trap that means if you have shorted a
1:31:05stock there is every possibility that
1:31:07the stock can reverse and go against
1:31:10your trade if you want to know more
1:31:12about analyzing delivery volume or
1:31:14delivery percentage for your trades do
1:31:17let me know in the comments
1:31:18[Music]
1:31:30now that we have finished with the
1:31:31fundamentals of price action from the
1:31:33market structure to the volums we are
1:31:36all set to learn the different price
1:31:37action strategies that we can employ in
1:31:40the market under various market
1:31:42conditions the first one in the list is
1:31:44obviously breakouts you may ask why
1:31:47breakouts it is just that breakout
1:31:50trading can be exciting the price
1:31:52quickly moves in your favor and makes it
1:31:54seems like you're riding a wave and at
1:31:56the same time making a hell lot of money
1:31:58for you however that being said breakout
1:32:01trading is also quite painful for
1:32:03example you notice the price breaking
1:32:05above the resistance now the candles
1:32:07formed are big and bullish and you
1:32:10instantly get the fear of missing out so
1:32:12you decide to go long and as soon as you
1:32:14enter the trade hoping to get a strong
1:32:16move up the price does a 180° reversal
1:32:20and before you know it you bought the
1:32:21highs and now your stop- loss is here
1:32:24and if you have not placed a stoploss
1:32:26order you will see your account bleeding
1:32:28I hope this has happened to at least
1:32:29some of you this brings us to a very
1:32:32critical question how do I filter for
1:32:35high probability breakout rates and know
1:32:38which are the ones to avoid we have
1:32:40talked about the basic idea governing a
1:32:42breakout and a reversal in the sixth
1:32:45episode of this price action course I
1:32:47want you guys to watch that video first
1:32:49because this video will be a
1:32:51continuation of where we left off in
1:32:53episode 6 and so in order to understand
1:32:56the concept completely watch that
1:32:58episode and then attend this video well
1:33:01then a breakout occurs when the price
1:33:03moves Beyond a certain level not just
1:33:06any level but a level of importance or
1:33:10an area of value the area of value can
1:33:12be anything from a resistance a support
1:33:15to a trend line or a moving average the
1:33:18very idea of breakout trading is
1:33:20entering the trades when the price
1:33:22momentum is in your favor however no
1:33:25system in the stock market is perfect
1:33:27keeping this in mind let us first
1:33:29discuss the positives and shortcomings
1:33:32of a breakout trade I will explain its
1:33:34pros and cons first of all let us talk
1:33:37about the pros of a breakout trades
1:33:39breakout trates comes with a limited
1:33:41risk which means that in many instances
1:33:44breakout trates present themselves
1:33:46during the consolidating market faes so
1:33:49the initial stop losses that we place
1:33:51for our trades may be relative small
1:33:54according to the compression or the
1:33:56price range used for the market entry so
1:33:59in addition a confirmation of a trade's
1:34:01failure may come very rapidly which
1:34:04offers an opportunity for a quick exit
1:34:06which simply means that if the trade
1:34:08does not go in our favor the price will
1:34:10reverse immediately and hit our stop
1:34:13loss we don't have to wait a whole day
1:34:14for the trade to complete and also the
1:34:17risk to reward associated with breakout
1:34:19trades is much better so that you can
1:34:22control your stop- loss accordingly the
1:34:24second Advantage is that the momentum is
1:34:27in your favor if a breakout trade is
1:34:29successful large gains are possible so
1:34:31getting in on strong Trend early can be
1:34:34a profitable situation and the third
1:34:36Advantage is trade management which
1:34:38means that the market entry and exit are
1:34:41predefined with the stop losses and
1:34:43profit targets being identified before
1:34:46the trade so that our only job is to
1:34:49place the stop losses and targets and
1:34:51wait for either one of them to get hit
1:34:54now talking about the disadvantages
1:34:56number one is false breakouts so false
1:34:59breakouts are a considerable part of the
1:35:02breakout approach of trading no matter
1:35:04how sound your methodology used in
1:35:06identifying the breakout is or how good
1:35:08your system is in quantifying the market
1:35:11in many instances a signal may appear to
1:35:14be solid but it will end up lacking the
1:35:16intended participation or the increase
1:35:18participation from the market
1:35:20participants which is the most essential
1:35:22thing for a break out trade to succeed
1:35:25the second disadvantage is associated
1:35:28with opportunity cost the optimal
1:35:30breakout setups don't occur frequently
1:35:32so searching for setups can often leave
1:35:34a Trader on the sidelines instead of
1:35:37pursuing other opportunities in the
1:35:39market or simply the number of breakout
1:35:41trades are less or it is hard to combine
1:35:44before venturing into different breakout
1:35:46trading techniques it is always better
1:35:48to understand how not to trade breakouts
1:35:51in the first place let us talk about
1:35:53inst instances when you should avoid
1:35:55trading breakouts first of all under no
1:35:58instance you want to be trading breakout
1:36:00against a trend now trading against the
1:36:02trend is quite illogical for me as a
1:36:05Trader and you don't want to do this in
1:36:07the first place we have all heard the
1:36:09famous saying a trend is your friend
1:36:12until it Bens so let's see why trading
1:36:15with the trend puts you in a much more
1:36:17favorable position than going against it
1:36:19when you are moving with the trend or in
1:36:22the direction of the trend the moves
1:36:23that you get are pretty strong and it
1:36:26can last for longer period compared to
1:36:27someone who wants to trade against the
1:36:30trend for example let's look at the bull
1:36:32traders who are going long in a bearish
1:36:35market look at these up moves or
1:36:37Corrections that are resulted from
1:36:39Trading against the trend so these are
1:36:41up moves which are very sharp and very
1:36:43limited you can see that the strength of
1:36:45the Bulls is very weak compared to the
1:36:47beers from the size of the candles
1:36:49formed so if you are looking to trade
1:36:51against the trend then you can see that
1:36:53that there is not really much of a
1:36:55strength in the move or the move is
1:36:57pretty weak which in turn means that the
1:36:59gains from these trades are pretty much
1:37:01limited because you are trading against
1:37:03the trend likewise if you want to trade
1:37:05breakouts I would strongly discourage or
1:37:08in fact I will strongly advise you not
1:37:10to trade against the trend and let's say
1:37:12you are looking to trade the breakout
1:37:15higher I would say the chances are this
1:37:17breakout isn't going to go very far
1:37:19because after all you are trading
1:37:21against the trend what is likely to
1:37:22happen in this situation is that even if
1:37:25you get a breakout it would not trade
1:37:27any higher before it will collapse lower
1:37:29which will give you a false breakout at
1:37:32that point so you have to be beware of
1:37:34trading against the trend whether you
1:37:36are trading breakouts pullback or
1:37:38whatever entry technique you are using
1:37:40trading against the trend is not usually
1:37:42the ideal situation for you as a Trader
1:37:45moving on you don't want to be trading a
1:37:47breakout and the price is far from the
1:37:50market structure we have talked about
1:37:52the market structure in the second
1:37:54episode of this price action course the
1:37:56important thing that I have to tell you
1:37:57is whatever Market you are looking be it
1:38:00bullish or bearish or whatever time
1:38:02frame be it swing time frame or intraday
1:38:05time frame the principles we are
1:38:07discussing are essentially the same and
1:38:09it applies to all of the M whether it is
1:38:11a 4-Hour time frame a daily time frame a
1:38:14weekly time frame or hourly time frame
1:38:16they're all the same nevertheless what
1:38:17we are looking at right now is an
1:38:19uptrend at this point in time you see
1:38:21that the price has traded a a point
1:38:24which is so high and some of those
1:38:26former Traders will look at this chart
1:38:28and decide to get long before the price
1:38:31trades any higher without them so they
1:38:33enter long at a high price over there
1:38:36now what the problem with going long at
1:38:38this high price based on the example
1:38:41think about this where are you going to
1:38:43put your stop loss or in other words
1:38:45where is the logical place for you to
1:38:47put a stop loss the possible answer is
1:38:50the previous resistance level with a
1:38:52possibility of of it becoming a support
1:38:54if the price drops down the level is the
1:38:57one that you need to lean against to
1:38:59place your stop- loss and of course you
1:39:01don't want to be placing the stop- loss
1:39:03exactly at the level as well because the
1:39:05price could just come into the level and
1:39:07bounce higher after hitting your stop-
1:39:09loss instantly so the chances are you
1:39:11need to put your stop loss somewhere
1:39:13below the resistance because in this
1:39:16case the price has to move at least an
1:39:18equal distance as that of your stop loss
1:39:20so as to achieve at least a one is to
1:39:22one RIS rest reward as you can see
1:39:25having a large stop- loss give you a
1:39:27poor rest reward so I would discourage
1:39:29you to trade breakouts when it is far
1:39:31away from the market structure because
1:39:34of the fact that you need to have a very
1:39:36large stop loss and it gives you a very
1:39:39poor risk to reward as a result of it
1:39:42now that we have understood what not to
1:39:43do we are ready to learn the different
1:39:45techniques of breakout
1:39:48trading there are two things to bear in
1:39:51mind when you have to identify a Hy
1:39:53probability breakout trade they are you
1:39:55want to trade with the trend or trade in
1:39:58the direction of the trend and secondly
1:40:01you want to trade near a market
1:40:03structure or an area of value now let me
1:40:06explain each of them in detail let's
1:40:09start with the trend trading breakout
1:40:11strategy SO trading with the trend is
1:40:13something which you should be familiar
1:40:15by now because earlier I discourage you
1:40:18from Trading against the trend and it
1:40:21only makes sense to be trading with the
1:40:23trend Trend now here's the deal for an
1:40:25intraday Trader or a swing Trader let us
1:40:27say in a strong Trend the price tends to
1:40:30stay above the 20 period moving average
1:40:33so if you are waiting for a pullback to
1:40:35the moving average or even a trend line
1:40:38then most often or not you will be
1:40:40disappointed as the market will continue
1:40:42making new highs without you able to
1:40:44initiate a long trade the thing is that
1:40:47there is a time for trading pullbacks
1:40:49but it's definitely not when the market
1:40:51is in a strong trend we will discuss the
1:40:54pullback trading systems in the upcoming
1:40:56episodes right now in this scenario you
1:40:59want to trade breakouts instead of
1:41:01pullbacks this type of breakout trading
1:41:04strategy is called as the trend trading
1:41:06breakout strategy here you can either
1:41:08trade the break of the Swing high or
1:41:11swing low depending on the type of the
1:41:13trend the market is in let's see how
1:41:15this works with an example let's say the
1:41:18market is in a strong uptrend and the
1:41:20market respects the 20 period moving
1:41:23average the idea of this trade is to buy
1:41:26the breakouts above the swing high you
1:41:28can see that the price has Consolidated
1:41:31and broke higher the price looks like
1:41:33forming a flag pattern then you could
1:41:35possibly trade higher from it in this
1:41:37case the trend is in your favor so the
1:41:40ideal thing is to trade the breakout in
1:41:42the direction of the trend here you will
1:41:45increase the odds of the trades working
1:41:47out in your favor the exact entry for
1:41:50this trade would be the candle above the
1:41:53the breakout candle High the next thing
1:41:55that you have to do exit when you're
1:41:57wrong this refers to your stop loss in
1:42:00other words you want to ask yourself at
1:42:02which point on the chart will I get out
1:42:05of the trade if the market moves against
1:42:07me as a guideline your stop loss should
1:42:10be at a level where if reached will
1:42:12invalidate your trading setup which
1:42:14simply means that keep your stop- loss
1:42:17at a level which you think will
1:42:19invalidate the breakout trade that you
1:42:21have taken so in this case set your stop
1:42:23loss one ATR below the swing low if you
1:42:26don't know about what ATR indicator is
1:42:29watch this video on ATR indicator or
1:42:31else you can simply place the stop loss
1:42:33below the trend line or even below the
1:42:3620 moving average for that sake now the
1:42:38second exit is when you're right on the
1:42:41flip side what if the market moves in
1:42:43your favor how would you exit your trade
1:42:45it is simply about setting the targets
1:42:47my suggestion is to write the trend for
1:42:50all its worth which means there is a
1:42:51good chance of the price heading even
1:42:54higher for an intraday Trader place your
1:42:56target as the next potential High Point
1:42:59or the swing High which is actually
1:43:01difficult to identify or it can even be
1:43:03the nearest resistance level but for a
1:43:06swing Trader I would ask you to write
1:43:08the trend and exit the trade only if the
1:43:11price closes below the 20 moving average
1:43:14or when the market breaks out of the
1:43:16structure by the structure I mean
1:43:19uptrend in this particular case that is
1:43:21when the market stop forming the higher
1:43:24highs or higher lows is the time to exit
1:43:26the trade so you can place a similar
1:43:29entry and exits for a downtrend with
1:43:32proper modifications moving on to the
1:43:34second strategy which is trading near
1:43:36the market structure or an area of value
1:43:40earlier we have discussed that when the
1:43:42price is very far away from the
1:43:43structure it doesn't really make much of
1:43:45a sense because your stop loss is so
1:43:48large and you will get a very poor risk
1:43:50to reward but what if you're trading the
1:43:52break out when it is near the structure
1:43:55in this example you can see an area of
1:43:57resistance resistance in a market as you
1:44:00may know is an area where there will be
1:44:02potential sellers coming in or where the
1:44:05supply is higher than the demand now the
1:44:08price tested the area of resistance and
1:44:10the price break and closed about it this
1:44:13is a breakout of resistance which is
1:44:15slightly different from the breakout of
1:44:17a swing high as we have discussed
1:44:19earlier because resistance is a much
1:44:21more respectable area in the chart so
1:44:23the probability of the trade success in
1:44:25this case is higher now if you are
1:44:27looking to get long right now where is
1:44:30the logical place to put your stop loss
1:44:32the possible answer would be below the
1:44:34previous resistance on support you can
1:44:37put the stop loss somewhere below the
1:44:39previous resistance so this is a much
1:44:41tighter stop- loss with a much tighter
1:44:44stop- loss it gives you a better risk to
1:44:46reward because the price does not have
1:44:48to move a lot in your favor to start
1:44:50giving you the gains and why do you
1:44:53think you have a much tighter stop- loss
1:44:55it is because you're trading much closer
1:44:57to the market structure so compared to
1:45:00the earlier example where the structure
1:45:02was too far away it does not really make
1:45:04any sense to make a trading in that
