Learn Trading with Practical Technical Analysis of Financial Assets

1. Welcome to the Course: Hello, I'm SeselZing. I'm the founder of trade central.in, and I share technical analysis on my blog, elliotwavestrading.com. I have been trading stocks in cryptocurrencies for last five years. It took me a long time before I got to a stage where I stopped losing money. And then some more time afterwards to start making money consistently. Through this course, I want to share the knowledge that I've acquired over the years to help you become a great trader. I will also cover the common mistakes people make while trading so you don't repeat the same mistakes. I'm thrilled to welcome you to this comprehensive course on technical analysis. Whether you are a seasoned trader or just starting out, the insights you will gain here are designed to enhance your trading skills and financial acumen. Technical analysis is a powerful tool used by traders and investors worldwide to evaluate securities by analyzing statistics gathered from trading activity such as price movement and volume. Unlike fundamental analysis, which looks at company data, financial records, and economic indicators, technical analysis focuses on the study of price charts and trading patterns to predict future price movements based on historical data, and that's exactly what we will be diving into. We will start with the basics, understanding the core principles and the why behind technical analysis. From there, we will explore the various forms of technical analysis. We are talking about deciphering price action, identifying key chart patterns, employing technical indicators, and even delving into the intriguing real of wave analysis. But it's not just about the charts, we will also delve into the psychology of trading, uncovering the mindset of successful traders and learning how emotions can impact your trading decisions. Risk management will also be a cornerstone of our journey. I will guide you through setting up protective measures to preserve your capital and mastering the art of risk and reward. And what's your course on trading without strategies? We will cover both intraday and swing trading strategies, giving you a tool kit to tackle the markets. No matter your preferred trading style. This course is meticulously crafted into bite size videos, each averaging around five to 7 minutes, perfect for learning at your own pace and schedule. Plus, you will get access to case studies, live trading examples, and a treasure trove of resources to further your trading journey. Together, we will build not just your knowledge, but also your confidence to face the markets head on. Let's get started and chart the course to your trading success. 2. Log Vs Arithmetic Scales: Hello. I hope you have gone through the previous section and have created a free TadingVew account. If not, you can pause this video and create it now. Also if you want to use some other charting software of your liking, you can also do that. In this session, we are going to change when setting in the charts, which we are going to use throughout this course. The setting I'm talking about is log and arithmetic scales. Once you log into your tdingVe account, you will come to this screen, go to products and super charts, and you will have this chart open. Um, so now if you click on the bottom right, there's a gear icon. You click on that, it shows few settings. So out of which there is these two settings, regular and logarithmic. Regular is the arithmetic setting I'm talking about, and then we have the log setting here. So what do these settings mean? When we say regular setting or arithmetic setting, it essentially means we are talking in absolute numbers. So for example, if I'm saying about this move from this bottom to this top, let's say, this is around 165 and this is around 190. I would say this is a $25 move. But when I do the same in log scale, I would say in terms of percentage, not in absolute numbers. That is the essential difference, but how does it change the charts? Let me try to show you. Right now, you have regular selected, which is arithmetic. I change it to log and you can see that there was a minor shift to the values here. Let me try it again. Yeah, you can see that. I think Apple is a high value or high price stock, so we can probably go to something which is not as high. This particular stock is $1.5. Now if I change from regular to log, you can see there's a significant change on the vertical axis. Why does this happen? Why does it matter? So let's go to the drawing board. Now we have chart is represented in something like this. We have the time axis here and then we have the price excess here. Let me give some What happens bottom my writing, it's not very good. Now when we are talking about arithmetic scale, let's say the stock move 10-20. Then at some point of time later, the stock moved 20-30. When you are looking at a chart in arithmetic scale, the size of this move, these two moves will be same because you are talking in absolute numbers. This is a ten point move and this is also ten point move. But when you are talking about logarithmic charts, what happens is let me do the same thing here. Now, let's say the stock move 10-20. Now since log scale uses percentage, we would say this stock was ten points or $10 and move to $20, so it is 100% move, isn't it? Now, if the same stock moves similar to 20 to 30, this bar or this move will be bit smaller compared to this one, original one. Why? Because 10-20, it was 100% move, but 20-30, it is just a 50% move. Because the price was 20 and it moved to 30, which is just ten points for a 20 point or a $20 stock. That's a difference. That's why you see when we change from regular to log or vice versa, you see there's a shift in the vertical axis and the shift is due to this fact. Why is it important? It is important because when we are talking about trading, investing or comparing stocks, we prefer to do it in terms of percentage. You cannot compare a high stock, high value stock like Apple with a low value stock like Sundial that we saw in terms of absolute numbers, right? Also when you are talking about moves in any kind of security, right, it's easier to explain them in terms of percentage rather than absolute numbers. Also in my experience, I have noticed that when you are using log scale, and when you are drawing trend lines or identifying price patterns, it's easier to do it or those price patterns align better with log scale compared to arithmetic scale. For that reason, we are going to stick with log scale during this course, and I also suggest you to use log scale unless you have a very good reason to use arithmetic scale. That's all for this session. Thank you. 3. Evaluation Methods: Hello. Here we are with a big question. What are the different methods available using which we can evaluate a security? We obviously have technical analysis, which we are going to study in more detail in this course. Then we have fundamental analysis, which also we are going to briefly cover in one of the sessions. Then there are some other methods which we are going to take a look at it in this session. So these methods include quantitative analysis. Quantitative analysis is essentially a form of technical analysis where we apply mathematical and statistical models to understand prices for security and try to predict its future price movement. Then we have sentiment analysis where we try to understand a market sentiment or a stock or a security sentiment by trying to analyze the buzz in news, social media, industry or the company grape wine. Then we have thematic investing. Thematic investing is essentially we try to identify the emerging or new trends which are very promising as an example, renewable energy, electric cars, artificial intelligence. We have events, news driven strategies where we try to capture the price movements caused by specific news events like earnings, regulatory changes, political events, merger and acquistion, et cetera. We have value investing. Value investing is essentially a type of fundamental analysis strategy where We try to identify securities which are currently trading below their intrinsic value. So we try to identify such stocks and invest in them. In fact, um, Warren Buffet uses the same strategy to identify stocks for investment. Then we have contrarian investing. In contrarian investing, people try to identify um, securities against the prevailing trend. For example, if something is going very bullish, then they become bearish on it. Then if something is going the other way around bearish, then they become bullish on it. It's basically the take a stand against the prevailing trend and um do trading or investing accordingly. There are some other methods as well, but these are the important ones and other methods like investing momentum investing and those are, again parts of technical analysis we are going to cover in this course. Thank you. 4. Fundamental Analysis: Hello. In this section, we are going to briefly talk about fundamental analysis. How does typically apply to stocks, cryptos, and FOX. Talking about stocks, we typically look at financial records of a company when we are doing fundamental analysis of a company. So for financial records, we are talking about balance sheet, cash flow, income statements. We look at the company management, how solid is the team, and what are the team involved in any fraudulent activities in the past. We look at the industry health. How are the industry prospects? How are the current economic conditions for the industry to grow or not grow? We also look at the economic indicators, which are inflation, interest rates, other macroeconomic, um, uh, factors, which might impact the company or the sector as a whole. We also look at the valuation metrics like price to earning ratio, price to book, price to earnings to growth ratios to understand where the company stands in terms of valuation. Is it overvalued? Is it undervalued, compared to its peer, compared to the sector as a whole and try to understand whether there is a scope for growth or not? We also look at other things like whether the company has any debt? Do they have any significant debt and this could be really a bad news if the interest rates are rising. So we have to consider these things. And then there might be many other factors which could be macroeconomic, social, governance, competition related, even supply chain related depending on the sector the company operates in. Talking about cryptocurrencies, we need to look at certain things like whether there is a utility for a particular crypto that we are trying to analyze, whether there is a v use case. What is a team which is behind this particular cryptocurrency? Do they have any positive experience in past or this is their first rodeo. We need to understand all these things before we can decide to trade or invest in a cryptocurrency from a fundamental perspective. We also need to look at the toconomics. Toconomics in talking in terms of cryptocurrency sense is essentially understanding the total supply of the cryptogarncy, how tokens new tokons are issued or minted, stained and how these factors affect the growth and scarcity of the cryptoburncy. We also need to look at the market adoption of the cryptocurrency, whether there is any positive user growth, whether there is any adoption in terms of its utility, and then we have to look at the regulations, whether the cryptocurrency complies with the existing regulations and laws, and whether any changes in the regulation would impact positively or negatively, uh, the underlying cryptocurrency. There could be other factors as well like security, competitive landscape, et cetera. Coming to ForEx, we need to look at economic indicators like GDP, interest rate, inflation, unemployment, industrial production data for both the countries in a given currency pair, let's say we are talking about USD JPY, then we need to look at this data for both the countries, and we have to keep an eye on the central bank policies for any change in quantitative easing, interest rates. Then we also need to look out for any geopolitical events like wars or unrest civil unrest or any such thing happening Similarly, we have to also understand the economic stability in the currenti in these countries with respect to each other. Then interest rates, as we already covered, interest rate differentials in both these countries. There are other such factors, mostly macroeconomic, whether before we can evaluate and make opinion about whether it's favorable to buy, let's say, USD JPY or sell it. I hope with this you get some understanding of how typically fundamental analysis is done. The fundamental analysis is not really the topic, which is related to this course, but we thought it's still useful. So you have some basic understanding of it before we get into technical analysis. Thank you. 5. What is Technical Analysis: Hello. In this section, we are going to learn some thritical aspects of technical analysis. What is technical analysis? How does it work and why does it work? We'll start with what exactly is technical analysis? The technical analysis is a study of historical price and volume data of securities to predict future price moments. It's a simple definition, isn't it? We basically look at what the price is doing, what the volume is going in a given security, and using that information, we try to predict what might happen next. Unlike fundamental analysis, where we need to look at so much of information, companies are securities, financial records, economic conditions, geopolitical situation, political situation, and so many other factors. In technical analysis, we just need to look at price and volume, and that helps us understand what might happen next. But how does it happen? There are three principles of technical analysis which try to explain how and why technical analysis works. The first principle is price discounts everything. What does this mean? When we say price discounts everything, it essentially means that at any given point of time, the price of a security reflects all the available information about it. Any factor that could affect the security price, be it, economic, political, geopolitical, historical, or any other factors. Whatever factors are there affecting your price, the current price of a security already factors in all that available information and reflects it. But at any given point of time, the price has everything, all the information there is to know about it. This is also known as efficient market hypothesis. So how does it help? When that you know, the price already has factored in all the available information. You don't need to look at any other data. You don't have to go and look at company's financial record, economic conditions or macroeconomic conditions or anything else. You just look at the price action and that should be enough to help us understand what it might do next. The next principle is price moves in trends. When we say price moves in trends, it essentially mean that market prices are not random. They move in some predictable trends and the trend could be an upward trend where price might keep moving in upside and there could be a downtrend, where the price could keep going down, and there could be sideways patterns as well. Sideways trend as well, essentially, where the price moves in, something like a range where price go and the upper range come back to the lower range and then keeps on going like that. If we can figure out or if we can identify these trends, it becomes predictable to identify it helps us make an educated guess about what the price might do next. So that's the second principle, and then we have another principle which says history tends to repeat itself. When we say history tends to repeat itself, it essentially mean that the market action or the price action repeats certain patterns, and that happens because the price at any given point of time or in any given time frame reflects the psychology and behavior of the market participants. When I say market participants, market participants are banks, funds, all kinds of funds, and retailers, retail traders like us. So what we are thinking at any given point of time and what kind of action we take depending on what we interpret from a given condition. Um, the market charts create certain patterns which are repeatable because essentially market prices are reflection of human emotions. Spray or it could be fear, it could be greed, it could be hope. These are the core emotions which don't change over a period of time. As humans, we tend to repeat same things and over a period of time. We keep on doing the same thing given similar situation, and that's what market price reflects and that's how those repeatable and predictable patterns are created. Using these patterns, we can make an educated guess again that after the pattern is found, what might happen next. Now that we know what is technical analysis and how does it work? We need to learn how to apply or use technical analysis practically. For that, we are going to take a look at some technical Manass techniques. The first technique is chart types. There are a lot of different charts available for technical analysis. The most popular are candlestick, Hakanashi. There is Ranco Kag and few other type of charts as well. We are going to study candlestick and Hakanahi as part of this course. Then we have to understand different kind of chart patterns. You might have heard about head and shoulders, double double bottom, ascending triangle, descending triangle, wedges, flags, and so on. We are going to take a look at all these patterns, how they are formed, and how to understand what the prize might do next once these patterns are formed. We are going to study in detail with practical examples in this cut. And then finally, we have indicators. Indicators are nothing but derivatives of volume data. So we apply some mathematical rules, mathematical formulas on the raw price and volume data and come up with some refined statics, statistics, and metrics, which might help us understand what the price is doing and what it might be next. Some common example of these indicators are RSI, NCD, moving averages, stochastic, and many others. We are going to take a look at some of these the most important ones. I hope after this session, you have some critical understanding of technical analysis, and now that we have covered most of the critical aspects, we are going to dive into the practical stuff, which is much more exciting. See you in the next session. 