Trading Chart Pattern.pptx

7/17/2019 Trading Chart Pattern.pptx

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R A J S T O C K S O L U T I O N S @ G M A I L . C O M

Trading using Chart Patterns


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Introduction

Thomas N. Bulkowski in his book Encylopedia ofChart Patterns talks about around !" chartpatterns. The most researched and comprehensi#e

content on chart patterns till today.

$ lot of people ha#e tried to simplify the chart patternsbecause it would not be possible to remember allthose patterns


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Types of Patterns

%. &arket at rest''''...continuations

(. &arket finished ''''re#ersals

". &arket uncommitted''directionless


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Types of Patterns

&ost patterns ha#e simple names based on what theylook like.

$ )ouble *e#erse +hirligig, if it e-isted, would be fartoo comple- to be useful.

.I././0


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Continuation Patterns

Triangles

*ectangles 1aka trading ranges2

3lags

4aps

But look at the ne-t slide'.


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*e#ersal Patterns

Triangles

*ectangles 1aka trading ranges2

3lags 1Not so much2

4aps Not So easy right5


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ey Points

The shapeof a pattern yields clues to what is going on in terms of marketpsychology

The positionof the pattern in the conte-t ofwhat cae !e"ore it is a#so

critica#

Most o" the ties $atterns #ean one way or the other!%t the ar&et'eci'eswhich way it breaks

)ecide a timeframe and look for patterns within the timeframe. )o not changethe timeframe. $t ma- you can ha#e two timeframes for the defining thepattern. 3or e-ample for Intraday trading /ee the pattern in daily timeframe,

which would gi#e o#erall trend 6 pattern. Plus see the pattern in %7 min 6 "7min timeframe whiche#er timeframe you are comfortable


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)irectionless Patterns

If your naked eye cannot detect the pattern in half asecond,

Then there is no pattern or

8ou ha#e a )irectionless Pattern

&o#e on


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$ll the patterns


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*eward9*isk Criterion

On any opportunity...

Assess the Target

and Initial Stopvalues.

Trade those patterns

with a Reward : RiskRatio of at least 3:1.

entry

stop

target

Reward:Risk = 3:1

Reward

Risk

3

1

Most patterns have clear targets.


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rior !ove Test

"#$ is %ore a%&iguous.

A

#

At "A$ we 'an use (.

H

:nly Trade Patterns with a clear mo#e1reference2 ahead of the signal.


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*eliance Infra ;E:) chart ; $nother e-ample


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$scending Triangle

/upport line isincreasing

which indicatesit would breakon the upside

*esistanceline is a

straight line

In an $scendingtriangle pattern the

breakout is normally

on the upside. In adescending triangle

it is the opposite

&C):+E


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/ymmetric Triangle

The *esistance lineis going down

and support lineis going up andthey are e#enly

poised. Better toa#oid tradingand play the

breakout

/BIN


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*ectangle

$fter a Bull run orBear run normally arectangle is formedwhich shows theconsolidation or

profit bookinghappening becausethe ne-t direction is

not yet decided.)uring the

*ectangle days,/ell near the

*esistance line andBuy near the

/upport line

NI3T8

/upport line

*esistance line


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3


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+E)4E

3or$ggressi#e

Traders

+edge is the opposite ofthe Triangle. But

normally the +edge isfor aggressi#e

Traders. Normally atthe support line 4:

:*T.IN38


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ri'e )ap Stru'ture#reakaway* !easured + ,-haustion

LongEntry

ShortEntry

LongEntry

MeasuredGap

ExhaustionGap

BreakawayGap

"Breakaway Gaps%ark the

&eginningsof %oves*

MeasuredGaps

%ark the'enters of

%oves*

and

,-haustion)aps

o''ur atthe ends

of %oves.$


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4$P/

/BIN )aily


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4$P/

&easuring4ap

Breakaway4ap

The break away4$P confirms

the trend and thebreakout. Themeasuring 4ap

normallyseparates thetrend into two

hal#es. /o after ameasuring gap,

you can e-pectanother ?7@ runand plan to closeyour positions

accordingly

NI3T8


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:ther patterns

*C:&

)iamond

>ead and /houlders


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/ummary

Chart patterns e-ist when the trend is in transition.

Basically, the ar&et is resting. :ur Aob is to

determine if it is resting in preparation for the ne-tleg or in preparation to turn around 1*e#ersal2.

The shape of the pause gi#es us clues but we must

wait for the market to make the final decision bymo#ing out decisi#ely from the pattern.


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/ummary

:ther than gaps, most patterns are #ariations of the others

Triangle ; $scending ; &ostly bullishTriangle ; )escending ; &ostly bearishTriangle ; /ymmetric ; )epends 5

*ectangle ; 4ood for *ange trading ; /ame as *esistance and /upport ;/ell near *esistance. Buy near /upport

3


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3IN$


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*eferences

Basic Patterns E#eryone should know ; &ichaelhan

The D Chart Patterns ; Confirming Entries and E-its

; Nir#ana /ystems

Trading Chart Pattern.pptx

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