1:45:06scenario now identifying when to trade
1:45:09is as important as knowing how to trade
1:45:13the breakout trade near a market
1:45:15structure can be classified into three
1:45:17types number one is breakouts with
1:45:20buildup number two is higher lows into
1:45:23the resistance level and finally number
1:45:26three is the lower highs into the
1:45:28support level let's start with the first
1:45:30one that is breakouts with buildup now
1:45:33buildup is basically a congestion or
1:45:36consolidation or a tight range near an
1:45:38area of value you can think of a buildup
1:45:41along these lines a lot of Traders will
1:45:44look at the prices consolidating at the
1:45:46resistance these Traders go short at the
1:45:49resistance or somewhere in the middle of
1:45:51the range and they will place their
1:45:53stop- loss above the resistance that's
1:45:55what they will do because at the
1:45:57resistance it makes sense to go short
1:45:59but think about this a little deeper if
1:46:02the price is consolidating at the
1:46:04resistance what does it really tell you
1:46:06you know that resistance is an area
1:46:09where there are potential sellers who
1:46:11will come in and push the prices lower
1:46:13but in this example the price is
1:46:15consolidating at the area of resistance
1:46:18so where are the sellers why aren they
1:46:21pushing the prices slower and why is
1:46:23that the reason why the sellers are not
1:46:25pushing down could be one of these two
1:46:28things either there are no sellers out
1:46:31there who are interested in selling or
1:46:33there are equally strong buyers at the
1:46:35resistance no matter what the scenario
1:46:38whether it is number one there are no
1:46:40sellers or number two there are equally
1:46:42strong buyers it does not look good for
1:46:45Traders who are looking to short either
1:46:47way and on top of that the clusters of
1:46:49stop losses above the resistance level
1:46:52would create an incentive for the smart
1:46:54money or the big players to actually
1:46:57break out higher so that they can
1:46:59Leverage The stop losses to take the
1:47:01market above the resistance so my point
1:47:04is that when you see a consolidation at
1:47:06a resistance basically a buildup just in
1:47:09front of the area of resistance this is
1:47:11a sign of bullish strength in this
1:47:14scenario I'll be looking to go long and
1:47:16my trade entry is when the price trades
1:47:19above the breakout candle high and I
1:47:21will put my stop losses below the
1:47:23resistance level that is below the low
1:47:26of the buildup or consolidation or you
1:47:29can even keep it around two times the
1:47:31ATR value below the resistance now
1:47:34talking about the targets my target
1:47:36would be the next nearest structure in
1:47:39this case the next nearest resistance
1:47:41level now look through your charts look
1:47:43through in the price approaching the
1:47:45support area and ask yourself what
1:47:48happens if there is a consolidation at
1:47:50the support area and what will you do
1:47:52come and down down below so buildup is a
1:47:54core concept whenever we trade breakouts
1:47:57however there are variations of it for
1:48:00example when you see higher lows into
1:48:02resistance it is a sign of a strength or
1:48:05weakness now think about it when you see
1:48:08higher lows into resistance what does it
1:48:11tell you it tells you that there is not
1:48:13enough selling pressure or the sellers
1:48:16are weak it also tells you that there is
1:48:18strong buying pressure which supports
1:48:21the higher prices and the final thing to
1:48:23keep in consideration is that there are
1:48:25buy stoploss orders which are clustered
1:48:28above the resistance which are kept by
1:48:30those sellers who went short at the
1:48:33resistance level and clearly this is a
1:48:35sign of bullish strength now you might
1:48:37be familiar with this chart pattern
1:48:39called the ascending triangle pattern so
1:48:41if you spot such a pattern in the market
1:48:43condition it means that the market could
1:48:45break out higher right it's the exact
1:48:48same scenario here you should be looking
1:48:50to go along in this case the entry
1:48:53should be above the breakout high and
1:48:55your stop loss should be slightly below
1:48:57the last higher low to the resistance
1:48:59level and finally your target for the
1:49:03trade should be the next nearest
1:49:05resistance or it should be equal to the
1:49:07length between the first higher low
1:49:10level and the resistance level projected
1:49:12above the resistance level now let us
1:49:15look at a situation of a breakdown this
1:49:18is the inverse of what you have learned
1:49:20earlier so whenever you see lower highs
1:49:23into the support it tells you three
1:49:25things number one there is no buying
1:49:28pressure or the buyer RV number two
1:49:31there is strong selling pressure pushing
1:49:33the price even lower and number three
1:49:36there are sell stop-loss orders
1:49:38clustered below the support level which
1:49:40are kept by the buyers who went long at
1:49:42the support now clearly this is a sign
1:49:45of weakness in terms of buying and you
1:49:48might be familiar with this chart
1:49:49pattern called the descending triangle
1:49:51so if you spot a pattern in the market
1:49:54it means that the market could break
1:49:56down lower in this case we should
1:49:59initiate a short trade below the
1:50:01breakdown candle low after the candle
1:50:03closes below the support level just for
1:50:06confirmation the stop loss can be kept
1:50:08above the last lower high into the
1:50:11support or it can be two times the
1:50:14average true range value above the
1:50:16support level and finally talking about
1:50:18the Targets in this case Target should
1:50:20be the next support level or it should
1:50:22be equal to the length between the first
1:50:24lower high level and the support level
1:50:27projected below the support level moving
1:50:29on let us look at a highly profitable
1:50:31breakout trade scenario now here's the
1:50:34thing the market is always changing it
1:50:36moves from a range to a trend from a
1:50:39trend to a range Etc the longer the
1:50:41market stays in a Range the harder it
1:50:44breaks this is true but why is it true
1:50:47because the longer the market is in a
1:50:48Range the more orders are placed in the
1:50:51market let me explain the bullish
1:50:53Traders will put buy orders above the
1:50:55resistance hoping to catch the breakouts
1:50:58similarly the bearish Traders will look
1:51:00to short the market at the resistance
1:51:02and they will have their stop- loss
1:51:04which is also a buy stop-loss order and
1:51:07they place it above the resistance and
1:51:09as the time passes you'll get an
1:51:11overwhelming amount of buy stoploss
1:51:13orders above the resistance level and by
1:51:16some chance if the market manages to
1:51:18break out of the resistance it will
1:51:20trigger all of these clusters of buy
1:51:23stop-loss orders which will fuel further
1:51:25buying pressure and in turn it will take
1:51:28the market higher so if you want to
1:51:30identify explosive breakout trades with
1:51:33high profitability you have to pay close
1:51:36attention when the market is in a range
1:51:38for a long period of time because the
1:51:40longer it is in a Range the harder it
1:51:43breaks and the more profitable you
1:51:45become
1:51:57in the previous episode we have
1:51:59discussed about breakout trading in
1:52:01great detail breakout trading is one of
1:52:04the oldest trading Styles in the book
1:52:06you watch the price consolidate within a
1:52:09range and then when the price breaks out
1:52:12of that range you bounce onto the trade
1:52:14and enjoy the benefits of a strong move
1:52:17and often when the price has been stuck
1:52:19in a Range it will move out of that
1:52:21consolidation range r with some good
1:52:23momentum giving the Traders a good
1:52:25profit potential but and it's a big but
1:52:29the breakout pattern has an evil twin
1:52:31which is actually a curse to all the
1:52:33breakout Traders and it's none other
1:52:35than the fake out if you have ever
1:52:37traded breakouts you'll recognize this
1:52:40situation just when you think you have
1:52:42caught the big move the market turns
1:52:44against you and shakes out of your trade
1:52:46so how can we tell the difference
1:52:48between a breakout and a fake out now
1:52:51there are a number of tools tools that
1:52:52Traders can use but the first thing I
1:52:55have to let you know is that there is no
1:52:57way you can avoid false breakouts
1:52:59completely there are certain times no
1:53:02matter how good a setup you have you're
1:53:04still going to get caught in a false
1:53:06breakout but we can minimize the chances
1:53:09of getting caught in a false breakout
1:53:11you have got some price action methods
1:53:13and some tips that you can make use to
1:53:15minimize your chances of getting a false
1:53:18breakout with that being said the first
1:53:20tip I have for you is to stop stop
1:53:22chasing the power moves or stop going
1:53:25after the power moves into an area of
1:53:27value what are power moves I have talked
1:53:30about power moves in the episode 6 of
1:53:32this price action course and we talked
1:53:34about reversals but let me talk about it
1:53:37briefly so as to brush up your memory if
1:53:40you see a big or strong momentum move
1:53:42with large candles this is what a power
1:53:45move is now if the price moves up from a
1:53:48level with little or no pullback and
1:53:51then it goes up higher breaking an area
1:53:53or a level of value like a support or
1:53:55resistance then my advice is not to
1:53:58chase the breakout of this type because
1:54:00more often or not the market tends to
1:54:03reverse under these conditions and why
1:54:05am I so sure and why is it so let me
1:54:08give you a very simple explanation of
1:54:10why this actually occurs when you chase
1:54:13a market where the price is making a
1:54:16strong move or a power move there is no
1:54:18floor or support to these higher prices
1:54:21now we if you look at the chart most of
1:54:23the time the price exhibits a specific
1:54:26type of price aution where the prices
1:54:28goes up and then retraces or pulls back
1:54:32in this type of price action there are
1:54:34levels like swing lows to support these
1:54:37higher prices what this means is that
1:54:40for example take the case of a
1:54:41resistance if the market were to reverse
1:54:44from the resistance it would find a
1:54:46floor or a support where potential
1:54:48buying pressure could push the price
1:54:50higher these types of moves are more
1:54:52sustainable because there are a series
1:54:54of higher swing levels along the way to
1:54:57support these higher prices now what
1:54:59happens when the market has given a
1:55:01power move into a level in this case
1:55:03let's talk about a resistance level it
1:55:06means that there are no intermediate
1:55:08swing levels to support these higher
1:55:09prices or there is no obvious levels for
1:55:12the buyers to come in to oppose the
1:55:14sellers if they sell at the resistance
1:55:17now the only possible area for buying is
1:55:20the previous support level and so there
1:55:22will be a lot of sellers waiting at the
1:55:24resistance to sell and also there will
1:55:26be a lot of buyers who looks to buy the
1:55:29breakout who place their stop losses
1:55:31below the resistance now there is a
1:55:33cluster of sell orders below the
1:55:35resistance by both the sellers and the
1:55:37buyers and by some chance if the price
1:55:40manages to reverse all of these stop
1:55:43losses would be triggered which will
1:55:44induce further selling in the market and
1:55:46the market will reverse even lower and
1:55:49there is a good chance if the reversal
1:55:51comes can be very Swift towards the
1:55:54downside to the nearest support level or
1:55:56the floor area where the buyers could
1:55:58then potentially come in but this is
1:56:00going to be a huge distance and for any
1:56:03buyer who hasn't placed a stop- loss can
1:56:05end up bleeding his account so as a
1:56:08matter of fact you want to stay away or
1:56:10stay on the sidelines if you are a
1:56:12breakout Trader under such conditions
1:56:15where there is a power move in the
1:56:16market to an area of value now we will
1:56:19look at some price action tricks that
1:56:21you can easily apply on the market to
1:56:23stay cautious of the fake outs however
1:56:26the problem with each of them is that
1:56:28you are left waiting for the candles to
1:56:30form their patterns and sometimes this
1:56:32might be a reason for missing out on
1:56:34some of the trades so it's up to your
1:56:36decision making as a Trader in the real
1:56:38market conditions for them to make any
1:56:40sense now there are clues in the
1:56:42candlesticks and volume data which can
1:56:45give information whether the breakout is
1:56:47a genuine breakout and these are worth
1:56:49considering and can be used in
1:56:51conjunction with other tools like
1:56:53indicators a breakout occurs because the
1:56:56price has been contained below a
1:56:58resistance level or a support level for
1:57:00potentially some period of time now the
1:57:02resistance or support level becomes a
1:57:05level which many Traders use to set
1:57:07their entry points or stop-loss levels
1:57:10so when the price breaks through the
1:57:12support or resistance level the Traders
1:57:15waiting for the break out would jump in
1:57:17and those who did not want the price to
1:57:19break out will exit their positions to
1:57:21avoid larger losses this is very much
1:57:24clear now this flurry of activity will
1:57:26cause the volumes in the market to rise
1:57:29which shows a lot of Traders were
1:57:31interested in the breakout level now the
1:57:33higher than average volume helps to
1:57:35confirm that it was a breakout but if
1:57:38there is a very little volume on the
1:57:40breakout then the level may not have
1:57:42been very significant to a lot of
1:57:44Traders or not enough Traders felt
1:57:46convinced to place a trade near the
1:57:48particular level and most of these low
1:57:51volume breakouts are are likely to fail
1:57:53in case if we are talking about an
1:57:55upside breakout if it fails the price
1:57:58will fall back below the resistance
1:58:00level and in case of a downside breakout
1:58:02of a support often called as a breakdown
1:58:05if it fails the price will rally back
1:58:08above the support level in some
1:58:10instances even after a high volume
1:58:13breakout the price will often retrace or
1:58:16pull back to the breakout point before
1:58:18moving in the breakout direction again
1:58:21this is because the sh short-term
1:58:22Traders will often buy the initial
1:58:24breakout but they will attempt to sell
1:58:26quite quickly for a profit this selling
1:58:29by the short-term Traders will
1:58:30temporarily Drive the prices back to the
1:58:33breakout point now if the breakout is
1:58:35legitimate then the price should move
1:58:37back in the breakout Direction after the
1:58:39retest or pullback and if it does not it
1:58:42is a fail breakout and the prices would
1:58:44reverse analyzing volumes were one way
1:58:47of identifying if it is a breakout or a
1:58:50fake out but as I have mentioned earlier
1:58:53does not work every time and there are
1:58:55occasions when this idea will fail so
1:58:57let us consider a few more ideas to keep
1:59:00in mind so as to distinguish between a
1:59:02fake out or a breakout the first thing
1:59:05is that you have to wait to see if the
1:59:07Candlestick closes through the line of
1:59:09support or resistance which means that
1:59:11the real body of the breakout candle
1:59:14should close above the resistance level
1:59:16or the real body of the breakout candle
1:59:18should close below the support level
1:59:20which in turn means that just a wick
1:59:23poking through the level is not enough
1:59:25to confirm a breakout so it's a good
1:59:27rule to follow but on its own it's not