6. Concept of Trends: Hello. In this session, we are going to talk about trends. You may have heard trend is your friend and trend has a lot of significance when it comes to technical analysis. Staying with trends usually rewards you. What exactly is a trend and how do we identify them? Trend in a stock market or any other security market, it a cryptocurrency, fx, commodities, refers to the general direction in which the price of a stock is moving. The direction could be upward, downward or sideways. How do we define upward, downward or a sideway direction? So here we can see the price is in an uptrend. Now, the price usually does not move in a straight line, which makes it a bit difficult to identify the trends correctly. But price moves in something called waves or swings. You can see this is one swing. Price moved up, made a high, moved down, made a low, then again, moved up, made another high, move down, made another low. So the first thing that we need to do is to identify these highs and lows correctly. So we mark or name the highs swing highs and lows swing lows, right? Once we have identified swing highs and swing low in a prize movement, we need to look for certain things. Here we can observe that this high is lower than this new high or this newer high is higher than the previous high. And also, this new swing low is higher than the previous swing low. When the current highs and lows or current swing highs and swing lows are higher than both of them, previous highs and lows, we say the price is an uptrend. So this is also known as making higher highs and higher lows. When we say higher highs, so this high, this one is a higher high than this one, this low is a higher low than this low. We are making higher highs and higher lows. Once we are making higher highs and higher lows, we are essentially in an uptrend. Similarly, when we talk about downward trend, the first thing we have to do is to identify swing highs, swing lows. Here is another swing load, another swing high. Once we have done that, we need to see what kind of pattern they are making. In this case, you can see that the price has made a lower high, lower swing high compared to the previous high. Similarly, the swing low, the current swing low or the new swing low is also lower compared to the previous swing. When both high and low. Swing high and swing low are lower than the previous previous swing high and previous swing low. We say the price is moving in a downtrend. In this case, we say that the price is making lower highs and lower lows, LH LL, lower high, lower lows, and that essentially reflects a downward trend. So with that, we come to the last kind of trend, which is sideways trend. In sideway trends, it's difficult to identify what's going on, there is no clear up trend. I have created a very clean sideway trend, but in actual real world scenario, you may not find these kind of clean setup for sideways. But one thing happens is that price typically moves within a range. We have swing hygien swing lows here as well. But Price makes a high, comes to a low, and then reverses from it, goes up, goes in the same region of the previous high and comes back and then keeps on moving like this. Sometimes these moves could even be like this. They may not be exactly like this. It may not go to a down, it may go here slightly up then down. But essentially the price will stay in some range. It will not make consistent higher highs and higher lows or lower highs and lows. When this happens, we say that the price is moving in a sideways trend. Now that we have seen different trends, we also need to understand very important concept, which is change in the trends. How do we identify a trend is changing? Now in this case, you can see the price has been making lower highs and lower lows. This lobe and this low, the new low is lower than the previous low and then this new low is also lower than the previous low. Same for the highs. All the highs are lower. We can say that the price has been moving into a downward trend at this point of time. Here, the price made a swing high. But it did not make another low. If it continued like this, then we would have said that the price is still making lower highs and lower lows, but that did not happen. I made a higher low. From this, this is a higher low. This is a lower high, but this is a higher low. Now something is happening after making this higher low, it made a higher high. Then it made a high or low again. Now this is how we can say that now the formation is broken, the downward formation is broken, and a new trend has started, which is an uptrend in this case. But one important thing to understand here is when trends change, it does not mean a reversal. When I say in this particular case, we saw that there was a downward trend which turned into an upward trend. But it's not necessary that again, it will always reverse. It could also may have been something like. So at the time of changing, it could have basically may have stayed somewhere like this in some kind of range. So it could have changed from downward to sideways as well. It's not necessary that from downtrend, we will get uptrend or from uptrend, we get downtrend. There would be intermittent sideway trends as well. So it could be any kind of trend change. That's all for this session. In the next session, we are going to see some real examples using real charts for upward, downward and sideways and also we'll try to see trend changing conditions. 7. Identifying Trends - Examples: Hello. In this session, we are going to look at some real charts and we'll try to apply the knowledge for identifying trends using things that we learned in the previous session. So here I have the Bitcoin chart open. So Bitcoin is currently trading at $37,525. And first thing we are going to do is we'll try to identify the swing highs and swing loves. Let me select highlighter. Now, here at the bottom, I can see this is a swing love. Then this could be another swing low. This could be another swing low this as well, this as well. You could even consider this if you want to. But in the bigger picture, I think it makes sense. I think it is still making a swing high. Is it. Let me try to mark the swing highs now. We'll color them differently. We'll make them red. This is a swing high. This is a swing high. Now, if we see it is consistently making higher highs and higher lows. Here, you might feel like this is not a higher high, but it actually is. If we try to zoom in, we can see that this low is at a higher position than this low. Bitcoin has been making higher highs and higher lows, right? But if I'm looking at, let's say, this particular section in isolation, then it might feel like the bitcoin is in a downtrend, right? Because I'm not looking at the bigger picture. But now when I looking the whole thing, I can see that the bitcoin is in up similarly, just before this uptrend started, Bitcoin was in downtrend. We can try to again identify the lows here. This is a low low, this is another low. This is another low. Then we will try to highlight the swing highs Here we can see it was consistently making during this time frame during this duration, it was making lower lows consistently and lower highs. We could say that the bitcoin was in downtrend during this and we could figure out where exactly the trend change using the principles we learned. Here we can see till this point of time it has been making lower highs and lower lows. But at this point, you can see it stopped making lower low than it made a higher high. And after making this higher high, it made sorry, after making this higher low, it made a higher high, and then it continued like that. So at this point of time, when it stopped making lower lows, we knew that the trend might change from here. It could either be uptrend or it could be sideways, right? Similarly, we can try the same thing in any kind of security. Let me open GB V USD for X. Now that we have seen this pattern in one of the chart in Bitcoin, you should be able to figure out, you should be able to see clearly that this currency pair has also been making lower lows and lower highs consistently. We can see that this is a downtrend. There are phases in between where it did not make a lower low directly, where it stuck in small range and then it continued making a lower low and then because it did not break the previous high. At this point of time, even though it did not make a lower low but after in the next sing it made a lower high and then it continued with a downtrend. Similarly, here I think it's a bit interesting phase slightly from this bottom, I think we can still see some higher highs and higher lows being made. But in this particular range, we can see this is a sideway. There were no higher highs or lower lows being made. The zone was more or less same and the price was stuck here for some time before it started moving up. Yeah. This is how we apply the trend identifying information, and this is just one of the method we use for identifying trends. There are other methods as well, which we are going to study in the next session. 8. Trendlines: Hello. In this session, we are going to learn about trend lines. Trend lines are one of the most important aspect of technical analysis. B just the trend lines or even if you are trying to draw any chart patterns, you would need to learn how to draw trend lines. Let's get into it. In first place, why do we need trend lines? We use trend lines to identify trend, we use them to identify trend changes. We can even use them to determine trend entries and exits. We're going to look at all these things in charge. And how do you draw a trend line? For drawing a trend line, just like any other line, we need two points. In this case for drawing a trend line, we need two major swing points. If you remember in our last session, we learned about swing highs and swing loose. These swing points would be either swing highs or swing lows. We use swing swing highs when we are drawing a downward trend line. We use swing lows if you are drawing up trend line. How do we do it? We are going to see in a minute. We also need to adjust our trend lines after we draw them depending on whether those trend lines still are valid ones or there is any diversion. Here I have Microsoft chart open. So as we saw, we first need to figure out swing highs minimum of two swing highs or sewing lows to draw trend line. So here if we just look at this section because here you can see some kind of trend. You can even pick this one, but this would be probably easier to explain because this is a shorter one. So we first need to see, this is a swing high. This is another swing high, this, this as well. Then we have swing lows here. We have a swing low here, we have another sing low here. Using these swing highs and lows, we will choose a drawing tool, ten line tool in trailing view and then we will join two of the swing highs. This is a down trend, so we will be using swing highs and then we can try to extend it and we can see this 123.3, this is a fourth point. Ida is to make trend line touch as many points as possible and as cleanly as possible. There is something which we can do. We can go to chart type here and we can choose line chart. Then we can try to align the tips of all the major swing highs in this case. We could do this. When we initially draw it, it will be something like this. But then we saw that this move went above it, but it again came back. Even if you go by higher highs and higher lows or lower highs and lower low theory, you can see that it's still making lower highs and lower lows. We will adjust a trend line so that it touches this one. This is what I meant when I said we need to keep adjusting our trend lines. Now we have made the trend line look like this and now we can go back to candles. So here you can see we have one, two, three touchpoints and once the price broke above this, trend changed and trend turned from downward to upward movement. It doesn't necessarily have to be down to up. It could also have been sideways movement from here. Using trend lines, we can identify the trends and trend changes like this. As long as the price remains below this trend line, we say this isn't downtrend, when the price brokes out above the trend line decisively, we say probably the trend is going to change now. Now that the trend has changed, we can start drawing up trend line. Here we can see this is a swing lo. This is another lo. This is another one. This also probably then these two hair. Then we have a swing high this or maybe this, this. Now we know that we have some swing highs in swing lows here, so we'll try to connect them using a trend line. Initially, we will draw this trend line from these points. Because these are two major swing lows here. But if you extend it, we can see that the next set of swing highn swing lows diverged quite a bit from this trend line. We can redraw this strand line from this point. Do something like this. To make it look better, we will go to line chart more and adjust these points can join this. Now, go back to candle. We can see this. Now we have one touchpoint, another touchpoint, and the price kept moving up. This time I will open a it Indian 50 50 index. So here, another thing I think which I did not mention previously is when you are planning to draw trend lines, you have to zoom in the chart sufficiently Zoom out the chart sufficiently so that you look at the bigger picture. For example, if I have the chart, this much zoomed in. I may just see that this is an uptrend. But if I just zoom out and look at this whole thing, then I may get a player picture that what was happening? Is in the larger picture? Are we still in an uptrend or downtrend? Right. So now let's try to draw trend lines in this one. Here again, we can see that we have a swing low here, we have another one here, possibly this two, and then similarly, we have swing high here, swing high here. Essentially, if you see we are making higher rise and higher low, so we know that we are in uptrend. We will draw this trend line. Now we can see that we are in the up trend, right? So we mentioned that we can use trend lines to identify trends, trend changes, and also for entries and exits. So now if the price comes again here a third time, then we know this might be a good idea to go long or buy here if the price does not break the trend line. So that's how we can identify entries. And if the trend line breaks, the price breaks the trend line, we know that, if we are in a trade, then this is probably a good idea to exit here. A? Let me also try to show you something very interesting. So here you can see there was a very big move down, right? The market crashed here. So this is March 2022, this is due to COVID, right? So now using trend lines, we could have figured this out easily. I mean, if you take these two loads, you could have drawn a trend line like this. And we know that this trend line broke here. Right? If you are in a trade, after this red candle formed, we knew that something is happening. If you were in trade, we could have exited here and if you exited at this point of time, it would have saved you from this much downside movement. The same thing can be done and identified in all markets, be it bitcoin or let me open SNP 500. When SMP 500, I think this is the zone where the COVID happened. If you draw a trend line from this slope. A. You can use line to draw it correctly. Now we align this point and this point, go back to candles. Now we can see this trend line broke here. When this trend line broke, again, if you are in a trade, we could have exited this trait and it would have saved us from this much down low. To summarize, we can use trend lines to identify trends to identify trend changes and even identify did entries and exits. To draw upward sloping trend line, we need to connect, major swing loads for drawing downward trending downward sloping trend line, we have to connect swing highs and we have to keep adjusting trend lines as and when needed. You may find initially that it's very subjective and there are no clear rules. But as you will keep practicing drawing trend lines, you will get a hang up. That's all for this session. Don't worry if you are still not comfortable with the idea of drawing trend lines correctly, we will keep drawing a lot of trend lines during this course, and I assure you you will get a hang of it by end of the course. 