1:59:29particularly reliable now the second
1:59:31thing is that you have to wait for a
1:59:33close beyond the support or resistance
1:59:35level and then you have to wait for the
1:59:38price to retrace back to the level or
1:59:40pull back by a little bit and then move
1:59:43in the direction of the breakout and
1:59:45this candle should close beyond the
1:59:47closing price of the breakout candle
1:59:49this is a resistance turned support or a
1:59:52support turn resistance method which is
1:59:54a reliable way to trade breakouts but on
1:59:57the downside there is a lot of patience
1:59:59required because there is a lot more
2:00:01waiting around and sometimes the prices
2:00:03won't even retest or pull back to the
2:00:05level and chances are you might miss the
2:00:07trade now the third point is to look for
2:00:10big candlesticks which will indicate
2:00:12that there is momentum behind the
2:00:14breakout and you have to check for large
2:00:16breakout volumes Which is higher than
2:00:18the previous volume but on the downside
2:00:20a very large candle means that you have
2:00:23potentially missed a hefty part of the
2:00:25move so it can right away affect your
2:00:27risk to reward as well as the placement
2:00:29of your stop losses and the final point
2:00:31to keep in consideration is that you
2:00:33have to look for a price buildup at the
2:00:35market structure which may be a tight
2:00:38consolidation near the area of value or
2:00:40higher lows into the resistance similar
2:00:43to an ascending triangle or lower highs
2:00:45into the support similar to an ascending
2:00:48triangle which are credible enough
2:00:49patterns that can give you high
2:00:51probability breakout trades you can
2:00:53learn a lot more about them in the
2:00:55previous video now we will look at a
2:00:57faster way to get a breakout
2:00:59confirmation using an indicator which
2:01:01will give us an immediate yes or no
2:01:03confirmation as to whether we can rely
2:01:05on this breakout or not so we have to
2:01:08add the RSI indicator or the relative
2:01:10strength index indicator in our chart so
2:01:13when we are looking for a breakout we
2:01:15are expecting the breakout to come with
2:01:17a degree of momentum and we will use the
2:01:19RSI indicator to find that moment
2:01:21momentum so basically RSI is a momentum
2:01:24indicator and it measures the speed of a
2:01:26move so if the speed is increasing the
2:01:28momentum will be building or increasing
2:01:31in this particular scenario I'm talking
2:01:33about RSI convergences RSI convergence
2:01:36occurs when the RSI Direction mirrors
2:01:38the price trend for example if the price
2:01:41of a security Trends upwards then the
2:01:43RSI will also Trend upwards this is what
2:01:46I mean by RSI convergence so if the
2:01:49price is moving up through an area of
2:01:51value we want the RSI indicator to be
2:01:53showing higher highs which signals
2:01:56building momentum or increasing momentum
2:01:58the idea is that if the market momentum
2:02:00is increasing the RSI should also be
2:02:02increasing the same is true if the
2:02:04prices are headed down and breaking
2:02:06through the value of support which will
2:02:08indicate a momentum towards the opposite
2:02:10direction or the downward Direction in
2:02:12the RSI 2 so this confirmation for both
2:02:15bullish and beish signals are generally
2:02:18more useful when the RSI period is 14
2:02:21days or month more and anything below
2:02:23the 14 period may be typically
2:02:25considered less reliable for confirming
2:02:28the convergence and of course no
2:02:30indicator is infallible but using RSI to
2:02:33confirm breakouts will give you a
2:02:35significant Edge in the market it adds
2:02:38weight to the evidence of a possible
2:02:40breakout and not a fake out so I
2:02:42recommend that you add it in your charts
2:02:44and see what it can do for you now
2:02:47coming to the most important part or the
2:02:50important point of this video you have
2:02:52to back test these techniques that I
2:02:54have discussed with you so as to
2:02:56understand how reliable each system is
2:02:58and then choose a system of your liking
2:03:01and convenience because practice makes
2:03:03you perfect and back testing can save
2:03:05your
2:03:17account in this episode we are going to
2:03:20learn all about about trading pullbacks
2:03:23a pullback to an area of value is one of
2:03:26the best techniques when trading in the
2:03:28market Direction and it is also one of
2:03:30the safer techniques because of the
2:03:32confirmation that it gives we will
2:03:34discuss the pros and cons of trading
2:03:36pullbacks and we will talk about the
2:03:39likely places on the chart where the
2:03:41market will pull back and how to
2:03:43approach your trades so if you ready
2:03:45let's begin what actually is pullback
2:03:48trading and why does it work in the
2:03:50market now a pullback is when the price
2:03:53temporarily moves against the underlying
2:03:55Trend in the market for example in an
2:03:58uptrend a pullback would be a move lower
2:04:01or we can say it is a corrective move on
2:04:04the other hand in a downtrend a pullback
2:04:06would be a move higher so in essence
2:04:09what you're trying for pullback trading
2:04:11is to buy the dips in the markets or the
2:04:14retracements to a critical level or the
2:04:16corrections in an existing trend for
2:04:19example the price breaks out of of the
2:04:22resistance level with strong candle and
2:04:25then it retraces or pulls back or test
2:04:28the resistance level and then move up
2:04:30higher another example would be if the
2:04:33market is trending higher you are always
2:04:35looking to buy the dip or to buy the
2:04:37retracement or to buy the pullback so as
2:04:40to buy at the least possible price and
2:04:43in case of a trending Market the reason
2:04:45why pullback trading works is because
2:04:47when the market is trending it does not
2:04:50go up in a single straight line instead
2:04:52in an uptrend you can expect to see a
2:04:55series of higher highs and higher lows
2:04:57so as a pullback Trader what you're
2:05:00trying to do is to time your entry on
2:05:02the pullback or the retracement or the
2:05:05correction so you are basically entering
2:05:07the trade as the market trades at lower
2:05:10prices during an uptrend as a pullback
2:05:13Trader you are trying to take a trade in
2:05:15the direction of trend but you look to
2:05:18Ender when the market is sort of going
2:05:20against the trend on the retracement or
2:05:23the corrective move but you are still
2:05:25trading in the direction of the trend
2:05:27and the reason for pullbacks in the
2:05:29prices is simple it is due to the
2:05:31short-term profit booking by some
2:05:33Traders which causes the prices to dip
2:05:36lower now let us move on to
2:05:39understanding the pros and cons of
2:05:41pullback trading we will start off with
2:05:43the positives with pullback trading you
2:05:46are basically buying low and selling
2:05:48high for example if you are trading
2:05:51pullback in an uptrend you're basically
2:05:53buying at lower prices and the intention
2:05:56is to sell higher and if you're selling
2:05:58pullback in a downtrend you're basically
2:06:00selling at higher prices so that you can
2:06:03buy back at lower prices and the second
2:06:06thing about this is that it is actually
2:06:09easier when it comes to your trading
2:06:11psychology when you're trading the
2:06:13pullbacks the reason being you are
2:06:15basically trading from an area of value
2:06:18because buying low and selling high is
2:06:20something that we are all accustomed to
2:06:22even when we start learning about the
2:06:24markets think about it in terms of a
2:06:26small business basically what we want to
2:06:29do is to buy at lower prices and then
2:06:32sell at higher prices now we will talk
2:06:34about the shortcomings of trading
2:06:36pullbacks now the downside of pullbacks
2:06:39is that you might miss the move more
2:06:41often or not let me explain for example
2:06:44we know that an uptrend consist of a
2:06:46higher highs and higher lows let's say
2:06:49the price is pulling back or retracing
2:06:51back right now assuming that you are
2:06:53hoping the prices to retest back to the
2:06:56lows onto the trend line or the moving
2:06:58average but what happens in the market
2:07:01is that the price does not pull back
2:07:03deep enough and then it broke out higher
2:07:06without you being able to take an entry
2:07:08so it ended up causing you to miss the
2:07:11move this is the biggest disadvantage
2:07:14when it comes to trading pullback which
2:07:16is that sometimes you actually miss the
2:07:18move while waiting for the price to come
2:07:20to your desire level the second
2:07:22disadvantage or maybe I won't call it a
2:07:25disadvantage is that pullbacks are not
2:07:28suitable for impatient Traders now if
2:07:32you are an impatient Trader or you have
2:07:34no patience to wait for a pullback then
2:07:37this strategy might not be your piece of
2:07:39cake now that we have understood about
2:07:41the advantages and disadvantages of a
2:07:44pullback trade let us learn how to
2:07:47approach a pullback trade so there are a
2:07:49few things to look for on trading a
2:07:52pullback the first point is to identify
2:07:55the market Trend now the first and
2:07:58foremost thing that you have to figure
2:08:00out while you trade pullbacks is to find
2:08:02the existing Market Trend you must have
2:08:05a trend in the market because most often
2:08:07you will encounter a pullback
2:08:09opportunity when there is a trend in the
2:08:11market and more importantly make sure to
2:08:14trade in the direction of the trend and
2:08:16not go against the direction of the
2:08:18trend now I'm not saying that there
2:08:20won't be any pull back opportunities if
2:08:22the market is not trending or if the
2:08:24market is in a range but instead the
2:08:27probability of getting a pullback setup
2:08:29is higher when there is a trending price
2:08:32action and most often or not during a
2:08:34range or Consolidated price action the
2:08:37market tends to give explosive breakouts
2:08:40where the chances for pullbacks are
2:08:42lower due to increased interest and
2:08:44participation by the market participants
2:08:47now the second point is to identify an
2:08:49area of value here's the thing just
2:08:52because the market is in an uptrend
2:08:55doesn't mean you want to blindly enter a
2:08:57trade instead you want to be trading
2:08:59from an area of value an area of value
2:09:02could be any of these including a swing
2:09:05low or a swing High a support or a
2:09:07resistance level a trend line or a
2:09:09moving average Etc these are all
2:09:12potential areas on your chart where
2:09:14buying or selling pressure could step in
2:09:16now the third point to consider is to
2:09:18look for an entry Trigger or an entry
2:09:21area assuming that the market is
2:09:23trending higher and it has made a
2:09:25pullback towards an area of value but
2:09:27this does not mean that we can blindly
2:09:29hit the buy Button as a pullback Trader
2:09:32you want to look for specific entry
2:09:34triggers to let you know that the buyers
2:09:36are stepping in or to make sure that
2:09:38buyers are in control and they are about
2:09:41to take the prices higher the entry
2:09:43trigger could be as simple as reversal
2:09:46Candlestick patterns which may be
2:09:48bullish hammers or bullish engulfing
2:09:50patterns Etc so that's an entry trigger
2:09:53for us to time our pullback to get on
2:09:55board the trade and to join the existing
2:09:58Trend in the market now the fourth point
2:10:00is setting up your stop- loss since you
2:10:03are trading pullback the most important
2:10:05question is where do we set our a stop
2:10:07loss logically speaking if you are
2:10:10trading pullbacks on a uptrending market
2:10:12then your stop loss should be below the
2:10:14loss of the pullback so in case if the
2:10:17market is on an uptrend and you have
2:10:20kept your stop- loss below the swing low
2:10:22this means that if the market corrects
2:10:24or retraces and breaks below the lows of
2:10:27the pullbacks it tells you that this
2:10:30pullback has failed and you want to get
2:10:32out of this trade so in order to be safe
2:10:35and not hit your stop loss before the
2:10:37pullback finishes you'll have to
2:10:39identify the loss of the pullback and
2:10:41give some buffer below the loss for this
2:10:44purpose you can either use the ATR
2:10:46indicator or you can even set it based
2:10:48on your risk- taking ability let's take
2:10:51a look at the ATR method briefly let us
2:10:54say the low of the pullback is 100
2:10:56rupees and let us say you pull out the
2:10:58ATR indicator and the average true range
2:11:01of the market is rupees 5 you can simply
2:11:04takee rupes 100 which is the low of the
2:11:06pullback and subtracts rupees 5 which is
2:11:09the value of the ATR at that specific
2:11:11period now your stop loss turns out to
2:11:14be rup 95 which will set a small buffer
2:11:17below the low of the pullback now a
2:11:20similar approach can be taken in case if
2:11:22the market is on a downtrend and the
2:11:25final point is setting up your targets
2:11:28now where do you take profits let's say
2:11:30you are trading in the direction of an
2:11:32uptrend what you can do is to reference
2:11:35the extreme swing High to take the
2:11:38profits when you're trading pullbacks
2:11:40during an uptrend you're buying the dip
2:11:42and the market has retraced against the
2:11:45trend if you look prior to the
2:11:47retracement you should be able to
2:11:49identify a swing high on the chart and
2:11:51this swing High could be a reference
2:11:53point for you to take the profits now if
2:11:56you are looking to buy a pullback and
2:11:58you went long and the market is moving
2:12:00favorably in your direction you can look
2:12:02to take the profits just before the
2:12:04swing high or before the nearest
2:12:07resistance if you are an intraday Trader
2:12:10and you can ask me why not after the
2:12:12swing high or why not at the swing high
2:12:14or why not at the resistance level the
2:12:17simple reason being swing highs and lows
2:12:20supports and res resistances are not
2:12:22specific levels on the chart instead
2:12:24they are areas or zones on your chart
2:12:27this means that the price could come
2:12:29close to the swing high but may not be
2:12:32able to reach the exact price point and
2:12:34then start to reverse from there so if
2:12:37you don't want to watch your open
2:12:39profits come close to your Target only
2:12:41to do a sudden reversal and then hit
2:12:43your stop loss what you want to do is to
2:12:46set your profit Target just before the
2:12:48recent swing high or the nearest
2:12:50resistance level for this example now
2:12:53that we have learned how to approach our
2:12:55pullback trades let us move on to the
2:12:58different ways of trading pullbacks
2:13:00successfully and how to employ the entry
2:13:02and exits in the right manner starting
2:13:05off with breakout pullbacks breakout
2:13:08pullbacks are very common and probably
2:13:10most of you have encountered them
2:13:12breakout pullbacks commonly happen at
2:13:14the market turning points uh that is
2:13:17when the price breaks out of a
2:13:18consolidation pattern or a range now now
2:13:21some of the most popular consolidation
2:13:23patterns includes the head and shoulders
2:13:25the wedges triangles rectangles Etc so
2:13:29the question that naturally comes up is
2:13:31how to trade the pullbacks although
2:13:33there are many ways how you can approach
2:13:35the pullback trading I will talk about
2:13:37two main concepts of pullback trading
2:13:39during a breakout now these principles
2:13:42can be applied to all other pullback
2:13:44scenarios that we will discuss along let
2:13:47us take the case of an aggressive Trader
2:13:49now the aggressive Trader WS for the
2:13:51price to come back to the pullback area