9. Understanding Timeframes: Hello. In this session, we are going to talk about time frames. What are time frames? If you open trading view and open any chart, you would notice some time durations mentioned here, five minute, 15 minutes, 30 minute, 1 hour, day, week. If you will open this drop down, you can see, there are a lot many options. Second section, then minute section, you have different values for hours. These are essentially time frames. Now when you think about it, Time frames are essentially different lenses through which we try to look at the markets because each time frame provides us a different perspective. Coming back to the same question, what exactly is the time frame? I have the five minute chart open here. When I say five minute chart, it essentially means it takes 5 minutes for one candle or this 1 bar to form completely. Each bar or each candle on this chart represents the five minute duration. So if I'm seeing, let's say, these one, two, three, four, five, six, seven, eight, nine, ten, then essentially means I'm looking at 50 minutes of data, then into five. Now if I explain this, I will go to 1 second chart. Now here you can see every 1 second, there is a candle being formed. Right? So this is essentially a time frame. Now, understanding the significance of time frame is very important. And before we do that, let's jump on to understanding something called trading styles. In financial markets, we have different kind of traders and all traders have their own trading styles. We are going to just take a look at trading styles because that has a very deep relationship with time frames. So one of these trading style is known as scalping. Scalping is considered the most dangerous form of trading because these kind of trade last hardly from few seconds to few minutes. People are trying to capture very short term moves when they are trying to scalp the market. Then the next form of trading style is intraday, which is much more common where people are trying to enter into a trade and which lasts for typically minutes to some hours sometimes. But these trades are typically opened and closed on the same day. The third form of trading style is swing trading. Swing trading, people enter into trades with an intention to stay in the trade for days to weeks. If you remember we studied about swing size and swing lows. Swing trading has got its name from those swings where in the swing trading, people are trying to capture one full swing. Depending on which direction a trend is. That's where the swing trading got its name. And these traits typically last, as I said, for sometimes just a couple of days and it could actually last for one, two, or three, four weeks, depending on how strong or weak the trend is. And, um, another form of popular trading style is positional trading, which is a much longer term trading style in which people are trying to capture the larger or long term trends, which could last from weeks to months and sometimes even years. So these trades might last from this much time frame, right? So each trader have their own style, and many other trader typically do one of these kind of training and some experienced traders might even do multiple kind of they might even do intra day and they might also be involved in swing in position. Now that you have some idea about the trading styles, we can see how these trading styles are connected with time frames. So now we saw that there are four forms of popular treading styles. When you're scalping, majority of the people use 1 minute or three minute time frames because they are trying to capture very short term moves, right? So they need to kind of enter and identify the moves very quickly and enter into a very short period of time, they don't need to look at very large or longer time period because their intention is to capture smaller moves. For intraday, the commonly used time frames or the popular time frames are typically 5 minutes and 15 minutes. For swing trading, people use 1 hour, four hour, and sometimes even the time frame. For positional trading, people use one day, one week, one month, kind of time frame. They can even use quarterly time frame, three month timeframe. So it's not necessary that these are the only time frame. People can change it. People can tweet them as for their own convenience, but these are some of the popular time frame people typically use. And it's not just one time frame people use. They use a combination of time frames, right? Which leads us to another topic called multiple time frame analysis, which we are going to study in the next session. 10. Multi timeframe Analysis: Hello. In this section, we are going to discuss a very important technique used in trading, which is called multi time frame analysis. When you think about trading and after going through the different time frames that we saw in the previous section, you may feel that it's probably a good idea to pick a time frame as per your trading style like 5 minutes, 1 hour or a daily time frame and stick with it. But that will be a bad idea. Remember what I said in the time frame section, time frames are different lenses through which we try to look at a market and each lens or each time frame provides us a different perspective. Let me go to a chart to make it more clear. Now I have this five minute chart open. When I look at this chart, it may look like it's making higher highs and higher lows and I can even draw trend line from this low to this point. I might be tempted to buy this particular security here. But if I look at a higher time frame, let's say, I go to 30 minutes, then I see it is actually making lower lows in a bigger time frame, and I could even draw trend line from these swing highs. Now if you see the price seemed to be going down after touching this trend line. Now if I go back to five minute, I might be tempted to sell it. It might look like a very good idea because there has been one touchpoint, two touchpoint, and this is a third touchpoint, and I see a big red bar here, right? So now, see how the perspective completely changed. If I'm just looking at five minute, I have a different perspective. But if I'm looking at the bigger picture, it gives me more clarity on what is actually happening. This is essentially the importance or significance of time frames. So how do we use them practically? Eight. When we are trading, we typically use two time frames at least. One is called the entry time frame. Entry time frame is essentially the primary timeframe in which you trade. For example, if I'm intraday trader, I might want to use 5 minutes or 15 minutes as my entry time frame because I'll be using that time frame for all the entries and exits, right? Then I will be using another time frame which would be of a higher duration, typically, just to get a big picture of what's going on. Because I don't want to be caught up in the wrong side of the trend. I have to figure out what is a larger trend. Then in my entry time frame, I would want to stick with that longer term trend rather than going against it. Okay. But now that poses a question. Okay, so I now know that I need to use two time frame, one short and one long. But how do I decide what would be the bigger time frame? If I have, let's say, five minute as my entry time frame, what should be the reference time frame? Should it be 1 hour? Should it be one day or one week or maybe one month, right? So on this, there is a very popular technician, Alexander Elder, who did a lot of study on this and he came up with a concept of four to six factor for the larger time frame. As per his analysis, he came to the conclusion that the reference time frame should be a factor of four to six of the entry time frame. Basically, reference time frame should be four to six times higher than your entry time frame. If I use five minute as my entry time frame, then I should be probably using, 25 minutes or 30 minutes as my reference time frame. Similarly, if I'm using 1 hour as my entry time frame, then I should be using four hour, five hour or six hour as my reference time frame. Now this is all theoretical, but practically speaking, there are a lot of popular combinations people typically use. What are these combination? So when it comes to scalping, people use 1 minute as their entry time frame and five minute as the reference time frame. It could again be like 3 minutes and 15 minutes as well. So these are some of the popular combination and not necessarily only ones, right? You may want to tweak them, and there is no such rule that you have to stick with these specific time frame. As per your treading style and as per your comfort, you can always change them and make the different timeframes work for you. Coming to intraday, um, you can use 5 minutes as your entry time frame and 30 minutes as your reference time frame. If you are using a bigger time frame for intraday, 15 minute, you can use 1 hour, which is a factor of four times 15 minutes into four, that is 60 minutes, 1 hour time frame. Similarly, if you are planning to do swing trading, then these are some popular combination 1 hour is your entry time frame and four hour for one day would be your uh reference time frame. This is more applicable in the stock markets because in stock markets, typically, the working hours are typically from 6 hours to 8 hours, right? So the factor of four to six or six to eight is also acceptable. We can make it work. But when it comes to cryptos and four X, those markets are open. 24 hours. The swing trading, a lot of people use four hour as their entitframe and one day, which is 24 hours, which is a factor of 66 into four, 24 hours. In crypto and forex, people tend to use four hour as their entitframe and one day as their recurrence time frame. For positional, people may want to use one day as their entry time frame, entry time frame, and one week as their reference time frame, which is a factor of five, they may also want to use one week as their entry time frame and one month, which is a factor of 4.5 roughly as their reference time frame. Now that you know how to use multiple time frame combinations for multiple time frame analysis, we are getting more and more close to start looking at more practical aspects of trading. See you in the next section. 11. Type of Charts: Hello. In this section, we are going to quickly take a look at all the different kind of charts that are available in training you. So we have candlestick charts, bar charts, HakanoshiRnko, Kagi point and figure range, line area, step line. You might be overwhelmed number of chart types that are available, but we don't need to study all of them. We are only going to focus on candleystic charts, bar charts, and haikanashi because these three are the most commonly used chart types and as you will see, you can obviously look at, explore other charts, but you don't really need to if you are really comfortable using candlestick bar and hi kanahi charts. Let me quickly also show you on tiding you how do these charts look like? Right now, you can see this is a candlestick chart. Candles hart. This is how a bar chart looks like. I will change it to HakanasheT is how Hikanashi looks like. It is similar to candles with some minor differences that we are going to discuss in more detail in the forthcoming sessions. Feel free to explore other kind of charts on reading you. And do let me know in the Q&A section in case you have any questions about those. But for this course, we are going to stick primarily with bars, candles and Hakanash. See you in the next session. 12. Candlestick Chart: Welcome back. In this section, we are going to learn about candlestick charts, and to make sense of candlestick charts, we first need to understand the anatomy of a candle, how a candle is formed, and what information a candle conveys to us. So now you can see we have two candles here, one green, another one red. These are typical candles that form, but they may not look exactly like this. These candles are created to make sure you understand all the different components of the candle correctly. And once you do that, even if the candle formation is different, you will be able to make sense of that candle. Let's begin with the candle on the left, which is a green candle. If you remember, during the time frames we discussed that each candle represent the duration of the selected time frame. If this candle, we are seeing in a five minute time frame, this means this candle was formed over a period of 5 minutes. So now you see the highest point of this candle. That is a high highest price which was touched during this five minute duration. It could be like one day duration, one day or it could be one week or it could be anything, but just for the sake of understanding this part, let's use 5 minutes, right? So assuming this is a five minute candle, this was the highest price that was touched during that 5 minutes. Same for the lowest during this fit this was the lowest price that was touched by this security. Here is an interesting part. Depending on whether we are looking at a green candle or a red candle, we have to identify open and lose accordingly. If you are looking at a green candle, that means the open of the candle was lower than the close. The close was higher. Basically, price close at a higher value, then it becomes a green candle. What exactly is open? When this candle started forming after the previous candle was completed, this is where the price was. This is at the open essentially. Then price closed when this five minute elapsed and the next candle was about to form, this was where the price was at the close. Moving on to the red candle. Highs and low remain the same. This was the highest point or highest price that was touched in the given duration, let's say five minute and this was the lowest price that was touched during this duration of five minute. As for the open and close, they will be opposite in case of a red candle. In red candle, open is higher than the close. That means when the candle formation was done at that time, price close at a lower value than it opened and that results in a red color candle. And this thick portion of the candle, that is called the body of the candle. These lines that you see on top and bottom part of the candles, these are known as shadow or wick. It's not necessary that each candle will have a shadow. Some candles may just be something like this. Some candles may look like this, where there is no shadow or some candles could also be where we only have a shadow at the bottom and no shadow at the top. Conversely, we can also have candles which look like this. We can have also candles which have uneven kind of shadow, a small shadow at the bottom, or bigger one at the top. We can also have candles which have bigger shadows and very small body. We're going to look at all these candles in detail once we start getting into candlestic chart patterns. We will go to Trading view now and have a look at a candlestick chart to understand the concept that we discussed here. So here you can see, I have a candlestick chart open. I will go to five minute chart, zoom it a bit. Now, I can see that this is a green candle and you can see there is a small wick at the top and a bigger wig at the bottom. This highest point of this candle, this one, this is the high of this candle. Similarly, this point, the lowest point of this candle, this is high, and this is the body of the candle. Since this is a green candle, we can assume that this was open price, and this is a closed price. The closed price was higher. If you look at the red candle, we know that close was lower than the open, right? So this will be the close, and this will be the open. Highs and low remain the same. So essentially, when we are talking about a red candle, it essentially means the price closed lower than where it was. And when we are looking at a green candle, it means price closed higher than where it was when the candle started forming. So now, if you think about it, this five minute candle or any time frame candle tells us a story, right? And that story is a fight between bulls and bears. So if you take this candle as an example, this big green candle, this is where price opened, right? And then wolves kept on pushing the price higher higher. But during this time, sometime during this formation time, at some point, B took control briefly and took the price down to this low level. But bulls again came with more strength and kept taking the price higher and they touched at some point of time this high, finally closing this candle at this closed price. I as you will see, in the coming sessions, it's very important to be able to read the price action using these scandals because they can give us very valuable clues about what's going on in the market, and what price might do next. 13. Bar Chart: Hello. In this section, we are going to briefly cover bar charts, and to understand bar charts, we have to take a look at how bars look like and how do they form. Here we have 2 bars. On the left, we have green candle and on the right, we have the red candle. If you will notice, they have the small outgrowth coming out of the candle in both the candles. This outgrowth or these small handles, they tell us about the open and close of this candle or of this bar in this case. Highs and lows remain the same as we have in the candles. The highest point of this bar is the high and the lowest point of this bar is the lowest price, the open and close are