2:13:54which may be a support or a resistance
2:13:56level a trend line a moving average Etc
2:13:59and he enters the trade right away and
2:14:01the price pull backs to the level let us
2:14:04say the point one marks this approach in
2:14:06the scenario of a breakout and pullback
2:14:09now there are a few more points that you
2:14:11need to consider when choosing such an
2:14:13approach using an aggressive trade entry
2:14:16you may be able to enter at the best
2:14:18possible prices as this point can often
2:14:21Mark the extreme point of the correction
2:14:23wave and the pullback phase so the
2:14:26potential reward to risk ratio is
2:14:28highest following such an approach
2:14:30because the stop loss can be placed very
2:14:32tightly but the major drawback is that
2:14:35you enter a trade against the price
2:14:38Direction without any confirmation so
2:14:41the price could easily go against your
2:14:43trade so such an approach can therefore
2:14:46have a lower win rate or a lower
2:14:48probability of success but the higher
2:14:51reward to risk ratio May offset it
2:14:53though but I wouldn't go by this method
2:14:55me being a conservative Trader Waits
2:14:58until the price continues the trend
2:15:01structure and breaks over the pullback
2:15:03now with this approach the trader goes
2:15:05with momentum and confirms that the
2:15:08trade is in the desired Direction unlike
2:15:11the aggressive Traders case where there
2:15:13was no confirmation of the trade
2:15:15Direction now the conservative approach
2:15:18or the conservative entry happens later
2:15:21and therefore the potential reward to
2:15:23risk ratio is smaller if you ask me
2:15:25there is no right or wrong when it comes
2:15:27to trading and it all comes down to your
2:15:29personal preferences as a Trader now
2:15:32talking about the stop losses you have
2:15:34to place the stop- loss below the
2:15:36pullback low in case of a breakout on
2:15:38the upside and make sure to add the
2:15:41suitable buffer based on your risk
2:15:43potential or you can even use the ATR
2:15:46indicator to do the same it is always
2:15:48better to stay cautious as to not move
2:15:51move your stop- loss to break even
2:15:52because this is a very dangerous and
2:15:54unprofitable thing to do and the reason
2:15:56for this is that pullbacks happen so
2:15:59often in the market after a long uptrend
2:16:02the market stays in a range between
2:16:05defined levels now many Traders use the
2:16:08levels to time their breakout entries in
2:16:11this case we are anticipating a breakout
2:16:13on the downside and most Traders would
2:16:16use the support level to time their
2:16:18breakout entry but where they go wrong
2:16:21is that they move their stop- loss to
2:16:22break even too soon and when the
2:16:25breakout pullback happens they will get
2:16:27kicked out of their trade just to see
2:16:29the price return in their anticipated
2:16:31Direction but without them finally the
2:16:34targets can be the next potential
2:16:37resistance level or place a suitable
2:16:39Target based on the type of
2:16:41consolidation pattern the market was in
2:16:43right now be it a wedge be it a triangle
2:16:46pattern be a rectangular pattern use a
2:16:48suitable Target based on the
2:16:50consolidation pattern formed in the
2:16:52market now the second way of trading
2:16:54pullbacks is using horizontal steps now
2:16:57the stepping Behavior can be observed
2:16:59during many trending phases in the
2:17:01market during the ongoing trending
2:17:03phases the price will often present
2:17:06those stepping patterns this pullback
2:17:08approach is a great addition to the
2:17:10previously discussed breakout pullback
2:17:13the breakout pullback happens very close
2:17:15to the market turning points but if the
2:17:18trader misses the initial entry
2:17:19opportunity the horizontal steps can
2:17:22allow the trader to find alternative
2:17:24entry scenarios it also helps the trader
2:17:27to enter a trade even if the pullback
2:17:29does not form a swing low touching the
2:17:31trend line or a moving average in case
2:17:34of an uptrending Market the entry in
2:17:36this case would be during the
2:17:37retracement from a swing high level to
2:17:40the previous swing high levels and using
2:17:42confirmation candlesticks like bullish
2:17:44engulfing or Hammer patterns for the
2:17:47trade entry and if you talk about the
2:17:49stop-loss for the trade it would be
2:17:51suitable to place the stop loss below
2:17:54the step pattern or the swing low with a
2:17:57suitable buffer depending on your risk
2:18:00appetite further a Trader could simply
2:18:02choose to use the stepping pattern as a
2:18:05trial stop-loss behind the trend in a
2:18:07much safer way in this case the trader
2:18:10Waits until the price has completed a
2:18:13particular step and then try the stop-
2:18:15loss behind the last pullback area and
2:18:18because of this the stop loss is
2:18:21protected and it is not very vulnerable
2:18:23a Target in this case would be each of
2:18:26the Swing high levels as the price moves
2:18:28in your favor now the third idea should
2:18:31have been trend line we know that trend
2:18:33lines are famous pullback tool but the
2:18:35drawback with trend lines is that it
2:18:37takes longer to get validated as a thumb
2:18:40rule we all know that a trend line
2:18:42requests at least three contact points
2:18:45to get validated we can always connect
2:18:47two random points but only when you get
2:18:50the third Third Contact point you are
2:18:52really looking at a trend line trend
2:18:54lines can work nicely in addition to
2:18:56other pullback methods but as a
2:18:58standalone method the trader will miss
2:19:00many opportunities as the trend line
2:19:02validation takes a long time so instead
2:19:05of using a trend line we can use the
2:19:08moving averages for pullback trading and
2:19:10without any doubt moving averages are
2:19:13amongst the most popular tools in
2:19:15technical analysis and they are used in
2:19:17many ways including Trend identification
2:19:20and you can also use them for pullback
2:19:22trading as well you could use a 20
2:19:25period a 50 period or even a 100 period
2:19:28moving averages it does not really
2:19:30matter and it comes down to whether you
2:19:32are a short-term Trader or a long-term
2:19:35Trader now short-term Traders generally
2:19:37use shorter moving averages to get the
2:19:40trade signals quicker and of course
2:19:42shorter moving averages are more
2:19:44vulnerable to a lot of noise and wrong
2:19:46signals and longer term moving averages
2:19:49on the other hand moves slower and so
2:19:52they are less vulnerable to noise but
2:19:54you may not get much trading
2:19:56opportunities as in case of the
2:19:58short-term moving averages so it is up
2:20:00to you to weigh the pros and cons of
2:20:02your own trading style for the purpose
2:20:04of this example I will use a 50 period
2:20:08exponential moving average and the price
2:20:10is in an uptrend now here we can see
2:20:13that the prices are correcting and
2:20:15reaching the moving average and it is
2:20:17actually respecting it the entry in this
2:20:20case would be above a rejection
2:20:23Candlestick from the moving average like
2:20:25a bullish pin bar or a hammer and
2:20:27bulling engulfing candles it shows that
2:20:30the buyers are willing to buy at higher
2:20:33valuations you can place a stop loss
2:20:36below the moving average line adding
2:20:38some buffer space because it is very
2:20:40common for the price to overshoot the
2:20:42moving average and show very deep
2:20:45pullbacks and that is why you need to
2:20:47give your stop-loss more breathing room
2:20:49if you choose such a pullback strategy
2:20:52and if you enter the trade with proper
2:20:54confirmation and not being aggressive to
2:20:56enter the moment the candle pulls back
2:20:59to the moving average then you can
2:21:00actually save yourself from the
2:21:02overshoot problem finally a riding Trend
2:21:05till the end is the best possible Target
2:21:08in case of an intraday Trader look to
2:21:10place the nearest resistance as the
2:21:12Target and for a swing Trader exit the
2:21:15trade either when the price breaks out
2:21:17of the moving average line or exit the
2:21:20trade when the market structure changes
2:21:23from trending to range or consolidation
2:21:26so as you have seen there are many
2:21:28different ways on how to approach the
2:21:30pullbacks now you can even use it with
2:21:32Fibonacci levels also you can even
2:21:35combine the various tools to come up
2:21:37with even stronger signals with that
2:21:39being said it is always a good idea to
2:21:42back test what you have learned to get a
2:21:44sense of how the strategy Works in real
2:21:47Market condition and see if it works for
2:21:50you
2:21:50[Music]
2:22:02reversal trading can be one of the most
2:22:05profitable trading strategies you can
2:22:07use you can trade reversals in trending
2:22:10markets ranging markets and even against
2:22:13the trend reversals refers to large
2:22:16price changes where the trend changes
2:22:18its direction altogether but the thing
2:22:20is that when it starts to occur a
2:22:22reversal isn't distinguishable from a
2:22:25pullback and the main difference between
2:22:27them is that a reversal keeps going and
2:22:30form a new trend while the pullback ends
2:22:33and then the price starts moving back in
2:22:35the trending direction or simply the
2:22:37price will continue with its previous
2:22:39Trend reversals often occur in intraday
2:22:42trading and happen rather quickly but
2:22:44they also occur over days weeks and
2:22:46years therefore reversals occur on
2:22:49different time frames games which are
2:22:51relevant to different Traders so an
2:22:53intraday reversal on a 5 minute chart
2:22:56doesn't matter much to a long-term
2:22:58investor who is watching for a reversal
2:23:00on The Daily or weekly chart yet the 5
2:23:03minute reversal is very important for an
2:23:05intraday Trader so as a reversal Trader
2:23:08you are in essence a counter Trend
2:23:10Trader who is trading against the trend
2:23:13or the current market momentum for
2:23:15example let's say the market is in an
2:23:18uptrend making a series of higher highs
2:23:20and higher lows as a reversal Trader you
2:23:23will look to sell in that uptrend or for
2:23:26example if the market is in a downtrend
2:23:28then as a reversal Trader you are
2:23:30looking to trade against the trend and
2:23:32the momentum reversal trading especially
2:23:35the trend reversal trading can be a
2:23:37profitable way to trade the markets
2:23:40however like any other trading strategy
2:23:43there is a correct way and a wrong way
2:23:45to trade reversals before we talk about
2:23:47the correct way to do reversal trading
2:23:50let me me first explain how you should
2:23:52not trade the market reversals or simply
2:23:55I'll talk about the mistakes that most
2:23:57Traders make while trading reversals the
2:24:00first and the most important point to
2:24:02consider is to not catch a falling knife
2:24:06for those of you who do not know what is
2:24:08catching a falling knife it means trying
2:24:11to enter a long position in a market
2:24:13that is crashing down so let's say the
2:24:16market is dropping every day you don't
2:24:19want to blindly enter a trade because
2:24:21you are a reversal Trader looking to buy
2:24:23low and sell High there is absolutely no
2:24:26sense in trying to catch a crashing
2:24:28Market similar to a falling knife and
2:24:30why is it so because if you are buying
2:24:32into the losss of the market there is no
2:24:35logical place for you to set your stop-
2:24:37loss there is no support or Market
2:24:40structure you can refer to and there are
2:24:42no signs that the downtrend could be
2:24:45ending anytime soon and most importantly
2:24:47Trends need time to reverse their
2:24:49Direction as we have discussed in the
2:24:51market trends as well as Market
2:24:53structure videos so avoid catching a
2:24:56falling knife the second mistake that
2:24:59Traders make is entering the first
2:25:01pullback anticipating that it will be a
2:25:04reversal now this is a common mistake
2:25:06that Traders make that is attempting to
2:25:08trade the first pullback itself this
2:25:11means that you go long when you see the
2:25:13market rallies after a huge decline but
2:25:17often this type of a rally is only a
2:25:19retrace M of the existing Trend and why
2:25:22do some Traders always do this and this
2:25:25is simply because of the fear of missing
2:25:27out or formo and you don't want to miss
2:25:29out on the next move thus you enter a
2:25:32trade as soon as the market shows any
2:25:35sign of reversal unknowingly this sign
2:25:37is usually a retracement or a pullback
2:25:40of the existing Trend and the market
2:25:42will continue the trend causing you to
2:25:44lose your money now that we have
2:25:47understood about what not to do during a
2:25:50reversal trade let us look at how to
2:25:52approach reversal trades in the market
2:25:56the first and foremost point is to have
2:25:58a reference point on your chart now what
2:26:01exactly is a reference point a reference
2:26:04point can be a trend a consolidation or
2:26:07an area of value like a support
2:26:09resistance a trend line a moving average
2:26:12Etc where there is a chance for some
2:26:14sort of a price action now after you
2:26:17have figured out a reference point the
2:26:19second point is to wait for the market
2:26:22to reach that particular reference point
2:26:25now no matter where the price is trading
2:26:27right now for a price action Trader to
2:26:29make any sort of conclusion with the
2:26:31prices it has to be in an area where
2:26:33there is a potential interest from the
2:26:36side of the market participants or
2:26:38simply the price should be at an area of
2:26:41value now the third point to consider is
2:26:43regarding the trade entry now that the
2:26:46price has reached an area of value you
2:26:49have to look for reversal Candlestick
2:26:51patterns you can use reversal
2:26:53Candlestick patterns like engulfing
2:26:55candles or pin bars to time your trade
2:26:58entry so you will enter a trade only
2:27:00after the market shows signs of reversal
2:27:03however you risk entering at a much
2:27:06higher price which may lower your risk
2:27:08to reward ratio but it gives you a
2:27:11higher win rate now the fourth point is
2:27:14setting up a proper stop loss when it
2:27:17comes to stop- loss you want to place it
2:27:19at a level that invalidates your trading
2:27:22setup this means if your stop- loss is
2:27:24hit then the pattern is broken and there
2:27:27is no reason to stay in the trade any
2:27:29longer so it is generally a good idea to
2:27:31keep the stop- loss with reference to
2:27:33the area of value and the high or losss
2:27:36of the reversal candlesticks by giving
2:27:39the ample buffer space to save yourself
2:27:41from pullbacks the buffer space can be
2:27:44decided using the ATR indicator or with
2:27:47respect to your risk appetite and the
2:27:49final point to consider is to set a
2:27:51conservative profit Target now your
2:27:53exits depend on your goals so what do
2:27:56you want to accomplish either you can
2:27:58capture a swing or ride a trend so if
2:28:01you want to capture a swing then you can
2:28:03exit the trades before the opposing
2:28:06pressure comes in for example if you are
2:28:08long in the market then you want to exit
2:28:10your trade before the next resistance
2:28:13level or the swing High where the
2:28:15sellers can come in and on the other
2:28:17hand if you want to ride a trend then
2:28:19you can you can Trail your stop loss as
2:28:21the market moves in your favor for
2:28:24example you can Trail your stop- loss
2:28:26using a 20 moving average now that we
2:28:29have understood how to approach a
2:28:31reversal trade I'm going to share with
2:28:33you three techniques which can help you
2:28:36identify reversal trades in the market
2:28:38and as a reversal Trader you want to be
2:28:40smart about when you want to enter your
2:28:43trades so here we go the first strategy
2:28:46is the break of the market structure we
2:28:49have talked about the different stages
2:28:50of Market in the market structure video
2:28:53and we also know how to identify a
2:28:56particular Trend type from the market
2:28:58strengths video now think about this in
2:29:00a trending Market let's say an uptrend
2:29:03you know the price makes a higher high
2:29:05and higher loss and what do I mean by a
2:29:08break of the market structure the break
2:29:10of Market structure is the clue that the
2:29:13market is telling you that it is about
2:29:15to get weaker or simply it is about to
2:29:18reverse its direction so in case of an
2:29:20uptrend you have a break of structure
2:29:23and the price fails to make a new higher
2:29:26low or a higher high so this is the
2:29:28first clue or the first evidence that
2:29:31the market is about to reverse lower but
2:29:33there is no 100% guarantee that the
2:29:36reversal will happen but it's an
2:29:38Evidence given to you by the market that
2:29:41there is a break of structure and there
2:29:43is a good chance that the price could
2:29:45potentially reverse lower again looking
2:29:47at the concept that I just shared with
2:29:50you for an uptrend to reverse we are
2:29:52looking for a break of the trend Market
2:29:54structure that is what we are looking
2:29:56for is a lower high or a lower low which
2:30:00invalidates the uptrend setup at this
2:30:03point you have actually got a lower high
2:30:05and when the price breaks below the area
2:30:08of support formed by the previous higher
2:30:10low you will have a lower low this tells
2:30:13you that this trend could be weakening
2:30:16and the trend could eventually reverse
2:30:19now the trend will not reverse all of a
2:30:21sudden because markets need enough
2:30:23sellers to bring the prices down and so
2:30:26most often the market go into a phase of
2:30:29consolidation where the price will stay
2:30:31inside a range for some time and then it
2:30:34will show a trend reversal when there is
2:30:36an ample selling pressure available this
2:30:39time when the price breaks out of the
2:30:41consolidation or the distribution stage
2:30:44and move lower is actually the best
2:30:46short trade entry for a reversal in case
2:30:50of a tighter stop loss you can keep the
2:30:52stop loss above the breakout candle high
2:30:55and to be much safer and to avoid deep
2:30:57pullbacks you can even place the stop
2:30:59loss above the consolidation range the
2:31:02Target in this case will be the nearest
2:31:04support level now let us consider this
2:31:06in case of a downtrending market again
2:31:09we will apply the break of Market
2:31:11structure concept we can see that during
2:31:14a downtrend there is a series of lower
2:31:17highs and lower lows the break of
2:31:19downtrend structure comes when the price
2:31:22stops forming the lower highs and lower
2:31:24lows or simply when you have a higher
2:31:27high because the price broke the prior
2:31:30resistance formed by a lower high or if
2:31:33it formed a higher low this again should
2:31:36give you a strong clue that this
2:31:38downtrend could possibly come to an end
2:31:41and the market could potentially reverse
2:31:43its direction in this case also the
2:31:46reversal may not come quickly instead
2:31:48there can be a consolidation or an
2:31:51accumulation stage where the buyers can
2:31:53come in in ample quantities so as to
2:31:55take the market higher here also the
2:31:58trade entry would be when the price
2:32:00breaks above the accumulation stage and
2:32:02moves higher you can keep a safer stop-
2:32:05loss below the consolidation range and
2:32:07the target can be set as the next
2:32:10nearest resistance level or simply you
2:32:13can write the trend until there is again
2:32:15a Breakin structure now there is no such
2:32:19thing as guarantee in trading or in
2:32:21price action or in whatsoever so if
2:32:24anyone promises you guarantees then it's
2:32:26better to stay far away from them this
2:32:29is why I like to use words like probably
2:32:32likely possibly so keep that in mind
2:32:34there is no guarantee for anything and
2:32:36especially when it comes to trading now
2:32:38the second strategy is the higher time
2:32:41frame reversal structure so in a market
2:32:44it's very important to pay attention to
2:32:46where you are in terms of the big
2:32:48picture or simply you should stay
2:32:50attention to what the higher time frame
2:32:52is doing this is where the higher time
2:32:55frame reversal structure comes in handy
2:32:57in this example the price apparently
2:33:00breaks above the swing high and then it
2:33:02collapses lower below the support level
2:33:05at this point a lot of unaware Traders
2:33:08would have bought the breakout on the
2:33:10upside only to get caught on the wrong
2:33:13side and why is that this is a chart in
2:33:16the 4-Hour time frame now let's see the
2:33:19same chart on a higher time frame for
2:33:21example a 1 day period on the higher
2:33:23time frame chart it is evident that most
2:33:26of the Traders are buying the breakout
2:33:29into a previous support level as shown
2:33:31that could eventually act as a
2:33:33resistance and thus it makes a very low
2:33:36probability breakout trade this means
2:33:39that the Traders are buying into a huge
2:33:42selling pressure and what do you think
2:33:44will eventually happen it's pretty much
2:33:46no wonder why the market reversed from
2:33:48the resistance level this is what I mean
2:33:50by a higher time frame reversal
2:33:52structure so what exactly are we looking
2:33:55at in case of this strategy you have to
2:33:57look for a higher time frame area of
2:34:00value like a support or a resistance
2:34:02where the prices can eventually reverse
2:34:05and you can then take a trade entry on a
2:34:07lower time frame with the help of a
2:34:09reversal Candlestick for confirmation in
2:34:12this case there was a false breakout and
2:34:14you can leverage the highs of this false
2:34:17breakout to place your stop- loss now
2:34:19the Third third strategy we will be
2:34:21discussing is using moving averages we
2:34:24can make use of moving averages for
2:34:26reversal trading in this particular
2:34:28Technique we will use the longer term
2:34:30moving averages like the 100 moving
2:34:32average or 200 moving average with a
2:34:35positional trading perspective we know
2:34:37from the basics that if the price is
2:34:40above the 200 moving average for example
2:34:43we should try to stay long and if the
2:34:45price is below the 200 moving average
2:34:48try to stay short the market now the
2:34:50reason for this is quite simple if you
2:34:53think about this the 200 period moving
2:34:55average summarizes the price of the last
2:34:58200 candles based on your time frame so
2:35:01if the price is right now above the 200
2:35:04moving average it is telling you that
2:35:06the price has been trending higher and
2:35:08similarly if the price is below the 200
2:35:10moving average it is telling you that
2:35:12the price has been trending lower this
2:35:15is a simple way to tell you what's the
2:35:17long-term trend on the particular chart
2:35:20that you're trading why is it a
2:35:22long-term trend on the particular chart
2:35:25of your trading it is because you could
2:35:27be using a 200 moving average on a 5
2:35:30minute time frame that is not really a
2:35:33long-term Trend because it's a 5 minute
2:35:35time frame right likewise it can be a
2:35:37200 moving average on a daily time frame
2:35:40then that's a pretty long time frame so
2:35:43it is actually the long-term trend of
2:35:45the chart that you are trading and
2:35:47depending on what time frame you are
2:35:49looking looking at so let's use 200
2:35:51moving average and one day time frame
2:35:54for this particular example over here
2:35:56the price is above the 200 moving
2:35:58average so from the basic rule you want
2:36:00to look for long opportunities in this
2:36:03market we can plot an area of support
2:36:06and every time the price comes into the
2:36:09area of support it forms a price
2:36:11rejection that is validating your
2:36:13trading setup but the key point to note
2:36:15here is that the price is actually
2:36:17forming a consolidation and it has
2:36:20tested the support level multiple times
2:36:22and you know what that means from the
2:36:24simple concept that we have discussed
2:36:26about supports and resistances in
2:36:28episode 6 and it is exactly what
2:36:31happened the price broke down the
2:36:33support level and even moved below the
2:36:36200 moving average with great momentum
2:36:38there wasn't any price rejection of any
2:36:40sort from both these areas of values now
2:36:43you can have a short bias since the
2:36:46price is trading below the 200 moving
2:36:48average and now we can look for
2:36:50opportunities to go short on the market
2:36:53now this is how you can actually use the
2:36:56200 moving average to give you a bias to
2:36:59know whether you should go long or stay
2:37:01short and after you have identified your
2:37:04bias then just reference to a market
2:37:07structure like a support or a resistance
2:37:10or even the moving average itself to
2:37:12kind of identify the area of value that
2:37:14you want to trade from and sometimes the
2:37:16price will test the 200 moving average
2:37:19which is which is actually an area of
2:37:21resistance and if it turns out to be a
2:37:23false breakout of the highs you can use
2:37:26the help of reversal Candlestick
2:37:28patterns to take a reversal trade lower
2:37:30anyway the 200 moving average is useful
2:37:33to help you find out the trend reversals
2:37:36and to identify the trade on the right
2:37:38side of the trend now these are some of
2:37:40the techniques which you can adopt and
2:37:42back test in the market conditions to
2:37:44check if they work for you and if it
2:37:47does the entry and exits can be decided
2:37:50based on your risk appetite and
2:37:53[Music]
2:38:03patience the inside bar pattern is one
2:38:06of the most common candlesticks you will
2:38:09find on your charts the inside bar is a
2:38:12simple yet powerful Candlestick pattern
2:38:15it can help you better time your trade
2:38:17entries with lower risk and the best
2:38:19part once you learn to identify this
2:38:22pattern then you will very quickly see
2:38:24it everywhere you will see it in many
2:38:26different markets and in all your
2:38:28different time frames however just
2:38:30because the inside bar forms often and
2:38:33can be easily identified does not mean
2:38:35you should be using it or trading it so
2:38:38in this video we go through exactly what
2:38:41the inside bar is and how we can use it
2:38:43successfully in our trading what exactly
2:38:46is an inside bar pattern the inside bar
2:38:49pattern is a Candlestick pattern where
2:38:52the price forms completely within the
2:38:55previous Candlestick so for an inside
2:38:58bar to be considered valid both the high
2:39:00and the low of the Candlestick needs to
2:39:02be completely inside the previous
2:39:05candles range most often or not Traders
2:39:08have this confusion around the wigs or
2:39:10Shadows of the candlesticks to clear
2:39:13this up from the start the inside bar
2:39:15takes into account the candlestick's
2:39:17Shadows or the wick also this this means
2:39:19that the high and the low including the
2:39:22Wix of the inside bar candle must be
2:39:24within the high and the low of the
2:39:26previous Candlestick to simplify this
2:39:29even further inside bar must have a high
2:39:32that is lower than the previous candle's
2:39:34high and it should have a low that is
2:39:37higher than the previous candle low
2:39:39including the vix however not all inside
2:39:42bars are created equal there are
2:39:44different types of inside bar patterns
2:39:46formed in the market let us take a look
2:39:49at a few of these the first type is an
2:39:52inside bar with a small range so this is
2:39:55a standard inside bar where the range of
2:39:58the candle is small and it is covered by
2:40:01the prior candle or the previous candle
2:40:03now this tells you that there is an
2:40:05indecision or low volatility in the
2:40:08market we will talk about this further
2:40:10in this video the second type is the
2:40:12inside bar with a large range now you
2:40:15can have an inside bar with a large
2:40:17range so this is still an inside Side
2:40:19Bar as the range of the candle is
2:40:21covered by the prior candle or the
2:40:23previous candle but in this case you
2:40:25will notice that the range of the inside
2:40:28bar is too large now depending upon the
2:40:30close of the inside bar this could
2:40:32either represent an indecision in the
2:40:35market or a reversal in the market now
2:40:38let's see an example each for the long
2:40:40range candles of these types as you can
2:40:43see in the first category there is a
2:40:45large inside bar with bullish close
2:40:48which shows sign of bullish strength
2:40:50moving on to the second type it is a
2:40:53large inside bar with a small real body
2:40:56which shows signs of indecision so
2:40:59depending upon the range and the real
2:41:01body the inside bar can either represent
2:41:03an indecision or a reversal in the
2:41:06market now the third type of inside bar
2:41:08is multiple inside bars so in this case
2:41:11you have multiple inside bars together
2:41:14this is a powerful pattern because it
2:41:16tells you that there is a low volatility
2:41:19in the market to briefly talk about
2:41:21volatility low volatility is associated
2:41:24with weak participation from the market
2:41:27participants or it can signify weak
2:41:30price movements while a high volatility
2:41:32is associated with elevated interest
2:41:35from the market participants and we know
2:41:38the market volatility is always changing
2:41:41that is it moves from a period of low
2:41:43volatility to a period of high
2:41:45volatility and vice versa so when you
2:41:47see multiple inside bars together it is
2:41:50a strong sign that the market is about
2:41:52to make a big move soon now the fourth
2:41:55type is the hikkake pattern which is a
2:41:57variation of the inside bar this is
2:42:00actually a must know pattern for all the
2:42:03Traders because this pattern helps you
2:42:06identify a false breakout from the
2:42:08inside bar pattern imagine this
2:42:10situation you identified an inside bar
2:42:12and you are hoping that the market will
2:42:14go higher or simply you have a bullish
2:42:17Outlook so you go along when the price
2:42:19breaks above the highs of the inside bar
2:42:22but the next thing you know the market
2:42:24does a 180° reversal and collapses lower
2:42:27and you are now in deep loss now this is
2:42:30what we call a hikkake pattern which is
2:42:32a false breakout pattern now there are
2:42:35two variants of the hikkake pattern the
2:42:37first type is a bearish hikkake pattern
2:42:40which actually entices the Bulls or the
2:42:42buyers into buying and then trap them
2:42:45and make them hit their stop loss the
2:42:47second one is the bullet shikake pattern
2:42:50which actually entices the beers or the
2:42:53sellers into shorting the market only to
2:42:55trap them and reverses the price against
2:42:58their position now the hik pattern can
2:43:00be traded the same way you trade an
2:43:03inside bar which we will discuss as we
2:43:05move along this video but this is a much
2:43:07more powerful strategy since the
2:43:10breakout Traders get caught on the wrong
2:43:12side of the move and the stop loss would
2:43:14push the market in your favor if you
2:43:16take the right side of the trade now let
2:43:19us talk about the nature of an inside
2:43:21bar or the Outlook of an inside bar in
2:43:23the market the inside bar is actually an
2:43:27indecision Candlestick pattern the
2:43:29inside bar is formed because the price
2:43:31was not able to break either the high
2:43:34nor the low of the previous session or
2:43:36the previous candle now this shows us