represented by these small handles. Now, here is important difference between candles and bar. In candles, we have no way of identifying what is open or what is a close without knowing the color of the candle. If the candle is a green candle, we know that the clothes will be higher than the open. If it is a red candle, then we will know that the clothes will be lower than the open. But bars, they help you identify this information, open and close information without even knowing the color of the candle. This left side outgrowth. This represents the open of a bar and the right side outgrowth represents the close of the bar. Here we can see the open was lower than the close or close of this candle, close of this bar was higher than the open. That's why it's a green bar. Similarly, if we talk about the red candle, highs and lows remain the same. This is the highest point and this is the lowest point or the lowest price attained by this bar within the given time frame, date, 5 minutes, ten minute or whatever. Then we have the open close. As we said, open is on the left side. In this case, this is the open on the left side and the close in the right side. Here we can see the close was lower than the open, which resulted in a red candle. Right? This is the important difference. Without even knowing the color, we can figure out whether this is a candle, which resulted in a closed price higher than the open, or if this is a candle, which resulted in a closed price lower than the open. And this is not possible in candles. Rest of the things remain the same. The area between open and close, this is the body of the candle and the area above and below, the open and close, in this case, this or this. These are the shadows or wicks, as we have in the candle. Similar to candles, it's not necessary that each bar will have a wick or not or the shadow or not. Some bar could be something like open here, close here. There is no upper. The highest point of this bar is same as. Let me draw it again. Highest part of this bar is same as close. The left side, open, right side, close. Right? Now, we'll switch to thrilling and we'll quickly have a look at some real charts with bars. So here we have this chart. It is currently in candles. I will switch it to bar chart. So now you can see there is one big red bar. On the left side, we have the open, the side, we have the close. So we know that the close was lower than the open. That's why it is a red bar, right? And there is no lower shadow or wick in this case. If you look at this candle, it has a very small upper shadow and a longer a lower shadow. It is a green candle. Why? Because the open is this left side is lower than the close. Close was higher than the open, right? Same for this candle. This candle, if you see, it has no upper shadow. So highest point of this candle or this bar is same as the closes, and there is a very little, very small wick at the bottom. So this is almost the open was very close to the lowest point of this candle. Right? So now, if you see bar chart and candle chart, both of them convey same information to us, bar chart could be preferred by some, and candlesticks are preferred by others. So both of them can be used for trading, and both of them can be used to arrive at the same conclusion, and both of them can help us understand the price action in more or less the same way. So which one is used depends on personal preference, mostly. Which one you like. So I would suggest for this session, we will not for this session for this course, mostly we'll stick with candlesticks, because as you would see, they would help us understand the candlestick patterns in a more clear way because bar charts may take some getting used to, and candlesticks are much more visually clear or even the original, uh, patterns. They have been derived from candlesticks only. Bar chart is something that came up later. So we'll stick with candlesticks first. And once you understand how to read candles and bars and also understand the candlestick patterns, then it's your choice, whichever you want to continue using, you can use that. 14. Heikin Ashi (HA) Chart: Hello. In this section, we are going to take a look at Hakanashi charts. Right now, I have this chart open in candles. Take a couple of seconds to observe this chart and the price action, which is the highs and lows being made and the color of the candles. Now I'm going to switch it to Hai kanashi. Did you see any difference? If you were observing closely, you might have felt that the price action or the price movement was a bit uneven when we were looking at the candles. For example, if you take this stretch from here to here, right? It looks pretty smooth when we are looking it in Hakanashi. If I go back to candles, you can see, there are some green and red, then red, green, then green and, you know, it looks like a bit choppy here. But if I go back to Hakanashi the price action is more smooth, and that's exactly the utility Hikinashi candles bring. So they can help you identify the trends in a more easy way by smoothing out the price action. But how does Hakanashi smooth out the price action? It does so by averaging out the candle prices. Et me switch to the presentation. In Haikenashi, we calculate all the prices for a given candle. Be close, open, high or low using these formulas. We calculate the closed price of a aikenahi candle by summing up open zero. Zero basically means the current candle or the current time frame for which the candle is being formed, the current five minute or current hour or current day. Open of the current period plus high plus low, plus close, divide it by four. That's how the closed price is arrived at similarly, open price is arrived at by summing open and close of the previous candle of the prior period, dividing it by two. So as I was saying, this is essentially kind of averaging out the current and the previous candles values to smooth out the price action. And coming to high it takes the current candles high, the current candles open, and the current candle close, the highest of the maximum or the highest in this case, the maximum of these three, whichever is the maximum will become the high of the Hakanahi candle. For low, it takes the low of the current candle. Kana open of the current candle. Hakanasi open is the calculated Hakanasi open, not the actual candle open. And I can actually close and it picks the lowest or the minimum of these three, two, calculate the low of the candle. Now you don't really have to remember all this. You don't have to worry about these formulas because trading view or any other charting application that you are going to use, that will calculate it for you and show it accordingly. This is only for theoretical purpose so you know how the price action actually looks better or smoother when you are using Hakanahi candles. Now we're going to quickly take a look at different patterns that we observe while viewing Hakanasi charts. Since Hikanashi you will find that there are three major patterns. First one is a trend continuation pattern. When it is green, you will find that there is a upper wick, but there is no bottom wick and the price keeps on moving higher. Similarly, on the opposite side, when the prices are moving down, you will find red candles which have lower wicks, lower shadows, but no higher shadow and price keeps on moving down. Till this kind of candy formations are being made, we know the trend is continuing. Then the second pattern is where you have a week on the top, a week at the bottom, be it red or green, and then we have a sizable body as well. I signifies that the trend is now weakening when weeks are being formed on both side of the candles and there is a sizable body present. And the final kind of pattern is when you have very large wigs on both side of the body and a very small body in between. This signifies that the reversal is near and the price might reverse from this point after this point. Let's switch to treading view and take a look at all these three patterns. So now, first we spoke about the continuation type candles. So when it is a green candle or the green or the uptrend, we see that we said that there is no lower shadows. As you still see, in all these candles, there is no lower shadow till this point and there is a upper shadow. That basically means that trend is healthy and the trend will likely continue. Now, here you can see there's a small wick in this candle. This qualifies as a second type of pattern which says the trend is possibly weakening at this point. And then here we have the third candle, which has a very small body, and then both upper and lower wicks. Now after this form, and then you can see even this candle has a small, very small. I I zoom out this chart a bit, you will be able to see that this candle also have a small wick at the bottom. All these candle formation the significant signifies that the trend is possibly weakening and then we have another trend weakening or weakening tread candle after this, the pattern reversed or the price reversed. Let's take a look at another case where the price reversed from down to up, so we can see here, the price was in downtrend as you can see, these candles are all. They show strong except this one. Here is a minor weight but rest of the candles, they don't have any upper shadow. And only bottom shadow, which signify a healthy downtrend. So till this point, everything was fine. And then we got a candle, which had both upper and lower wicks. So which is a pattern that shows that the trend is possibly weakening. And after that, we saw that green candle form without any lower shadow, right? So it's not necessary that every time you will get a reversal candle and only after that reversal will happen. And these things are not absolute. They will help you figure out the bigger picture, and you may have to consider a lot of other things before you can take decisive action on what you are supposed to do. So now when you take a look at Akanah you might feel that after a candle, I got a green candle, I think I should start selling or I should be shot on this particular security. Or if I get a green candle, then I should probably go along. But you will notice that even kanashi after this averaging out the prices, it doesn't really work even in these cases. You've got some green move and then red here as well. We don't really use Akanashi candles for taking entries and exits and traits. We use them to identify the trend continuation part. During this part, I will stay in my trade if I am long or I have bought the security. When this starts forming, I will be cautious. The red candle starts forming, I'll be cautious about it and will manage my trade accordingly. I don't use or you should also not use Hakanashi to determine the entries and exits because this could again be very choppy even with Hakanashi and that's not really a good idea. Use Hakanashi only to confirm the current trend and stay or add to your positions as we are going to see later on, but not for making entries and exits. Here is another important thing about HakanashiKds. On the right side, if you see it shows two different prices. First is 375.19, which is the Hakanashi calculated price. And then there is another price 374.51, which is the actual price at this point. If you remember, we use some formulas for calculating the current open, high, low close price in Hikanashe. That's the reason it shows two different prices. If I go to any chart, bar, candles or any other chart, it will just show me the actual price of a given security at any given point of time. This is another reason why a lot of people don't use Haikanashi for entries and exit because it doesn't tell you the actual price. It always tells you the calculated price based on those formulas. So this is another important thing which you should be aware of the OHLC prices. OHLC basically means open, high, low and closed prices shown in HR or icon C charts is not same as the actual OHLC prices because they are derived prices or the calculated prices. So once again, use Hakanashi charts only for confirmation of the trend, whether it's uptrend, and it is continuing or not, or whether it's a downtrend, is it continuing or not? Or are you seeing any signs of reversal or weakening of trends? Do not use Hakanashi for taking fresh traits or new traits just based on the colors or the reversals or the trend continuation signals that you see in Hakanashi. 15. Candlestick Patterns: Hello. Now that we have studied about different kind of charts, we are going to come back to candlesticks, and we are going to study some common patterns which are very useful in identifying trends and also reversals using just candlesticks. So for this session, we are going to study some patterns listed here. So these patterns are doge Hammer, hanging man, inverted hammer, shooting star, Bullish engulfing, Barish engulfing, Hami, also known as inside bar, morning star, and evening star. 16. Candlestick Pattern - Doji & Variations: So this is how our typical doji looks like. As you can see, the doji has long wigs and a very small body. For a candlestick to be a doge, there are two conditions that candlestick should match. So the first condition is open and close of the candle should be at almost same price. As you can see, this is a green candle, which means the close of this candle is a bit higher than the open, right? In this case, but open and close, if you see there is not much difference, right? The price difference is very little, so hence the body is very, very small and same thing can happen for a red candle also, but in this case, the open is higher than the close or close is lower than the open. But the color of Dji does not really make much of a difference as long as it looks like this. The second condition is there can be a upper shadow or a lower shadow or both. Now, if you remember, in the candlestick session, I said that each candlestick tells you a story. By studying these patterns, we are trying to understand that story. What does a doji tells you? What story the Dji hides in itself? We're just going to look at it. Let me switch to your drawing board. This is how A Doge looks like. Say it is a green doge, but it doesn't really matter. It could have been a red doge as long as the Doge meets a condition that it has long wicks and it is a small body. Let's assume this is a five minute candle. Based on this formation, can we deduct what actually happened during this 5 minutes? Definitely, we can try to write. This is the open and this is the close because the close is higher than the close as it's a green candle. It might have opened somewhere like this. It might have been a formation like this. If let's say these are 1 minute candle. We are breaking down this five minute candle into a series of 1 minute candle, there would be five candles. We're just trying to understand what happened during this 5 minutes and how this candle got a formation like this or a Doge formation. Maybe the price open here as that is a five minute candle open, and the bulls took the price a little bit higher, right? And then the candle, 1 minute candle closed. And next candle, price will open typically at the close of the previous candle, right? So during that time, bulls try to take the price a little bit higher, maybe to the high of this candle, right? This one, this high. And after that, let's say, the beers took over. And at the close of this candle, beer started pushing the price down. There could be a we also. Basically, the price went higher than but bulls came in and they took the price a bit little bit up. Wha happened later? This is the close, this is where the next candle likely opened and Bears pushed the price to the bottom. Or at the low of this. Maybe there is a week or maybe there is not. Then what happened? The final candle This is the close, this is where the candle will open and the bulls started to taking control and they closed the price somewhere like this. If you will notice, the high of this five minute candle and all this happened between the high and low of this candle, all this price action, initially, the bulls to control took the price higher, and then the beers to control, took the price lower. Then bulls again came in and tried to take the price up. All this happened. But if you will notice the open and the close or this was pretty much at the same place. That essentially means, there were bulls, there were bears and it all resulted in some indecision. It's not necessary that the prize action unfolded like this. It could have happened in a different way also. But the point is during this duration, in this case, 5 minutes, there were points where bulls were in control, then there were points where beers were in control, but at the end of it or end of this duration or a five minute in this case, there was a indecision. Neither wolves nor beers could take the price up or down respectively, right? So this is what a Doge reflects indecision. Typically, after an indecision case, price moves one way or other, right? It could be a reversal or it could be a continuation. Let's look at some charts. So here, can you notice some dogs? I can see one here. This one, right? I can also see here. You see the price was in a downtrend, and then a Doge form. In fact, there are two dogees for back to back. One is red, one is green. As I said, the color doesn't really matter. At this point, we could say there was no decision, clear decision who is in control, bulls or bears and then reversal happens. Price this was the original move, and then after Doge form, this is what happened. And then when the price went up, here you can see there's a doge form here as well. But after this, the continuation happened, the bulls kept on taking the price higher, but soon, another doge form, this one, there is another doge after that two dogies form back to back and then price reversed. Doge basically tells you that it's time to be cautious and pay attention to the price action after a doji has been formed. There can be some variations of Dji as well. So here you can see three prominent Dji variations. So first one is gravestone Dji, which looks like a gravestone, and the other one is a dragonfly Dji, and the third one is a spinning top. So now if you look at the gravestone doji, you can see that during the formation of this particular candle, Buls tried to take the price up and it took the price to this level, the high of the candle. But beers took control and they took the price down where the price actually opened. Now you can see it essentially means that bears are dominating the bulls in this case, because even though bulls took the price to this level, bears eventually took the price down at the same level, price open. And close is always more important than the open. It is said in technical analysis that amateurs open the candle and professionals close the candle. You always have to pay attention to the close value of a candle or a bar or whatever type of chart you're looking at. And we are going to emphasize the same point over and over again that you have to pay more attention to the closes. Now naturally, when a gravestone Dji forms, it has wearsh implications. The opposite is true for dragonfly Doge, where you can see the price open somewhere here, and then during this candle duration, Beers managed to price to take the price down at this low, but wolves came back with more force, and they took the price again, back up where the price opened. So lower wicks or lower shadows means buying pressure, and upper wicks or longer upper shadows means bearish or selling pressure. Third kind of variation is known as spinning top. Spinning top is pretty similar to how traditional or typical doge looks like. Only difference is the body is slightly bigger than what you see in a typical doge. And the implications are same as Doge that spinning top reflects indecision in the market between bulls and bears. So here you can see there's a long way upside. So there is bearish pressure, and there is a long way downside, so there is bullish pressure. But open and low are, like, quite close, not as close as in a typical doge, but still they are kind of, you know, close enough to show that there is indecision. Now, we will look at some charts quickly to see all these variations. Okay. So now I have this chart and here I can see. This is a gravestone doji, right? So there is a very small wick, but these small negligible kind of wicks are permissible, though we should definitely give more weightage when there is no wick at all, absolutely, at the bottom when we are looking at a gravestone doge, but it's still a valid, gravestone or a doge formation. So once this form as we saw that upper wicks means bearish pressure, right? So selling pressure came in after this can candle form and there was some selling happen. Now if you see after this happened, then this candle form, which could qualify as a sparing top, it has upper wick, long upper wick, long, lower wick and a body. This is not really a very good spinning top, but it did work nonetheless. Same thing can happen here as well. Here also you can see another spinning top form, which is after which the price reversed after the formation occured. Let's look for dragonfly as well. Here also, you can see another doge formation. After there was a downtrend, Doge formed, and then price kind of reversed, you can see a lot of small doge formations here. Here is another Doge. Yeah. So here, can you see this dragonfly emoji? No Emoji, sorry, Dragonfly Doge. Okay, so there was this downtrend spinning top form here. Price reversed for a bit. Then another doge form, and the price came back down. And then this dragonfly Doge form, after which price went up. So now it's not that these formation always work, right? There are a lot of other factors to be considered, and the primary factors for these candlestic patterns to work where exactly these formation happen, these Dji formation or any other candistic formation happen. And we are going to look at support resistances incoming sessions, and that's when these patterns would make more sense. 17. Candlestick Pattern - Marubozu: In this session, we will look at another very important candlestick pattern, which is Mubozu Marubozu candles are very easy to spot because they have very long body and they hardly have any wicks even if the wigs are there, they are very little or almost negligible. And for a candle to be a valid Mavozu they need to have a long body first, second, for bullish Mavozu candles or green candles, the open and the lobe should be same. Here you can see this candle open here. And after that, the price kept on rising and there was no selling seen from the point of open. So there is no lower wick at all. That means price open here and consistently keep going up and candle close near the high or at the high. And if you look at this candle, here also open is same as low the candle opened here and price kept on going high. There was a little selling pressure scene due to which the price closed a little below the high, but this is insignificant. When we are looking at green candles or green Mabusu candles, we should pay attention that they should not have any lower wicks. Even if the wick is there, it is hardly visible. Coming to the red Maui candles, they are also same qualities. They are very long candles, easy to spot, and they opened here, this particular candle opened here and you can see after opening, the price kept on going down and there was not even single point where the price could be pushed higher and that's why there is no wick. The price opened here and kept going down directly. Same thing here. So in this case, also the price open here, and then it kept going down. So there was a little buying pressure seen here due to which this wig formed and the price closed at this place a little above the loop, right? So these are Mavosu candles. And when these form, they communicate that, um, the trend is very strong. If it is a green candle, that means there is a lot of buying pressure and the price might go up. If it is a red Mabozo that means there is a lot of selling pressure and the prices might go down. Now we'll quickly look at charts to see these candles in action. Here can you spot Amara vozu. I can see a few this one, here you can see, there is no lower wick, strong long body, and a very little upper wick, which is okay. It should be so small that it's not easily visible. After this form, you can see the prices kept going up. Here you can see another MabozuGreen Mabozu which is a good body and no lower wick very minor little upper wick. Very little selling pressure see prices kept going up. Coming to red M here we can see this is nearly perfect, very little wick shown. If you will notice you can see, there is a very little small wick at the bottom and negligible or dot wick visible at the top. After this form, you can see the price reversed or the prices started going down. So that's how these candles work and you need to spot them, and you can spot them very easily because they are long bodied candle. This is also a long bodied bodied candle, but this is not a maraboso because this is a clear wick which is not something acceptable in a Ma boozoo. So this is not a marabozooT is also a long candle, but again, it has a clear wick which is clearly visible. This is not a Mabozo, right? So you have to look at candles which have almost zero to negligible wick and have uh long bodies. 18. Candlestick Pattern - Hammer & Hanging Man: Hello. In this session, we are going to take a look at hammer and hanging mean candlestick formations. Both of them look exactly the same as you're going to see, but both of them have completely different implications. Right now, we are looking at a hammer formation, and we have two candles which look exactly the same except the color. In hammer, color does not really matter, but green candles are more reliable. For a hammer to be a valid formation, these are the conditions. The first one Price must have been in a downtrend before hammer. Price must have been falling before we encounter a hammer formation. Size of wick should be at least twice the size of the body. This is the size of the body. The size of this wick or the shadow, it has to be at least two times of the body. The longer the wick, the more reliable the hammer formation would be. The third condition is there should not be any upper wick. Here, you should not have any or even if it is there, it should be very negligible, very small minimal wick. Most important thing is that hammers form after a down trend. It's very important. You see a hammer formation in the context of where exactly hammer has form. Now let's move on to hanging man. Here we have hanging man formation, but you might feel that you are looking at exactly the same thing, what you saw in Hammer. Which is true, the formation is exactly the same. The conditions are exactly the same. Only difference being that in hammer, we expect that the prices should have been falling before a hammer formation is encountered. But in case of hanging man, we expect that prices should have been in an uptrend when hammer or a hanging man is encountered and it has bears implications. We are going to look at charts to see how does it work? I have this Bitcoin chart open here. Now, if you see this candle, you could say it's a hammer, it's a hanging man. But the prices have been in an uptrend before this formation was encountered. This becomes a hanging man or a gem. After this hanging man formation was encountered, the prices reversed went down. In the same chart, we can also see another formation. Or you could again say that this could be a hammer or this could be a hanging man. But if you look at it in the context that the prices have been falling before this encountered, it becomes a hammer. After that, you can see that the price is reversed and it downtrend changed to a uptrend. That's the most important thing. You have to look at these formations always in context. If the prices are in a downtrend, when this formation is encountered, then it's a hammer. If the prices are in an uptrend before this formation is encountered, it becomes a hanging mat as simple as that. 19. Candlestick Pattern - Inverted Hammer & Shooting Star: In this session, we are going to look at inverted hammer and shooting star candlestick patterns. Since we have studied hammer and hanging Man, these will be very easy to understand because these are inverted hammer and shooting star shooting star are just opposite of hammer and, um hanging man. Now, as you can see from the shape of this formation, it is just the opposite of the hammer pattern and this could form in any of the candles like red or green. The color of the candle does not really matter. But since it is a bullish pattern, a green candle will be slightly more reliable. For a valid inverted hammer to form, these are the conditions. Prices should have been in a downtrend, just like hammer for inverted hammer also, the price should have been in a downtrend before this formation is encountered. Size of whip should be at least twice of size of body, which is same as in case of hammer and hanging man. The size of the body, this should be at least sorry, the size of the wick should be at least two times of size of body, there should not be any lower wick or a very negligible or very small wick. So once these conditions meet, we can say it's inverted hammer. Just to reiterate, it's very important that we look at inverted hammer and shooting star along with hanging man and hammer in the context of whether we are currently in a downtrend or an uptrend. Hammer and inverted hammer both form after there has been a downtrend. So now move on to shooting star. Shooting star is exactly the same formation as inverted hammer, as you can see, the color of the candle does not matter, but shooting star is a bearish pattern, which is why the red candle will have slightly more reliability compared to the green candle. The only difference between inverted hammer and shooting star is the prices should have been in an uptrend before this formation is encountered. Once this happens, it's likely that prices may go down, but we have to wait for the confirmation and see that prices have started going down. The conditions are same exactly, and the most important part, the shooting start forms an uptrend. Now we are going to quickly look at the charts to some example patterns. Okay. Here in this chart, we can see here we have a shooting star. Again, you could say that it's a shooting star, it's a invited hammer. But since it was encountered after an uptrend, we will say, this is a shooting star, and here you can see another shooting star. There are two shooting stars and after that, you can see the price reversed. Here also you can see another shooting star, but this is not really shooting star because the prices have been in a downtrend. This one will be treated as inverted hammer. The price is reversed briefly but continue to fall down. Now here you can see we encountered the same formation and since the prices have been in a downtrend, this will be an inverted hammer. After that, you can see the price is reversed. Here you will see a interesting thing. After the price has moved up for some time, a hanging man, sorry, this is not a valid hanging man and the reason being the body and the wig sizes do not comply. The wig has to be two times at least of the body. But here you can see we have a hanging man, which is valid because the body is clearly at least twice the size of the wig. After that, the price reversed. It is a hanging man, not a hammer because the prices are in a uptrend. Here again, you can see inverted hammer because the prices are in a downtrend, we came across inverted hammer and the price is reversion moved up. These patterns are very frequent and uh you have to look at them in the context whether we are in a downtrend or an uptrend. But all four of these patterns, shooting star, inverted hammer, hammer, and hanging man. Once you look at some charts, you can easily understand and as I said earlier, you don't have to remember these names. You just need to see the formation. These formation are very easy to identify this and if you will see you can see Dragonfly Doge also here, you will find all kinds of patterns that we have studied so far, Doge dragonfly, gravestone, shooting stars. And once you start putting everything in context, you will see that more often than not, these patterns work beautifully. And when we combine them with support and resistances, which would be the next session after candleistic patterns, you will be able to more accurately, um, decide whether the trend will continue or there are good chances of trend might reverse. 20. Candlestick Pattern - Bullish and Bearish Engulfings: Mm hm. So far we have been looking into single candlestic patterns like Doge hammers, shooting star, hanging man. Going forward, we are going to look at some important multi candlestick patterns. Right now, we have bullish engulfing here, which is a two candlestick pattern. So englfing pattern, what happens? We have a first candle, which is a red candle and the second candle, which is a green candle and a green candles body. So when we say body, we are talking about this region. The body of the green candle completely engulfs or overlaps the red colour candle body. When this happens, we say it is a bullish engulfing. Now there are a few other conditions we should also hold true. The security that we are looking at, the stock or crypto or whatever, it should have been in a downtrend before we come across this formation. Another thing is this red candle could be of any kind of red candle. It doesn't have to look like this. It could be simply a doge. As long as the body of this red candle is completely covered by the green candle's body, it's still a valid bullish engulfing signal. And since we are expecting that there should be a downward trend before this happens, this is essentially a reversal pattern, bullish reversal pattern. Barish engulfing is exactly the opposite of bullish engulfing. It is also a two candlestick pattern where the first candle is a green candle and the second candle is a red candle. This is a bearish reversal pattern, which means the stock should have been in uptrend before this formation occurs, and after this, reversal is expected to happen. So for this formation to hold true, what condition is, it should be y. An uptrend before this formation occurs. Second, the body of the red candle, this portion should completely engulf or overlap the green candle's body. Same condition. This should be just a green candle. It doesn't have to exactly look like this. This could be gravestone, dragonfly, or this could be normal Doge or this could be something like a hammer, doesn't really matter as long as it's a green candle and the body of this candle, green candle is completely overlapped by this red candle. So these are the engulfing patterns, and now we're going to look at some real charts to see how these patterns work. Now we are looking at this chart and here we can see this region, if you notice, we have these two candle, one red candle followed by the green candle and the prices have been in a downtrend, and the green body completely overlaps the red candles body in this case. This is a valid engulfing. These two candles form a valid engulfing pattern. As you can see, after this happened, the price is reversed. In the same chart, we can see there is this small doge cream candle doge, after which a large bodied spinning top form, red color spinning top and a body of this spinning top candle completely overlapped. The green colors, candle body, right? So this also forms a valid engulfing, which is a bearish kind of engulfing pattern. After this, the trend reverse and previous trend was uptrend, right? So this is how engulfing signal works. If you look at YouTube videos and other literature, you will notice that there is discussion or like, some people say that for engulfing to happen, the engulfing candle, the second candle should completely engulf, including the highs and lows of the previous candle, which doesn't have to be true in all cases as per the definition, as long as the body of the previous candle is engulfed or overlapped by the engulfing or the second candle, it is true. Don't get confused. Just focus on the body if the body of the engulfing candle overlaps or engulfs the first candle and uh the context is correct, in this case, the previous trend was down and this formation occurred and then reversal is expected. Similarly, in this case, the previous trend was up trend, this formation occurred and with the red candle as a second candle and then trend reverse. This is how engloping works. 