2:43:38that or this tells us that neither the
2:43:41Bulls nor the beers were in control
2:43:43during the session this is a very
2:43:45important information when used
2:43:47correctly however it is important you
2:43:49note where the inside bar is formed and
2:43:52in what type of market so if an inside
2:43:54bar is formed in a strong trend for
2:43:57example a trend higher then it could be
2:43:59signaling a quick pause before the price
2:44:02continues on with the trend and if the
2:44:04inside bar is formed at a swing point or
2:44:08even at a major support or resistance
2:44:10area then it could be signaling that the
2:44:12steam has run out of the current move
2:44:15and the reversal is about to play out or
2:44:17simply the market is about to reverse
2:44:20because this is an indecision
2:44:21Candlestick it is very important to pay
2:44:23attention to where and how this pattern
2:44:26forms moving on let us look at the best
2:44:29time frames to trade the inside bar
2:44:31candle as I have mentioned earlier you
2:44:34will be able to find this pattern on all
2:44:36your time frames from the one minute
2:44:38chart right through the monthly chart
2:44:40however just because you can find an
2:44:42inside bar on all your time frames does
2:44:45not make them all created equal because
2:44:48inside bars formed on a higher time
2:44:50frame will hold more weight compared to
2:44:53inside bars formed on a smaller time
2:44:55frame the reason for this is simple
2:44:58because of the time that goes into
2:44:59forming this pattern so if price action
2:45:02is showing indecision and it cannot
2:45:05break the previous Candlestick high or
2:45:07low on the 1 minute time frame that
2:45:09shows us that for 1 minute the price was
2:45:12stuck however if we see that the price
2:45:14could not break higher or lower on The
2:45:17Daily time frame and formed an inside
2:45:20bar then it shows that for a whole day
2:45:22neither the Bulls nor the beers could
2:45:25gain control of the market this leaves
2:45:27us with the conclusion that the higher
2:45:29time frame inside bar candle holds a
2:45:32much higher weightage than a inside bar
2:45:34on a shorter time frame well then let's
2:45:37talk about the trading strategies now
2:45:39there are many ways you can use the
2:45:41inside bar in your trading you can use
2:45:43it to find new trades and you can also
2:45:46use it to manage your trades the three
2:45:48simplest best and most common strategies
2:45:51to trade the inside bar are the inside
2:45:53bar breakout the inside bar reversal and
2:45:56the inside bar Trend trading strategy
2:45:58let us start with trading the inside bar
2:46:01as a breakout the first key to trading
2:46:03the inside bar as a breakout strategy is
2:46:06identifying a strong Trend either higher
2:46:09or lower in this example the price is in
2:46:12a strong Trend lower and because there
2:46:14is a strong Trend the inside bar
2:46:17represents a pause in the the price
2:46:19action where some profit booking is
2:46:21being taken and the price is taking a
2:46:24breather so when you are looking to
2:46:26enter with the inside bar breakout you
2:46:28are looking to enter when the signal
2:46:30confirms itself this happens when the
2:46:33price breaks the inside bar high or the
2:46:35low in the direction of the trend in
2:46:37this particular example we are looking
2:46:39to take a short entry when the signal
2:46:42confirms itself and breaks lower with
2:46:44the trend or simply we are looking to
2:46:46Ender when the price breaks below the
2:46:49previous candle low but to be frank I'm
2:46:51not a great admirer or a fan of the
2:46:53inside bar breakout strategy in
2:46:55particular and it's simply because of
2:46:57the sheer number of false breakouts that
2:47:00this particular strategy can generate
2:47:02also it is not a very smart move to
2:47:04trade an inside bar on a choppy range or
2:47:07consolidation because of its low
2:47:09probability trade and why is it so
2:47:12because a range or consolidation happens
2:47:14when the market is taking a breather or
2:47:17when the Bulls or beers are in some form
2:47:19of indecision so it does not make any
2:47:22sense to use an indecision Candlestick
2:47:24to take a trade on a market where
2:47:26indecision exist so personally I would
2:47:29be well off using the other two
2:47:31strategies than the breakout so moving
2:47:33on to trading the inside bar as a
2:47:36reversal the key to inside bar reversal
2:47:39strategy is where the inside bar forms
2:47:41to use the inside bar as a reversal you
2:47:44need to see it Formed at a swing high or
2:47:46a swing low depending on the market
2:47:48Trend and even at Key price action
2:47:51levels or areas of values and these
2:47:54levels are often the major support or
2:47:56resistance level for example the price
2:47:59approaches a support level and we know
2:48:02that a support level is one where there
2:48:04can be higher chances for demand for the
2:48:06stock or where the buyers will be
2:48:09willing to enter a position and if an
2:48:11inside bar was formed at or near the
2:48:14support then it could be an indication
2:48:16that the price is looking to make a
2:48:18reveral back higher and we could get
2:48:21long when the price breaks back above
2:48:23the inside bar high but that being said
2:48:26I prefer to wait for the price to make a
2:48:29reversal move first and then for an
2:48:32inside bar as shown in this case now
2:48:34what is the benefit of this by doing
2:48:36this I get to know two very significant
2:48:39things number one that the buyers are in
2:48:42control at this period as they managed
2:48:44to make the first wave of reversal from
2:48:47the support level number do is that
2:48:49there is a volatility contraction due to
2:48:52the formation of an inside bar and if
2:48:55the buying pressure could continue
2:48:57further then it will manage to break out
2:48:59the reversal candles high and move
2:49:01higher this is exactly when you can
2:49:04enter a long position that is when the
2:49:06price breaks out of the inside bar this
2:49:09particular approach will let you enter
2:49:11the trade as the price moves in your
2:49:13favor but on the downside there is a
2:49:16possibility of a false breakout due to a
2:49:19bearish hake pattern as we have learned
2:49:21earlier you can avoid this trap by
2:49:23taking on a more conservative approach
2:49:26you can wait for the breakout candle to
2:49:28close and enter the very next candle if
2:49:30the breakout candle manage to close
2:49:33above the reversal candle high now again
2:49:35in this scenario you risk missing a big
2:49:38move or sometimes it can lower your
2:49:40reward to risk potential so clearly
2:49:43there is no right or wrong answer to it
2:49:45so you have to find a trade entry which
2:49:48Suits You you best when it comes to the
2:49:50stop loss you don't want to set it
2:49:52beyond the loss of the inside bar as the
2:49:54general rule states and why is this
2:49:57because we have already learned that
2:49:59there is a variation of the inside bar
2:50:02which is the hikkake pattern this means
2:50:04if you set a stop loss just below the
2:50:07loss of the inside bar you could get
2:50:09stopped out prematurely on a bullish
2:50:12iake pattern so a better way to set your
2:50:15stop- loss is using the ATR indicator
2:50:18that is you can place the stop loss 1
2:50:20ATR below the low of the inside bar in
2:50:23case of long entry trades this will
2:50:26ensure that your trade has more
2:50:27breathing room so if you want to know
2:50:29more about the ATR indicator you can
2:50:31watch the video here now I will talk
2:50:34about setting the targets at the end of
2:50:36this video after we have discussed the
2:50:38next strategy the third strategy is
2:50:41catching the trend previously you have
2:50:43learned how inside bar allows you to
2:50:46catch reversals in the market now you
2:50:48will learn how to use it to identify
2:50:50Trend trading opportunities now here's
2:50:52the main idea behind it let us reference
2:50:55with the use of a 20 moving average in a
2:50:57strong uptrending Market the price is
2:51:00above the 20 moving average so pullback
2:51:03in such a market will be shallow so when
2:51:05the price starts or stops after a
2:51:08pullback in form of an inside bar let us
2:51:10say you want to enter as soon as the
2:51:13price resumes the direction of the trend
2:51:15now here's how you can approach the
2:51:17trade when you are going long on the
2:51:18market now as we have mentioned the
2:51:20price is in a strong Trend that is the
2:51:22price is above the 20 moving average we
2:51:25have to wait for a pullback to occur and
2:51:27if the pullback has occurred we have to
2:51:30wait for an inside bar to form and if
2:51:33the inside bar is also formed then you
2:51:35can go long when the price breaks above
2:51:38the highs of the previous candle of the
2:51:40inside bar or you can wait for the
2:51:42confirmation that is wait for the
2:51:44breakout candle to close above the
2:51:46inside bars previous candle's High so as
2:51:48to avoid being trapped by the hikkake
2:51:51pattern for this trend trading strategy
2:51:53you can consider setting your stop- loss
2:51:56one ATR away from the 20 moving average
2:51:59since the market finds support at the 20
2:52:02moving average now let us talk about
2:52:04setting targets for inside bar trades
2:52:07now your exits or targets depends on
2:52:10your goals so you can either catch a
2:52:12swing or you can ride a trend so if you
2:52:15intend to catch a swing then you can
2:52:17exit your trades before the opposing
2:52:20pressure comes in for example if you are
2:52:22taking a reversal trade from the support
2:52:24and you are long on the market then you
2:52:26want to exit your trade before the next
2:52:29resistance or the swing high now if you
2:52:32want to write the trend then you can
2:52:34trade the stop- loss as the market moves
2:52:36in your favor for example if you have
2:52:39taken the trend trading approach you can
2:52:41Trail your stop loss using the 20 moving
2:52:44average and when the price breaks below
2:52:46the 20 moving average that is when you
2:52:48should exit the market now when trading
2:52:51the inside bar pattern by entering above
2:52:54or below the breakout of the pattern
2:52:56using any of these strategies I would
2:52:58recommend you to go with the small
2:53:00ranged inside bar breakouts now there
2:53:03are a few reasons as to why this is
2:53:05important the first benefit is that you
2:53:07can place a very tighter stop- loss you
2:53:09can reference the low of the inside bar
2:53:12to set your stop- loss as we have
2:53:13discussed and the smaller the inside bar
2:53:16the smaller the stop- loss is and with a
2:53:18smaller stop- loss you can put a larger
2:53:21position size and still keep your risk
2:53:23constant the second benefit is that the
2:53:25price will move quickly in your favor
2:53:27the market moves from a period of low
2:53:29volatility to a period of high
2:53:31volatility and vice versa so if you
2:53:34trade a small ranged inside bar it means
2:53:37the volatility is low and there is a
2:53:39very good chance that it could expand or
2:53:42breakout in your favor this means you
2:53:44could get a good reward to risk
2:53:46potential on your trade in a short short
2:53:48period of time I hope this makes sense
2:53:50to you as a closing note even if you
2:53:53find the inside bar on all your
2:53:55different time frames the higher the
2:53:57time frame the more weight the pattern
2:54:00holds because this is an indecision
2:54:02pattern it is absolutely crucial as to
2:54:05where and how it is formed so you need
2:54:08to look at and follow the price action
2:54:10that is formed around the inside bar to
2:54:12successfully start using them in real
2:54:14market conditions and as always don't
2:54:17forget to learn about the pattern in
2:54:20detail and back test it so that you are
2:54:22comfortable while using it in the
2:54:35market in the fourth episode we have
2:54:38talked about the different candlesticks
2:54:41and what each of them had to say with
2:54:44regards to the market participation and
2:54:46one of the main candlestick of our
2:54:49discussion was the pin bar candlesticks
2:54:52the pin bar is one of the most popular
2:54:54reversal Candlestick patterns you can
2:54:57use a pin bar on all your different time
2:54:59frames and it can be traded across many
2:55:02different markets making it a very
2:55:04flexible trading Candlestick pattern
2:55:06most importantly the pin bar Candlestick
2:55:08is a reversal pattern and it can often
2:55:11help you find when a new swing either
2:55:13higher or lower is about to occur let's
2:55:16hop into a more detailed study about the
2:55:19pin bars so what is a pin bar
2:55:21Candlestick pattern if you remember a
2:55:24pin bar is a Candlestick that has a very
2:55:27large Shadow or a Candlestick Wick with
2:55:30a small real body the shadow of the pin
2:55:33bar is at least two times the size of
2:55:35the real body the tail or the shadow of
2:55:38the pin bar shows the area of the price
2:55:40that was rejected and the implication of
2:55:43it is that the price will continue to
2:55:45move opposite to the direction the tail
2:55:47point
2:55:49now this pattern can be bullish or
2:55:51bearish depending upon where it occurs
2:55:53and how it is formed within the price
2:55:55action the example here shows a bearish
2:55:58pin bar the pin bar is formed with the
2:56:01price trying to break higher in this
2:56:03particular Market the Bulls are in
2:56:05control but as soon as the bearish pin
2:56:08bar was formed it shows that the beers
2:56:10have entered the market and are looking
2:56:12to take the price lower with a reversal
2:56:15and this is exactly why the large candle
2:56:18STI Wick is created which shows that the
2:56:20higher prices were rejected and the
2:56:22Bayers are trying to regain control
2:56:25after the initial break higher similarly
2:56:28a bullish pin bar shows rejection of
2:56:30lower prices the large lower Wick shows
2:56:33the beers were in control earlier but
2:56:36eventually it was overcome by the Bulls
2:56:38and now the Bulls are dominant and the
2:56:40market could reverse higher now the most
2:56:43important point is that the key to high
2:56:46quality pin bars is where they form in
2:56:48the market as we discuss more about pin
2:56:51bars in this video we will understand
2:56:53why the best pin bars are found at the
2:56:56key market levels or within the obvious
2:56:59Trends let us try to understand the two
2:57:02pin bar types in Greater detail let us
2:57:04start off with the bullish pin bar some
2:57:07of the highest quality pins are when
2:57:09there is an obvious trend in the market
2:57:12in this particular example the price is
2:57:14moving in a clear Trend higher we can
2:57:17see from the price action that the price
2:57:19is making regular higher highs and
2:57:21higher lows with this uptrend for a
2:57:24bullish pin bar to make sense to a price
2:57:26action Trader we want to see it Formed
2:57:29at one of these swing lows with the
2:57:31trend now the reason as to why the pin
2:57:34bar should be formed at the swing lows
2:57:36is that pin bar is actually a reversal
2:57:38signal and we are looking to enter the
2:57:41bullish pin bar and make a profit as the
2:57:43price reverses higher with the trend or
2:57:45simply we want to enter when the buying
2:57:48demand starts to kick in and in addition
2:57:51to that we want to trade with the trend
2:57:54in this particular example the price
2:57:56forms a bullish pin bar at the swing low
2:57:59within the trend higher and the
2:58:01rejection is quite strong which will
2:58:04actually strengthen the bullish
2:58:06perspective even more so in this case we
2:58:09can enter a trade straight after the pin
2:58:11bar has finished forming or we could use
2:58:14additional confirmations a confirmation
2:58:16type of Entry is where we are looking
2:58:18for the price to break higher and above
2:58:21the pin bar high and when we see the
2:58:23price breaking above the pin bar High we
2:58:25can Ender long now let us take a look at
2:58:28the bearish pin bar setup to clear
2:58:30things even more as mentioned the pin
2:58:33bar can be both bullish or bearish
2:58:36depending upon where and how it forms
2:58:38with respect to the price action the
2:58:40difference between the bullish and the
2:58:41bearish pin bar is that the bullish pin
2:58:44bar has a wick or a shadow rejecting
2:58:46lower prices while the bearish pin bar
2:58:48has a wick rejecting the higher prices
2:58:51which is a sign that the bearers are
2:58:54more dominant over the Bulls now the
2:58:56other great time that you will find high
2:58:59probability trades with this Candlestick
2:59:01in addition to a trending market is when
2:59:04the price is rejecting a level in the
2:59:07market that is of importance or an area
2:59:09of value these can often be the key
2:59:12support or resistance level or dynamic
2:59:15levels like the moving averages in this
2:59:18example the price moves higher into a
2:59:20key resistance level we can see that the
2:59:23price rejects from this resistance level
2:59:25and forms a bearish pin bar this tells
2:59:28us that the resistance level has held
2:59:30and the price may now be looking to sell
2:59:33off lower and then we can either enter
2:59:36the trade the very next candle or we can
2:59:38wait for the confirmation that is we can
2:59:40wait for the price to break below the
2:59:43lows of the pin bar Candlestick moving
2:59:45on let us find out which are the best
2:59:47Mar markets to trade the pin bar now the
2:59:50best markets to trade pin bar strategy
2:59:52are markets where the price has a solid
2:59:55amount of volatility or the markets with
2:59:57a high volatility the more the price M
3:00:00and volatility the more opportunities
3:00:03you will have to trade the pin bar and
3:00:05also the bigger potential for large
3:00:07winning trades but markets such as
3:00:10individual stocks that can often have
3:00:12large gaps like Gap UPS or Gap Downs are
3:00:15not ideal for Pinar trading in said the
3:00:18markets which are fast and free flowing
3:00:20with smooth price action is actually
3:00:23good for Pinar trading so markets like
3:00:26Forex crypto Etc are the best candidates
3:00:29for this particular strategy in trading
3:00:32mistakes are bound to happen sometimes
3:00:34it may be due to lack of knowledge and
3:00:37other times it may be due to how we
3:00:39conceive an idea that is if we
3:00:41understand a particular idea in a
3:00:43different context that will lead us to
3:00:46confusion so I will talk about some of
3:00:48the mistakes that you should avoid while
3:00:51using the pin bar trading strategy the
3:00:53first and foremost mistake is to expect
3:00:56Market reversals because of a pin bar a
3:00:58trend either uptrend or downtrend will
3:01:01not reverse just because there is a pin
3:01:03bar on the chart it takes more than a
3:01:06single Candlestick to reverse a trend
3:01:08sometimes even a major news release has
3:01:11difficulty in reversing a trend so what
3:01:12more of a pin bar we have talked about
3:01:15the market structure or the different
3:01:17stages of the market and why and how
3:01:19they are formed so you can watch the
3:01:21second episode to get more insights on
3:01:23this topic so if you spot up inar
3:01:26against the trend it does not
3:01:28necessarily mean a trend reversal is
3:01:29about to play out the odds are that the
3:01:32trend will continue the second mistake
3:01:34is giving too much attention or interest
3:01:37to pin bars now we have learned that pin
3:01:39bar represents price rejection but
3:01:42here's the important thing price
3:01:43rejection can come in different forms
3:01:46and patterns and not just in the the
3:01:48form of pin bars so if you focus only on
3:01:51pin bars and reversals associated with
3:01:53pin bars then you will miss out a lot of
3:01:56other trading opportunities in the
3:01:57market now the most important mistake of
3:01:59all considering all pin bars to be equal
3:02:03the point is if you see a strong
3:02:05momentum on the upside followed by a
3:02:07small bearish pin bar it is likely to be
3:02:10a pause in the price action as the Bulls
3:02:12are in control of the market and on the
3:02:14same note if you see a weak momentum on
3:02:17the upside followed by a huge bearish
3:02:19pin bar it is likely to be a reversal
3:02:22since the preceding price action tells
3:02:24you that the Bulls are getting weak so
3:02:26it's clear we should not treat all pin
3:02:29bars the same because they are actually
3:02:31not and remember the bigger the pin bar
3:02:34relative to the previous candles the
3:02:36stronger the price Rejection it is
3:02:38always a good idea to compare the pin
3:02:40bar with the previous candles sticks to
3:02:43understand the price action logic now
3:02:45let us hop onto the pin bar trading
3:02:47technique
3:02:48starting with trading the pin bars with
3:02:50the trend one of the simplest and most
3:02:53effective ways to start stacking the Ws
3:02:55in your favor is to trade in line with
3:02:57the obvious trend in the market when
3:03:00trading with the clear Market Trend you
3:03:02are trading with the current flow and
3:03:04not trying to push against it so the
3:03:06trick when using pin bar and Trend
3:03:08trading is to look to Ender from areas
3:03:11of value and important swing points
3:03:13which are swing highs or swing lows in
3:03:16this example the price is a clear Trend
3:03:18higher and so we will start looking for
3:03:20a bullish pin bar to get long and when
3:03:23the price makes a swing low due to a
3:03:26short-term profit booking into an area
3:03:28of value like a trend line or a moving
3:03:30average or even a swing level and then
3:03:33forms a bullish pin bar reversal
3:03:35Candlestick rejecting the lower prices
3:03:37we could look to enter long trades we
3:03:40could either go long as soon as the pin
3:03:42bar has formed or we can wait for a
3:03:44confirmation to enter and the price
3:03:47breaks the pin bar high in case of stop
3:03:50loss you can place the stop loss one ATR
3:03:52below the swing loss or the trend line
3:03:54or the moving amage as amble buffer or
3:03:58you can even place the stop loss below
3:04:00the losss of the pin bar Candlestick in
3:04:03case you want a tighter stop- loss now
3:04:05the target can be set as the next swing
3:04:08high or the nearest resistance level or
3:04:10you can ultimately write the trend and
3:04:13exit when the price breaks out of the
3:04:15uptrend structure now there are a few
3:04:18advantages by trading with the trend
3:04:20number one is that you don't require a
3:04:22precise entry to make a good profit
3:04:25secondly you have better ODS for the
3:04:27trade to work out as you are trading
3:04:29with the market flow and finally you
3:04:31have a greater profit potential as the
3:04:34impulse move is stronger than the
3:04:35corrective move moving on to the second
3:04:38strategy trading pin bars from an area
3:04:40of value take this example where the
3:04:43price moves higher into a key resistance
3:04:46level we know as a some rule that
3:04:48resistance is an area of value where
3:04:51sellers will be looking to short the
3:04:53market or there will be a larger supply
3:04:55for the stock than the demand so when we
3:04:57see a price rejection from the market
3:05:00level and it forms a bearish pin bar
3:05:02Candlestick this is a clue that the
3:05:05resistance level has held or the sellers
3:05:07are active and this is an indication
3:05:10that the price may now be looking to
3:05:12sell off even lower the important point
3:05:15to note here is that pin bars are
3:05:17reversal candlesticks which can help us
3:05:19make a trade entry but can't guarantee
3:05:22us a reversal now since there is a
3:05:24strong price rejection from the
3:05:26resistance level we can either take a
3:05:28short entry on the very next candle or
3:05:31we can wait for a confirmation the
3:05:33confirmation in this case is when the
3:05:36price breaks below the loss of the
3:05:38bearish pin bar candle and the stop loss
3:05:40for this trade would be above the highs
3:05:43of the bearish pin bar candle with a
3:05:45suitable buffer using the at indicator
3:05:48and finally the target can be set as the
3:05:51nearest swing low level or the nearest
3:05:54support level now some of the benefits
3:05:57of trading at a support or resistance
3:05:59level are that you are trading from an
3:06:02area of value secondly it tells you when
3:06:05you are wrong that is if the reversal
3:06:08fails your stop- loss will be hit and
3:06:10you will be out of your trade and
3:06:12finally it improves your winning rate as
3:06:15well as improve your reward to risk
3:06:17because because of the area of value and
3:06:19also based on the degree of rejection
3:06:21from the level now the third strategy is
3:06:24using a combination of moving averages
3:06:27and support resistance levels so in
3:06:30strong trending markets the price is
3:06:32unlikely to pull back towards the trend
3:06:34line or a moving average or simply the
3:06:37pullbacks are shallow thus you can look
3:06:40to trade from a 200 moving average Now
3:06:43by a general rule of defining the market
3:06:45Trend if the 200 moving average is
3:06:48pointing higher and the price is above
3:06:50it then the market is on an uptrend now
3:06:53on an uptrend find key support and
3:06:55resistance levels using a higher time
3:06:58frame or you can even use a more
3:06:59responsive 20 moving average then we
3:07:02have to wait for the price to come to an
3:07:04area of value which could be a support
3:07:07resistance level or a dynamic support
3:07:09resistance level like the 20 moving
3:07:11average and if the price comes to the
3:07:13area of value and when you see a bullish
3:07:16pin bar or a price rejection from this
3:07:18area of value then you can go long you
3:07:21can take a long entry on the very next
3:07:23candle or you can wait for the break of
3:07:25the highs of the pin bar so as to enter
3:07:28with a confirmation if you are long you
3:07:31can place the stop loss below the low of
3:07:33the pin bar or 18r below the pin bar low
3:07:36now if the price goes in your favor then
3:07:38you can take the profits at the nearest
3:07:41swing high level or the nearest
3:07:43resistance level or you can even use the
3:07:4520 moving average as a trailing
3:07:47stop-loss and exit when the price breaks
3:07:50below it now on a closing note pin bars
3:07:53will show up in any Market condition on
3:07:56all the time frames so be sure to
3:07:58understand the prerequisites and
3:08:00practice identify and trading them on a
3:08:02demo account before trading them with
3:08:05real money because practice makes you
3:08:07perfect
3:08:20Traders have always benefited from
3:08:22massive jumps in asset prices especially
3:08:25during volatile market conditions so it
3:08:28is our responsibility as a Trader to
3:08:31understand these massive gums in asset
3:08:33prices or simply the gaps formed in the
3:08:35market and then learn about them analyze
3:08:38them and finding ways to trade them in
3:08:40the market so what exactly is a gap the
3:08:43difference between two consecutive
3:08:45candles closing price and opening price
3:08:48is called as a gap or simply a gap is an
3:08:51area of discontinuity in the chart where
3:08:53the price of the asset either Falls or
3:08:55rises from the close of the previous day
3:08:58a gap occurs when the prices skip
3:09:01between two trading periods that is
3:09:03skipping over certain prices and so it
3:09:05creates a void on the price chart or
3:09:08simply these are areas on the chart
3:09:11where no trading activity has taken
3:09:13place now you will have a question in
3:09:15your mind why do gaps occur in the
3:09:18market in the first place now there are
3:09:20a few reasons as to why gaps occur in
3:09:22the market let us look at the reasons
3:09:25one by one first of all gaps occurs due
3:09:28to an imbalance between the demand and
3:09:30Supply the Gap up for example is because
3:09:33of the aggressiveness of buyers which
3:09:35means that there are more buy orders in
3:09:37the market or simply the demand is
3:09:40greater than the supply which will boost
3:09:43the prices to go up or in other words
3:09:45the price will Gap up similarly a gap
3:09:48down is because of the aggressiveness of
3:09:51sellers which simply means that there
3:09:53are more sell ERS or simply the supply
3:09:56is more than the demand which caus the
3:09:58price to gap down lower so in short gaps
3:10:01occurs at levels where there is a supply
3:10:04and demand imbalance the second reason
3:10:07due to which gaps occur are due to the
3:10:09overnight Sentiments of the market
3:10:11participants or due to any big news gaps
3:10:15usually occur when there is a fresh news
3:10:17or a big announcement that will lead to
3:10:19change in the market fundamentals
3:10:21usually when the markets are closed so
3:10:24when such a news spreads there is a
3:10:26flood of buyers or sellers waiting to
3:10:28buy or sell depending upon the nature of
3:10:30the news and finally sometimes this
3:10:33smart money or the big institutions try
3:10:35to skip the important support and
3:10:37resistance level that is for example if
3:10:39they are bullish on a particular stock
3:10:41they will Gap up the price above the
3:10:43supply Zone where they could have faced
3:10:45a potential selling price pressure
3:10:48another important point to note about
3:10:50gaps is that gaps can act as supports or
3:10:53resistances so in case of a gap up the
3:10:56Gap can actually act as a support Zone
3:10:58and during a gap down the Gap can act as
3:11:01a resistance Zone we will use this
3:11:03particular idea further up in this video
3:11:05now another idea which is worth
3:11:07mentioning is the idea of Gap filling
3:11:09now Gap fill refers to the price
3:11:11retracement back to the previous day
3:11:13closing price now you can ask the
3:11:15question that do all the gaps get filled
3:11:18the simple answer to this question is a
3:11:20no that is not all gaps get filled
3:11:23however 90% of gaps eventually get
3:11:26filled the problem that you will have if
3:11:28you are making trades thinking that a
3:11:30gap will get filled every single time is
3:11:33that even if it does get filled it can
3:11:35take a very long time while most gaps
3:11:38get filled quickly some gaps will not be
3:11:40filled for months or even years so if
3:11:42you're looking to make trades aiming for
3:11:44The Gap to get filled then you need to
3:11:46keep in in mind that not all the gaps
3:11:49will fill and some of them will take a
3:11:51very long time now all the gaps are not
3:11:54the same there are different types of
3:11:56gaps and actually the gaps are divided
3:11:58based on the context in which they
3:12:00appear so I'll talk about three of them
3:12:02number one is the Breakaway Gap or the
3:12:04breakout gaps the Breakaway Gap means
3:12:08breaking the important support or
3:12:10resistance level or significant trend
3:12:12line in the form of a gap the Breakaway
3:12:14Gap actually appears after the
3:12:16completion of an important pattern like
3:12:18a price in a consolidation range or a
3:12:21continuation or a reversal pattern so
3:12:23the main logic behind break of a gap is
3:12:26that the smart money knows exactly where
3:12:29the support and resistance areas are let
3:12:31us say for example if the smart money is
3:12:33bullish and higher prices are
3:12:35anticipated the smart money will
3:12:37certainly want a rally but the problem
3:12:39is how to avoid the old resistance which
3:12:42could trigger some selling pressure so
3:12:44what they will do is that they will Gap
3:12:46up through the B area of Supply as
3:12:48quickly as possible as a way of avoiding
3:12:51the resistance now after the Breakaway
3:12:53Gap has occurred we have a clear sign of
3:12:56strength now the smart money does not