21. Candlestick Pattern - Harami / Inside Bar: Hello. In this session, we are going to take a look at another two candleisti pattern which is Hami, also known as inside bar. Let's start with bullishiami. Bullishiami, if you will notice, it's opposite of what an engulfing looks like. In this, we have two candles and the first candle is a red candle and the second candle is a green candle. And the first candle, in this case, completely engulfs the body of the second candle or the green candle. The body of the first candle, red candle engulfs the body of the second or green candle, then it becomes a foolish ami. Another important thing to notice here is the stock or the security should be in a downtrend when this pattern is encountered. And since this is a reversal pattern, after this formation occurs, it is expected that the price might reverse from here. Here is one difference between Hami and inside bars, though both look essentially similar, very similar. But in case of hami we use the engulfing of the bodies. We say that the body of the first candle should engulf the body of the second candy. But when we say inside bars, we say the highs and lows of the first candle should completely engulf or overlap the highs and lows of the second candle. For all practical purposes, I would suggest you treat them both as same and you use highs and lows instead of the body engulfing, especially for Hami cases. Let's move on to the beer Shami in Berri Shiami we have the same pattern. First candle is a large candle. Second candle is a small candle. First candle is a green candle whose body completely engulfed the second or the red candle's body. So if you go by inside bar, the highs and lows of the first candle completely engulf the second candles, highs and lows. And since this is a bearish reversal pattern, the security should be in an uptrend when this formation occurs, and after this, it is expected the price might reverse. Let's look at Hami and inside bars in action in a chart. Now in this chart, you can see these two candles. First candle is a big red candle. Sorry, it's a big green candle and the second candle is a red candle. The body and highs and lows both completely engulfs the body and highs and lows of the second candle. This becomes a bearish rami. We also need to look at whether the previous trend was up trend because it's a bearish reversal trend. This is true in this case. After that, you can say the price reversed and went down. Now here at the bottom, you can see, we have a big red candle followed by a smaller green candle and the body of the red candle, which is the first candle of the pattern, completely engulfs the body of the second candle. If you go by inside bar definition, the highs and lows of the first candle completely engulfed green candle. After that, you can see the price reversed and for bullish Hami to be a valid pattern, the previous trend should be a down trend, which was the case and after that, price moved up. Here you can see. Again, we came across a bearish Hirami pattern. First candle is a cream candle which completely engulfs the second candle, which is the red candle. After that, price is reversed. The previous trend was uptrend. And here also, we can see another case where the first candle in the pattern is a large red candle. Second candle is a smaller green candle, which is completely engfed by the first candle or the red candle and the prices were going down and once this happened, the price started going up. Now, here's a interesting thing. Now you might also say that this is also a valid bullish rami pattern because the body of this green candle is completely engfed by this red candle, which is true. If you see it in fact worked as well and after this, the price is reversed but it does not meet the criteria of inside bar because the highs and lows of this candle are not completely engulfed or overlap by this first candle. I would suggest that you avoid trading these kind of setups and stick with the highs and lows in case of Hami rather than the body. That's all for this session. In the next session, we are going to look at couple of three candlestick patterns. So far, we have only looked at single and two candlestick patterns, SO in that session. 22. Candlestick Pattern - Morning Star & Evening Star: In this session, we are going to take a look at morning star and evening star, both of which are three candlestick patterns and both of them are very powerful. They may not occur very frequently, but when they do, often they work as expected. So let's start with morning star. So as you can see here, this is how a morning star formation looks like. It's a three candle formation. First candle is a large red candle. Second candle is typically a doji, but it could also be a hammer or a doge variation like spinning top or hammer variation, inverted hammer, or even gravestone doji. The third candle is a green candle, which has to close above at least half of the first red candles body. For example, in this case, the 50% of this body will be somewhere around this. This green candle has to close above this. When this happens along with all these three conditions, then we say a morning star has formed and it's a bullish reversal pattern, which means the security should have been in a downtrend before this formation occurs once this formation occurs, we expect the prices might reverse from here. To reiterate, here are the conditions, the downtrend should be there before this formation occur. First candle should be a long red candle. Second candle could be a doge hammer or a variation. Third candle should be a green candle which closes above at least half the body of first red candle in the formation. As I said, this is a 50% roughly, then it has to close above this. When this happens, a morning star is formed. We will take a look at evening star as well and then we will go to the charts. This is the evening star which looks inverted form of morning star and evening star is a bearish reversal pattern, which means before this formation occurs, the security should be in an uptrend. This formation occurs and then we expect the prices might reverse from here. This also is a three candalystic pattern. First candle in this pattern should be a large green candle. Second candle is typically a doge, but could also be a hanging man. If you remember, this is what hanging man looks like when this forms during an uptrend. It could also be a shooting star, so it could be a hanging man or it could be shooting star as well. This is how a shooting star looks like inverted hammer when this forms during an uptrend. Herd candle should be a red candle, this one, which closes below at least half the body of first green candle in the formation. This is the first candle. Let's say this is around 50% or half of it. This red candle should close at least 50% of its body size. When this happens, we say an evening star is formed, and chances are that the prices might reverse from here. Now let's go and look at the charge to see these patterns in action. So here we have if you notice this section, First candle is a red candle. Second candle is a doge. Third candle is a green candle, which has closed above 50% or half the body size, and the previous trend was down trend, then this formation occurred after which prizes reverse from here. This is how a morning typical morning star looks like. Let's look at evening star now. In this chart, if you notice candles these three candles. First candle is a green candle. Second candle is a shooting star with a very small weight which is negligible. This could still be considered as a valid shooting star pattern third candle is a red candle, which closes below 50% or half of the body of the first candle in the formation. This is a valid evening star pattern. Also, most importantly, the prices were in an uptrend before this occurred and after this, you can see the prices they was from here. Now, in the same chart, we can see another evening star formation, which occurred here. The first candle is a green candle. Second candle is a doge. You could also call it spinning top because body is slightly bigger than a typical Doge. The third candle is a red candle which closed well below 50% of the first candles body. After this happened, prices went down briefly before this pattern occurred, the prices were up. This is how these patterns play out in the coming session, we are going to see how all these patterns work with better accuracy when we combine them with support and resistances. 23. Candlestick Pattern - Ending Notes: Hi. I hope you had as much fun learning candlestick patterns as much as I had while creating these videos. Now that you have some understanding of these candlestick patterns, you might be tempted to jump to charts and start reading them. With an impression that now I understand how the candlestick work and I'm ready to take on traits. But avoid the temptation because there is still so much we need to cover as you will see, these patterns work sometimes, they don't work sometimes, we need to focus on under what scenarios they work better, and we'll be focusing on that in the sessions which we are going to do next. Hold your horse courses and stay with me for some more time and then we'll get to how we can use these candlestic patterns to our advantage. Also, you might come across numerous other, uh, candlestic patterns like dark cloud, piercing signals, three white soldiers, three dark crows and many others. Don't worry about them. Whatever signals we have studied so far in this course, they are more than sufficient and once you understand the anatomy of candles, how they form, and what does a wick represent, what kind of buying and selling pressure you are observing in a candle, once you understand these concepts, then I don't think you need to worry about all those names or all those candlestick patterns. And finally, if you are using a paid plan, the premium plan on trading, then there is a trick which you can use, especially when you are new. So you go to indicators and in the indicators, go to technicals and then select patterns, the last tab, and there you can see candlestick patterns. They have all the individual patterns, whatever you will find. You can enable them one by one, which interest you or you can enable all of them. It will automatically plot these patterns. It will indicate that this pattern has formed. For example, you can see B E, which is a bearish engulfing, it's in red, and here is another B, which is a bullish engulfing. You can see the signal. The red candle completely engulfs the body of the previous candle and after that price went down and the previous trend was up and then you have this BE bullish engulfing previous trend was sideways, not exactly, but in terms of lower lows and lower highs, I think it was still downward and after this formation price reversed. Then it will identify dogs for you. You can use it to identify and test your knowledge that you are able to identify the patterns correctly. The only issue is, this is available only in premium plan, so you may have to upgrade, but you don't really have to upgrade just for this, you should be able to still identify most of the patterns just by looking at them. But if you already have a plan or you plan to upgrade in near future, then this is one feature available in treating view, which you can definitely use. And, uh, one more thing. Here is one book which I used when I was learning candlestick. This book is by Bal Krishna Sadika and this book covers most of the candlestick pattern that we have studied apart from a few others in a very detailed manner. It also explains, from, um, psychology perspective why these candlestick formations occur and why do these work. This is a good book. If you want to learn more about candlestick and dive deeper into it, I strongly recommend if you're interested to learn more about candlestick than buy this book, and you can probably find a PDF version of this book also online or on Kindle. So anything would be fine. I mean, whatever works for you. With that, I think we can close the candlestick section and we'll move on to support and resistance next, followed by chart patterns and technical indicators. See you in the next section. 24. Interpreting Volume: Welcome back. In this session, we are going to cover another very important aspect of technical analysis that is volume. What exactly is volume? Volume is nothing but the total number of shares or contracts that have been traded in a security in a given time frame. If I switch to the charts, I am currently in weekly time frame. This is the current candle that is being formed, which represents the current week. At the bottom, you can see some bars. These are the volume bars. These bars tell us for a given candle or given time frame, how many shares or contracts we created. We say contract when we are talking about options or futures. But let's stick with simple numbers in this case because we are not talking about options here. I I hover my mouse on the current candle on the left side here, I can see it shows the volume number. So for current week, this number is around 151.784 thousand bitcoins have been traded in this week. If I hover on the previous candle, I can see the number was slightly less, 126.83 thousand bitcoins were traded in this week. This information is available on trading view, and it is enabled by default, but if it is not there, you can go to indicators. And search for volume. You will find it under technicals, volume and you can just click on it, it will add the volume information to your chart. This is how we can see both rise and volume. Now going back to your presentation, how does volume information help us? What is the significance of it? Volume essentially provides us with the insight into the strength behind price movements. As an example, if there is a very high volume and the price is moving up, we know that a lot of people are buying. When a lot of people are buying, then chances are the price might keep going up. Similarly, if the volume is very high and the prices are going down, we know that a lot of people are trying to sell here. Chances are, the price might keep going down. So essentially, volume provides us with the information on strength of the current or ongoing move. If um, the volumes are low or average, we know that there is no strength and nothing much significant is happening in the market right now. So this is how we associate price with volume. If the price is going up, volumes are also going up, then we can deduct that there is a lot of a lot of strong buying interest in the market and the price can continue to go up. If the price is going down and volumes are high, then we might be able to say that, there are a lot of people who are selling volume is high, this trend or discount trend might continue for something. And when price is going up and volume is down, that means, price is going up, but not a lot of people are buying, so maybe this trend is weak, or this trend will not last for long time. Similarly, if the prices are going down, volumes are low, that would mean similarly that it's a weak downtrend, and we have to be cautious, there might be a reversal happening if the volumes are low. So this is how volume helps us understand the current movements, price movements and provides us an additional insight into what might be happening or what might happen along with all the other information that we might have from studying the charts and candlesticks. Here are some of the applications or use cases where volume is very helpful. First one is trend conformation. Volumes can help us identify as you were discussing whether a given trend or the current trend might continue or