3:12:58want to have to buy the stock at higher
3:13:00prices because they have already bought
3:13:02their main Holdings at lower levels
3:13:04during the consolidation and they also
3:13:06know that a breakout above the old
3:13:08resistance area will create a new wave
3:13:11of buying in the market and how can they
3:13:13be sure about this number one many
3:13:16traders who have shorted at the market
3:13:17will now be forced to cover their
3:13:19positions by buying back the stocks and
3:13:22then there will be a second group of
3:13:23traders who will be looking to buy the
3:13:25breakouts and finally there will also be
3:13:28traders in the market who may feel they
3:13:30are missing out on a big opportunity and
3:13:32they will be encouraged to start buying
3:13:34most often or not the Breakaway Gap will
3:13:36not be a trap up move or a false
3:13:38breakout because High volumes will be
3:13:40supporting the move often now coming to
3:13:42the second type of Gap it is a runaway
3:13:45gap or a measuring Gap in this case the
3:13:47price move have been underway for some
3:13:49while and somewhere in the middle of the
3:13:51move the prices will Gap up and this
3:13:53type of Gap up is called as a Runway Gap
3:13:55so in case of an uptrend it is a sign of
3:13:58the continuation of a trend and also in
3:14:00case of a downtrend it is also a signal
3:14:02that the trend will continue moving on
3:14:04to the third type which is an exhaustion
3:14:06Gap these are generally weak Gap UPS or
3:14:09Gap Downs so it can be a weak Gap up to
3:14:12the resistance or a weak gap down to a
3:14:14support this price action is actually
3:14:16designed to trap you in a potentially
3:14:18weak market and into a poor trade and
3:14:21thereby hitting your stop losses and
3:14:23most often or not it will form a false
3:14:25breakout or a false breakdown in the
3:14:27market well then let us figure out how
3:14:30to trade the gaps successfully there are
3:14:32several ways to leverage GS in the
3:14:34market to your advantage in this episode
3:14:37however we will talk about the idea of
3:14:38breakouts and reversals with respect to
3:14:41Market gaps these strategies are based
3:14:43on two types of gaps with the open price
3:14:45depending upon the highs and and lows of
3:14:47the previous trading section or the
3:14:49previous sessions range so it can be an
3:14:51outside Gap or a full Gap now this
3:14:54happens when the market open outside the
3:14:56previous day range that is the candle
3:14:59opened outside the previous day high or
3:15:01the low for Gap up or gap down
3:15:03respectively and the second type of Gap
3:15:05is an inside gap or a partial Gap in
3:15:08this case the market open inside the
3:15:10previous St range that is in case of a
3:15:12gap up the candle opened above the
3:15:14previous day close but not above the
3:15:16previous day high so there are three
3:15:18main factors we have to monitor to
3:15:20determine whether the Gap is real or a
3:15:22trapped Gap so these three factors are
3:15:24the volume opening price and the
3:15:26pullback to a particular level let's
3:15:28talk about the volume briefly it is
3:15:31important to watch the volume carefully
3:15:33when determining if a gap is valid or
3:15:35not so for example if a stock gaps up
3:15:38and the volume is also high and also the
3:15:41price remains above the opening price
3:15:43after the morning pullback it is an
3:15:45excellent sign that this stock can
3:15:47further go on the upside in addition to
3:15:49volume you can also make use of an
3:15:51indicator called the VAP or the volume
3:15:53weighted average price which plots the
3:15:56average price adjusted for volume on the
3:15:58chart and it is fairly very easy to make
3:16:00use of also the VAP assigns more weight
3:16:03to the price points with high volume to
3:16:05talk about VAP briefly VAP is typically
3:16:08used with intraday charts as a way to
3:16:11determine the general direction of the
3:16:13intraday prices it is similar to a
3:16:15moving average in that when the price is
3:16:18above the V app prices are rising and
3:16:20when the price is below the VAP the
3:16:22prices are falling but for the sake of
3:16:25this video we will go with the
3:16:26conventional approach of following the
3:16:28volume bars for confirmations now
3:16:31talking about the time frames the
3:16:33strategies that I am about to discuss
3:16:35are based on a smaller time frame that
3:16:37is the intraday time frames particularly
3:16:39on the 5 minute chart and considering
3:16:41the price data from two consecutive days
3:16:43where the Gap has occurred so to begin
3:16:46with I have to plot the previous day
3:16:48high and lows and also bring up the
3:16:50volume indication on the chart then you
3:16:53have to see if it is a gap up or a gap
3:16:55down and you have to figure out if the
3:16:57Gap was a partial Gap or a full Gap now
3:17:00after finding out these prerequisites
3:17:02you are ready to take either the
3:17:03breakout approach or the reversal
3:17:05approach and the most important thing of
3:17:08all do not trade the first hour after
3:17:10the market open in case of a gap opening
3:17:13because we need to understand the price
3:17:15range or the price action happening
3:17:17during such a volatile opening so as to
3:17:19implement our strategy with some amount
3:17:22of confidence as I have mentioned
3:17:24earlier there are two types of gaps
3:17:25partial gaps and full gaps and these can
3:17:28be further categorized to partial Gap
3:17:30ups and GAP downs and full Gap ups and
3:17:33GAP Downs so for these four category of
3:17:36gaps we can actually Implement a long
3:17:38trade and a short trade which will leave
3:17:40us with eight different strategies to
3:17:42use with but at this point I will
3:17:45pinpoint only four strategies IES which
3:17:47has a higher win rate than the other
3:17:49four strategies and let me make this
3:17:51very clear that sometimes the trades
3:17:54won't work out as we have planned and it
3:17:56is better if we opt to not trade under
3:17:59such situations starting off with
3:18:01trading the full gaps let us talk about
3:18:03a full Gap up that is open price of the
3:18:06Gap up candle is higher than the
3:18:08previous day high we have to note here
3:18:10that the previous day high is an
3:18:12important price level which can act as a
3:18:14support level for the prices it can
3:18:17trigger a buying pressure in the
3:18:18direction of the Gap up so in this
3:18:20particular situation we have to wait for
3:18:22the prices to form a range during the
3:18:25first hour of the market open and then
3:18:28if we manage to find a pull back to the
3:18:30previous day high which is the demand
3:18:32Zone here then we will look for a
3:18:34continuation trade on the upside
3:18:36Direction when the price actually breaks
3:18:38above the opening Range High or the high
3:18:41that was formed during the first hour of
3:18:43Market open we also have to see if the
3:18:45volumes are favorable or high enough
3:18:47which will help to strengthen our trade
3:18:49confirmation we can enter a long trade
3:18:51above the high of the range and we can
3:18:53keep the stop loss below the previous
3:18:55day high level with a suitable buffer
3:18:58and in case if the Open Range High is
3:19:00very large we can actually enter a trade
3:19:03above the range keeping at least 1.5 is
3:19:05to1 risk to reward and placing the stop-
3:19:08loss below the highs of the range or
3:19:10below the breakout of the range candle
3:19:12losss now you may have a doubt in your
3:19:15mind what if the gap of is too large
3:19:17that is if the price opened far above
3:19:20the previous day high which means it is
3:19:22far away from any area of support and in
3:19:25such a case the probability of the price
3:19:27rate racing back to the support level or
3:19:30the previous day high level is very low
3:19:32so as a price action Trader we can't
3:19:35initiate any reasonable trades as there
3:19:37is no critical price levels where we can
3:19:39find a trade entry and of course if
3:19:42there is any Market support and
3:19:44resistance level near the 1 hour range
3:19:46after the market open then we can take a
3:19:49breakout or a reversal approach based on
3:19:51price action other than that it is
3:19:53better as a price action Trader to stay
3:19:55away from such a huge shift from the
3:19:57price level as the win rate of the trade
3:20:00can be low I'm not saying that it is not
3:20:02possible to trade such huge gap UPS of
3:20:05course it is possible with technical
3:20:06indicators like VAP which we will talk
3:20:09about in the technical analysis course
3:20:11but on the scope of a price action
3:20:13Trader it is better to stay away from
3:20:15such setups moving on let us talk about
3:20:18a similar case but it is about a full
3:20:20gap down that is the price open below
3:20:23the previous day's low in this case the
3:20:25previous day low will act as a
3:20:27resistance level where there could be
3:20:29potential sellers coming in and push the
3:20:31price lower so in our approach we will
3:20:34wait for the first hour so that the
3:20:36volatility will cool down and then if we
3:20:38see a pullback of the prices back to the
3:20:41previous day low which is a potential
3:20:43resistance level now you have to mark
3:20:45the low price of the range so form
3:20:47during the first hour and if the price
3:20:49manages to break below this range low
3:20:52with a high amount of volume then we can
3:20:54enter a continuation trade in the
3:20:56direction of the gap down we can take a
3:20:58short entry below the breakout of the
3:21:00range low and we can place the stop loss
3:21:03above the previous day low or in case if
3:21:06the range is too large we can enter a
3:21:08short trade with a predefined reward to
3:21:10risk of at least 1.5 is to1 keeping the
3:21:13stop- loss just above the breakdown of
3:21:15the range candle low similar to the
3:21:17previous case that we have discussed in
3:21:20case of a full Gap up in case of a full
3:21:22gap down where the open price is far
3:21:25from the previous day low which is a
3:21:27potential resistance level the
3:21:29probability of a pull back or retest
3:21:31back to the resistance level is very low
3:21:33and it does not make any sense as a
3:21:35price action Trader to be trading
3:21:37without a critical price level to rely
3:21:39upon so better avoid trading when the
3:21:41price does not respect any support or
3:21:44resistance levels now these are the two
3:21:46full Gap trading strategies that I
3:21:48prefer using in contrast to their
3:21:50counterparts which are the full Gap up
3:21:52short trade and a full gap down long
3:21:55trade now the idea to trade the other
3:21:57two techniques is based on the strength
3:21:59of the pullback which means if the
3:22:01pullback is very strong and breaks
3:22:03through the level with high volumes then
3:22:05we can think about implementing these
3:22:07two strategies we can research more
3:22:09about the other two strategies if you
3:22:11are curious enough moving on let us talk
3:22:13about the two partial Gap trading
3:22:15strategies one of one of the most
3:22:17important points that we have discussed
3:22:19earlier was that a gap can act as a
3:22:21support or resistance level when price
3:22:24does move in and close the gap or fill
3:22:26the Gap it will often bounce away and
3:22:28act as an area of Supply or demand so
3:22:31there are two potential levels to
3:22:32consider out here the first one is the
3:22:34previous day closing price which can
3:22:36oppose the prices so is the opening
3:22:38candle of the particular day and
3:22:40consideration so both these levels are
3:22:42potential levels for Price reversal so
3:22:44instead of considering both these these
3:22:46levels as separate entities we will look
3:22:49at them as a zone or area of price
3:22:51action now starting off with a partial
3:22:53Gap up that is open price is above the
3:22:56previous day close but still below the
3:22:58previous day high level now when a
3:23:00market gaps up the Gap can act as a
3:23:02support level for any pullback the
3:23:04pullback test the Gap with lighter
3:23:06volume which tells us that the price
3:23:08does not have enough legs to get pass
3:23:10through the gap or break down below the
3:23:12Gap Instead The Gap becomes a support
3:23:15and there is a potential price reversal
3:23:17possible towards the upside and any
3:23:20bullish signal that is triggered is our
3:23:22buy entry so it can be a bullish pin bar
3:23:25or a bullish engulfing pattern Etc we
3:23:27can also look for a rise in the volumes
3:23:30and the prices starts to rise we Ender
3:23:32long at this bullish signal that is we
3:23:35can wait to enter above the reversal
3:23:37Candlestick high or for an even more
3:23:39conservative approach we can enter when
3:23:41the price breaks above the day high
3:23:43level formed so far but this particular
3:23:46approach apprach of Entry doesn't make
3:23:47sense if the Range High is very close to
3:23:50the previous day high then there can be
3:23:52potential selling pressure and your
3:23:54trade can go against you so make sure to
3:23:56maintain a good reward percentage and
3:23:59keep an eye on the important levels
3:24:01where the opposing pressure could
3:24:03potentially come in we can place the
3:24:04stop- loss just below the Gap Zone and
3:24:06we can fix a reward to risk of at least
3:24:091.5 is to one or you can even keep the
3:24:12target as the previous day high level so
3:24:14the benefit of using this strategy is
3:24:16that gaps fill 90% of time so this is a
3:24:19popular trading strategy the second
3:24:22strategy is when there is a partial gap
3:24:24down that is open price is below the
3:24:27previous day close but it is still above
3:24:29the previous day low when a market gaps
3:24:32down then the Gap acts as a resistance
3:24:34level for any pullback if the pullback
3:24:37tests the Gap with a smaller volume it
3:24:39tells us that the price does not have
3:24:41enough strength to break through the gap
3:24:43or break out above the Gap instead the
3:24:46Gap becomes a resistance level and there
3:24:48is a potential price reversal possible
3:24:50towards the downside and any bearish
3:24:53signal such as a bearish engulfing
3:24:55candle or a bearish pin bar gets
3:24:57triggered it is our opportunity to short
3:24:59the market we will also have to check if
3:25:02there is high enough volume associated
3:25:03with this particular move you can enter
3:25:05a short trade below the bearish
3:25:07confirmation Candlestick and place the
3:25:10stop L just above the gap for safety or
3:25:12it is much better if you keep a
3:25:14predefined reward to risk before hand as
3:25:16a part of risk management now these were
3:25:19the two partial trading strategies the
3:25:21two others are the partial Gap up with a
3:25:24short entry and the partial gap down
3:25:26with a long entry in these strategies
3:25:28also volume and pullbacks back to the
3:25:31Gap regions is the key that is if there
3:25:33is a strong enough pullback assisted
3:25:35with strong volume break through the Gap
3:25:37Zone then we can think about utilizing
3:25:39these techniques you can check them out
3:25:41yourself if you want you can also notice
3:25:44that all the strategies that we have
3:25:45discussed we were actually taking a
3:25:48trade in the direction of the Gap and
3:25:50not against it and finally it is up to
3:25:52you as a Trader to back test these
3:25:55strategies on the chart and find out if
3:25:57you can actually Implement successfully
3:25:59in your trades now that is it for today
3:26:01guys I hope you have learned something
3:26:03new if you have please do like the video
3:26:06and subscribe to the channel and don't
3:26:08forget to press the Bell icon so that
3:26:10you don't miss out on the upcoming
3:26:12videos you can also follow us on our
3:26:14official Instagram page I will see you
3:26:17guys on another video till then see you

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