not. If the current trend is supported by the volume, be it uptrend or downtrend, chances are it might continue. Another important application of volume is understanding of phenomena of volume climax. A lot of time what happens once a security has been in a trend, be it uptrend or a downtrend. There is a large move with a huge spike in volume, and this could result in exhaustion of the current move and reverse it. This typically happens because of the heightened emotions in the market because everybody is trying to join the ongoing trend and the people who have been in the trend from long, they start booking profits, and that results in the trend exhausting or losing its steam. Third application is understanding breakouts and breakdowns and identifying whether there is a possibility of a breakout or a breakdown working or resulting in a fake breakout or a breakdown. When a breakout happens, along with very good volume, breakout essentially means price is coming out of a zone or price is breaking out of, let's say, a trend line and then the move is supported by volume. There is a large volume along with that, then there are good chances that a breakout might work. Same for breakdown. Now we'll go to charge and we will try to see all these three applications. Here I have the weekly chart of Btuinopen. Here you can see there is a strong up move and you can also see the volumes are supporting the move. Volumes are also increasing then volume started declining and that's when the move ended. Volumes can help you understand when a trend might continue and when a trend might lose steams or reverse or even go to sideways situation. This is how you can use volumes to confirm a trend. Second thing, we talked about the volume climax scenario. So when a stock has been, security has been in any trend, and then there is a large spike along with a spike in volume. Here you can see there is this large spike. In volumes and also in the price. At this point of time, prices reverse. This point of time, downtrend exhausted, or this was the selling climax and then prices reversed from here. Here also, you can see, there was a large move this one and then there was a corresponding spike in volumes. After that, the move reversed. Same thing can be visible here. This is actually the COVID fall and there was a large spike in price and then associated accompanied by the large movement in the volume. After that, price is reversed. Here also you can see the same phenomena. There is a large uh, movement in volume and then pies reverse. If you will zoom out this chart, you can associate that most of these spikes in volumes can be associated with either some peaks or bottoms. Here, for example, this one is a bottom. This one, let me try to this one. This one. Here is this one. Then the ones we saw, this one, I have to select it every time. I forget. Yeah. Basically, the point is using these volume spikes, you can get a hint that a reversal or a change is possibly coming. The third application was understanding the breakouts and breakdowns. So here, I have a chart where I have drawn a trend line. If you remember drawing trend lines, we switch to line chart, we connect the swing lows or swing highs. In this case, swing lows, we have connected them, move back to the candles and the price is kept bouncing from this one time, second time, third time, fourth time, then again, quickly fifth time. Now, this is the candle which resulted in the breakdown of this trend line. And if you see this candle was accompanied with a large volume bar. If you see, these are the average volume, but this bar which broke down from this trend line had high volume, and then the prices kind of continued to go down. So since this move was accompanied with volume, we could be, you know, more sure about what the chances are, this might actually continue. In the same chart, I have drawn a trend line here in the same way connecting these sewing highs. You can see there is a lower highs and lower lows being made. Then the price came up strongly towards the trend line. You can see there was a very good volume and there were large bars. But the bars which hit the trend line or breaking out, it did not really have a lot of volume. This part, the volume here corresponding or compared to these volume bars, it was pretty low. Also you can see there was spike at the top, which results which represents selling pressure. So combining this volume information along with the candlestick formations and after this candle, we got a shooting star. So this should give us some information that, okay, this breakout may not work and the prices might fall from here, and this is what happened. This is how volume actually works as an indicator or as an additional signal to support our hypothesis about what might happen in the market. So let's go back to the presentation. Here are some important things about volume, which we will see as we go along in the course. First thing is uptrends usually do not occur without good volume. Uptrends typically require very good volume for breakouts and if there is no volume during breakouts or for continuation of uptrend, the chances are this might not continue or might breakout might not happen. Downtrends can occur and continue without significant volume. So Think of it like if you're climbing a hill or climbing stairs, it requires more strength. But when you are going down or climbing down a hill or going down the steps, it requires lesser energy. The same is true in the market. It requires a lot of strength for the market to go up. When I say strength, it requires a lot of volume, a lot of people coming in and making buying and buying the security, take the prices up. But for taking the prices down, it does not require a lot of strength. Same for breakouts and breakdowns. Breakouts would almost require strong volume, but breakdowns can occur with average volumes as well. So these are some practical things we will see and you will learn as you continue to work with technical analysis. And third, important thing is, volume should always be used as an additional conformation and not as a primary input for buying or selling decisions. As an example, you see a lot of volume suddenly. Um, in any direction, um, you should not base your decision for buying or selling a security just based on volume. You should use some other ways like chart patterns or candlestick patterns, and then use volume as a supporting evidence that whether what you thought might happen or not. Do not use volume as a standalone indicator for making any kind of decision. Volume is a very good, um, supportive or supportive added evidence, but it should never be used to take buying and selling this year directly. 25. Support and Resistance: Hello. In this section, we are going to take a look at a very interesting concept in technical analysis that is support and resistances. You might have seen in charts that the price moves in swings, waves or whatever you want to call them. There are some areas where price sometimes reaps in a predictable way. As an example, in this case, if I draw a horizontal line, let's say from this zone, so we can see that when the price came to this point, it reversed, came down, went up, broke this line, and when it went up, it came down and took support around the same zone, which was here. The same thing can happen in different ways. You can also have something like the price is trading in a range and price keeps going up. And when it goes to a certain point, it reverses. Similarly, when it goes down to a point, it reverses. You will find that when looking at charts, there are areas or zones where price behaves in a predictable way, not always, but many a times. For example, if a price comes down and reverses from a point and then it does the same from around the same region, we say that this is a support zone. Support zone are also known as demand zones. Why demand zones? Because when price comes to these points, the demand of a particular security increases and people start buying it, which takes the price higher. The reason could be fundamental or technical. Fundamental because a fundamental trader might feel that at this price, the security is available at a reasonable price and it's a good place to buy. And whenever the price comes back to the same zone, they may have the same thought process and they may buy again. Similarly, a technical analysis, inspired trader might see that the price reverse from this particular point. When it comes here again, there is a good chance it will reverse. That might be the reason for the technical trader to buy it here. But the point is once you can identify these zones, it will help you in your trading and ntifying the zones from where price might take support and reverse or go up. Similarly, on the upside, there are areas where price reverse to the downside. In fact, this is one such area, then this is second such area, and these areas from where prices reverses to the downside from up. These are known as resistances. And resistances are also known as supply zones. Which is essentially the opposite of demand zones. Why supply zone? Because people start selling when price goes to these levels. Again, the fundamental trader might think at this point, the security is expensive, though they may start selling and a technical trader might feel that previously or in past the price reversed from this zone, so I will sell again at this zone. And that's how when a lot of people are thinking in the same way, it becomes a self fulfilling prophecy. That's how these resistances and supports work. We are going to take a look at charge, but there is one more thing we need to understand. So if you look at this particular, let me remove this part for clarity. Okay. Now if you look at this particular example that we have here, now you can see this area, this area was a resistance because the price was below it. Price hit this zone, reverse from here, and then at some point of time it broke above it. This is essentially what we can call a breakout. Breakout from this line, when a resistance is broken, in future, it starts behaving as a support, which you can see here. Earlier at this point of time, it was a resistance and once it was broken, it acted as a support when the price came back to this level. Similarly, in a downtrend, assume this was the support level and at this point it was broken. Chances are once this ran price and comes back to this level, it might become a resistance in this case. Support and resistance switch roles when they are broken, right? So just to revise what we have seen so far, let's recap it quickly and then we'll go to the charts. Support, also known as a demand zone is a region where chances of a price reversing from down to up high. At support zones, price comes and reverses back to the upside. On the contrary, resistances, also known as supply zones is a region where chances of a price reversing from up to down are high. Simple, right? There are some important points which we also talked about. When a support is decisively broken, it starts acting as a resistance. When a resistance is decisively broken, it starts acting as a support. Another important point is, some people prefer to use highs and lows for drawing support and resistances while some people prefer close values. This is something which we are going to see when we are looking at the charts. Also, remember that support and resistances are not exact values. If you draw a line at let's say 100 and you expect that exactly at 100, the price will react or reverse or something like that. It doesn't happen that way. Price support and price resistances are typically areas or zones that 100 actually reversal might happen, but it might happen from 99 or it might happen from 101. It depends basically. You just need to look at these supports and resistances as areas, not at exact values. Now let's head to charge. Now here, I have Bitcoin chart open, daily chart. Now, if you look at this chart, you can see there are some zones even this, they are nearly around the same area. What we can do, we can take the horizontal line and draw it here. Now you can see this is one point then 2.3 0.4 point. This is something similar to a trend line. We need to draw support and resistances in such a way that they cover as many points as possible for drawing a support or a resistance, we need to have at least two points exactly, again, same as trend lines. So you cannot draw like, you know, support is tens with just one point inside. For example, if I want to draw it just here, it probably may not be a good idea because this is only a single place, right? But I can definitely try to draw something like this, which covers, 1.2 0.3 0.4 point. Again, as I said, we need not look at these things as, um, single lines or exact points, but these are considered as an area. It would be probably better if I use something like this which touches all these points. I know that this area covers all these four points. This is basically a resistance zone. Now if I scroll down the chart in the future, I can see that this was our support area and here you can see that price took support here after age was falling. Then finally, there was a breakdown from here. But the price was stayed here in this zone for quite some time. Now when we have this line and prices falling here, you know that this area something might happen the price might stop. Or for example, if you're shot on the market, this is probably a good area for you to cover your shot. Again, if we go further back, you can see the price broke down and then this area became a resistance because from here, it was a support. Now this will act as a resistance. Price again, went to this point, reversed from there, went again to this point, reversed from here. Again, as I said, you should not treat this as an exact point but an area or a zone. You can see there was some enough fluctuations here, but the price reversed from here. Then eventually there was a brick. This is how supports and resistances work. Even if I extend this resistance area to this level, you can see after coming to this region, the price reverse from here, I have here another chart opened up, Amazon, so here again, I think you might have noticed that if I draw something like this, it can have this one point, two point is three point. On the upside also I can draw this resistance because I have at least these two points one and this two. Now if I go in future, you can see that around this support line, there was a reversal happened once and then twice again. Then finally, there was a breakdown and once a price reversed after the breakdown, this support line acted as a resistance. From here, price went down again. If I just go again, you can see that price came back to the same level and again, reverse from the same level. Then there was some fluctuations after coming to the same zone and then the price went up, came back, this became a support now. Price took support here and then went up. That's how support and resistances are very helpful once you draw them correctly in identifying the zones where price might reverse or price might take support or price might halt at some point of time to decide some good entry and exit levels in your trades. I 26. Drawing Support and Resistances Correctly: Mm. Video, I'm going to show you how to draw support and resistances correctly. If you remember, I mentioned in the slides in the previous video that some people prefer to use highs and lows and some prefer closed values. I prefer close values, but it's up to you. You can go with any of these and just make sure that whatever approach you decide using highs and lows or close, just stick with it. Now I have a 50 50 index chart open here, and when I look at this chart I can see some areas which are around same zone like this and this. And then this. I will take the horizontal tool in trading view and we try to join. Now if you see when I'm drawing support, I take the closed value of the bar. In this case, there's only 1 bar in this area. Then can see that this joins this point. Earlier this was a resistance, price was moving up, it reversed from here, then there was a breakout. Then once the breakout happened, price came back to this price and this zone, which act as a support in this case. I can also draw this and this. In these two points when I'm drawing support, I will use the close of the lower candle. In this case, this low is lower than this. In fact, there is no low nearby, so I can write like this. Now, you can see that it's not even touching it. It doesn't really have to touch it. As I said, these zones are not exact, there are some areas. If you prefer, you can also use something rectangle. To draw this instead of using a trend line. Then you can stretch it for future use. That way, I think this is actually a better approach using area tool rather than using a single line. Now if you see while I have drawn this on the bottom side, I have taken the close of this and on the upside, I've taken the close of this swing point, the lowest close off this swing point, and here the lowest close off this swing point. That defined my area. If I'm using lows, for example, because this is a support we will use lows. If you're drawing resistances, we will be working with highs. If I'm using lows, I would probably stretch this to the low of this and then maybe I will pull this area down to the low of this. This is probably how my support will look like if I'm using let's say highs and lows. Either of those is fine. Basically, the idea is just to get that ntify some area around which the price might reverse or price might take support or might stop for for a while. For example, in this case, this was a resistance. Here you can see this is a minor swing, but here, price stopped for a while before it broke out of this right. So that's how we can draw supports and resistances. You can take any chart and you will find some areas where there are points, where price reacts in a predictable way. Now in future, okay now if you look at this here also, we have two swings here, but they are not really at the same level. So we cannot draw exact horizontal line. But what we can do now, if you can see, I have these two swing highs for the swing highs, I've taken the close of this swing. And then for this swing, I have taken again, the highest close of this swing, both cases high highest close of this swing and highest close of this wing. That's how I draw resistance if I'm working with let's say ici instead of close, since it is a resistance, I could do something like this. I of this swing, highest high of this thing and highest i of this swing. This will become. Now if I stretch it here, in future, if the price is coming down, then I know that there is a good probability that the price might take support in this area. If I have shot, let's say this index here, this might be a good place for me to exit my shot. Also, if I'm planning to go along, when the price comes here, I know there is a chance this is a support because the price book broken out of this resistance and now it at support, then this might be a good place for me to buy. That's how we can, uh, draw resistances and support. Let me take another chart. This is a stock chart, Microsoft, here we can see that this area and this area have a common zone. I draw it here. Now, if you can see, I have drawn and place this line here because this is the lowest close in this. How to entify the lowest close in an easier way, you can also use a line chart. That way you will not have any confusion. You know, this is the lowest close because line chart only shows the close values. It doesn't show high highs and lows. Armus have drawn this. I'll go back to Candle and see that there is there is you know, Confluence, so basically prizes coming or meeting this line in both these places. This is a good line, good support now. If I go here, look here, I can see another zone. So if I draw it again, again, if you'll see, I have taken the lowest close. So close of this green is above this line. This green also is above the line. This is the lowest close because I'm drawing a support line, and this also touches this swing low. And if you see here also, you can see the price hesitated at this line before and took a break and then before it moved up, right? So these are the line. I may also be tempted to draw a support here based on this. But remember what I said, we need to have at least two swings like trend lines for drawing a valid support or resistance, we need to have at least two points. This one is not really a valid resistance or a support line. That's how we draw this. But if you have any doubts, you can always ask me a question in the Q&A section. Let's solve for this with you. 27. Introduction to Chart Patterns and Indicators: Hi. Now that we have learned the fundamentals of technical analysis, it's time for us to move on to the new section, which is applying this technical analysis for trading purpose. In this section, we are going to learn about price action. Price action is nothing but understanding what the price is doing and this is what we typically do using candlestic chart patterns that we have seen. We also combine it along with ten lines a resistances and volume analysis. So bits and pieces of which we have already seen, and then we will move on to chart patterns and finally technical indicators. As part of chart patterns, we are going to look at reversal patterns, chart patterns which end up reversing our existing trend like head and shoulders, rounding tops and bottoms, wedges, and we are also going to look at consolidation and continuation patterns, triangles, flag spans, box, and range. As for indicators, we are going to look at trend following indicators like moving averages, MACD, momentum oscilators RSI, rate of change, and other important technical indicators like Ballinger vans, VWAP, and pivot points. With this, now let's get ready to start with this section. 28. [Reversal Patterns] Head and Shoulders: Hi. In this video, we are going to take a look at head and shoulders reversal pattern. So before we look at head and shoulders, what exactly is a reversal pattern? Assume price is an uptrend, it's going up, and then a certain pattern occurs, which makes the price reverse. So price starts going down from that point of time. Similarly, there could be a down trend, and then a certain pattern is encountered, which makes a price, reverse or start or make the price start going up from that point of time. So these are reversal patterns. So most important of these reversal patterns is head and shoulders. Head and shoulders in larger time frames, they like weekly, daily, monthly, they typically form during the tops. So let's assume the price is in an uptrend, and at some point of time, it creates a swing. Price starts going down and from some point, some level starts going back up. This time, it creates a bigger swing. Price comes back around the same level and then starts creating another swing, which is smaller than the previous or the middle swing. So now, if I connect these bottoms swing lose then this is what a typical head and shoulder pattern looks like. So on the left, this left swing is left shoulder, the middle or the biggest swing, that is your head, the right swing, that is right shoulder. So this is called head and shoulder but also HNS pattern. And this black line which connects these swing lows, this is called neck line. All right? So for drawing neckline, the rule is you should always connect the left part of the head, this one, with the right part of the head first, and then extend it towards right and left shoulder. Let's say if we have something like this, we should not try to draw the line from here to here directly. We should try to connect the left part of the head with the right part of the head first and then extend it on the left and then on the right. That's how we spot and draw neckline or a head and shoulder pagon. Now, what you are seeing here, this is kind of an ideal scenario where you have a perfect horizontal neckline, and then kind of, you know, nicely formed left shoulder, right shoulder and head. But typically, when you will notice in the charts, you'll rarely find such kind of perfect formations. So charts, you may find something like, you know, this is a left shoulder and then there is some movement which ends up creating this thing and there is a very small right shoulder. Something like this, you can also have a very small left shoulder, a bigger head, and then a shoulder. Basically, they need not be symmetric, apart from this, you can also have formations where the neck line may not be horizontal, but rather upward slanting. Similarly, you can also have formations like this. Where the neckline is downward slanting. So when you are trying to identify head and shoulder patterns, you need to consider all these cases. The most important part is it should have three clear formations, three clear swings, right, left, right, and the middle one, which is your head. That is the most important part, and you should be able to clearly connect this left part of the head with the right part. And when you extend this line towards the shoulders or the left and right swings, it should connect all these points. So once this happens, we can say that, okay, a har shoulder pattern has been formed. And, um, also, another important thing is when you are seeing this, the price strand should have been up previous to this formation. Let's look at some charts to see some real head and shoulder patterns. As I said, head and shoulder patterns, when you're looking at higher time frames like weekly monthly, you will spot them during the tops. I have the weekly chart open of Bitcoin here and you can Observe, if you will zone this part, you can see in this top, we have a hen shoulder formation. This looks like a left shoulder. This looks like a head. This looks like a right shoulder. When I connect this and this left and right part of the heads and extend this, I have a he shoulder pattern which looks like. This, right? So let me try to scroll and see if we can spot some more in the tops, this top, no, this top, no, no. I have another chart open of apple he let me zoom out and let's observe the tops. I see, let's see if we can find any head and shoulders. Here, I think we will observe closely, you can see Uh, this is a left head, left shoulder, sorry, this is the head, and this is the right. I connect. Then I will have my any shoulder pattern. I think if I go to daily, it might be more easily visible. Yeah. So now I think it's more clearly visible. We have a clear left shoulder head, and they are small right shoulder. I said, they will never be perfect, rarely be perfect. So you need to keep an eye out and make sure that you are able to identify them correctly. And you can see the previous trend is uptrend, and then we have this formation. The so now, you might ask, how do we draw this neckline correctly? So drawing a neckline is same as drawing a trend line or drawing support or resistance. Only differences, it's more like a trend line because this neckline may not be horizontal always. So first, you have to connect the left part of the shoulder, left bottom not left bottom of the head with a right bottom, right side, bottom of the head. Once you have done that, you can extend this line on both sides. Here and then here. So I'm using closed values as I do in trend lines and support and resistance, but you can also use the lows of this. So this low, you can connect this low with this and then extend it on the both sides. So either of them is fine, or you can use whatever works for you. And also, like, you know, there will be times where you might find that, in this case, there is only one, there could be multiple shoulders on the right or maybe on the left also. So that is also a valid, head and shoulder patterns. So it's not like it has to be perfect and it has to look like, you know, textbook kind of pattern. So this formation, once you start looking at the charts and observe the price reversal trends and patterns, you will be able to identify, okay, yeah, this is probably a valid, even though this may not look like an exact, uh something like this, like, clear left shoulder, head, and this kind of pattern. I should also highlight another important thing when you are evaluating head and shoulder patterns, and that is the volume. So when the left shoulder starts forming, the volume should be relatively high, as you can see this, right? But when the price comes down and head starts forming, which is a bigger swing, the volume should be lower than what it was when the left shoulder started forming. So basically, volume should go down, even though the price is going up. So this is essentially called a divergence. So price is going up in head from left shoulder to, but the volume is going down, which essentially depicts that the strength of this trend is waning or slowing down. So that's a good indication. When you combine this pattern along with volume, that will give you more confidence that, even though the price moved higher than the left shoulder. But the volume is not that many people are buying ARU Pi at these high prices. So that will give you more confidence that, okay, this might actually work out. Finally, the most important part. So now that you have identified a Haden shoulder pattern, how do you trade it? So for trading a head and shoulder pattern, it's very easy. What we do is we use the price tool. If you're using trading view, you can use any other similar tool. Price range, we measure the height of the head from the neck line. So this comes about thy 5%, and we take it to the neck line where the head and shoulder pattern has broken down. So this gives us an approximate target. So now you can see if I just take it here, this 25%, you can see it exactly met the target, this particular pattern. So but note that this is not something which works. Always. First of all, the pattern may not work at all. I price might actually reverse from here. So you always need to, you know, do risk management and trade management. So these are topics we're going to cover in later section. But for now, you need to understand that this is what the target should look like, but ideally, we should kind of, you know, be a bit more conservative in our targets, and we should probably take a smaller target when we are trading it because there is a chance that it might not do a full target. So now if I go with the previous den shoulders in the bitcoin chart, I need to draw the trend line again, neck line. I connect these two, then extend it here and here. I will do the same thing. I will measure the height of this head till neck line, it comes to about 49, 50% roughly, and I measure the 50% down from the neck line where it is broken down. Here also you can see 49, something like this. In fact, here the target was exceeded slightly. But again, as I said, we should be a bit more conservative with our targets and trade accordingly. Our price target defined accordingly. 29. [Reversal Patterns] Inverse/Bottom Head and Shoulders: In this video, we are going to take a look at inverse head and shoulder pattern. Inverse head and shoulder pattern is exactly the opposite of head and shoulders. Assume the price is in downturn and then at some point, it makes a swing to certain level, starts going back down again, makes a bigger swing, comes back to around same level and goes on to create another swing. When we connect, these lows of the heads and extend them on the right and left, we end up with inverse head and shoulder tart. Obviously, it's a reversal pattern, so price trend has been down before, we expect that after this move price will go up. This is your left shoulder, this is your right shoulder, and this is your head. And in terms of volume, as I mentioned in the previous video when we were looking at head and shoulders, we expect that the volume should keep decreasing as the hen shoulder formation is done when it is straight or this one. In this case, the volume should keep going down. But in case of inverse head and shoulder pattern, since it ends up reversing the price to the upside which require more volume, the volume pattern should be should keep getting much bigger and bigger. So for example, if the volume was this much and the formation of this left shoulder, on the head formation, it should probably be more and on the standard shoulder formation should be even more. So the volume should go up as the head and shoulder form the inverse head and shoulder formation occurs. So that's the only difference other than that, it's just a mirror image of head and shoulder pattern. Let's take a look at some charts quickly. I have the Bitcoin chart open here again. As I said, head and shoulder formation occurs at the tops and inverse head shoulder patterns typically occurs at the bottoms. Here is one bottom, and I can see a ad in shoulder here. If I draw the neck line, I think it will probably be more clear. So here, this is the head. This is the left shoulder. This is the right shoulder. I think if I again go to daily chart, it will probably look more clear. Now, can you see this is the left shoulder. This is the head, and then there is smaller. I said, there can be multiple shoulders. In this case, you can see two shoulders, and these kind of formation can actually confuse traders. For example, at this point, it might look like that, uh probably this thing has broken down and on the upside, but the price came down again, I did another dip, in fact, a much bigger dip than the previous swing and then it started going up. If I do the same thing, let me go back to weekly chart, it'll be easier to draw and sizing part. If I check the size of this, it's around 54%. If I put it at the level from where it broke out, you can see the target has been met and the price is still moving up. Here I have reliance chart in 1 hour time frame. And here you can see the price has been in a downturn. And then it form head and shoulder hair. So this is the biggest swing, this is the head. If I connect the left side of the head with the right side and extend it, then you get to see the left shoulder. Here you can see there are multiple left shoulders, too, and then there is a right shoulder head and right shoulder, and then after that, the price moved up. If I do the sizing of head, comes around 5%. This is hourly charts, hence the targets are smaller, and you can see the target was met and the price kept on moving higher. Also, I want to show you something more important that here, you can see that as the price is moving up, the volume levels are also increasing here. You can see the volumes are increasing here, here, here, as the price tries to break out from this. So that's how we can look for inverse adam shoulders in charts and trade them profitably. 30. [Reversal Patterns] Rounding Tops and Bottoms: And In this video, we are going to discuss rounding tops and bottoms. So rounding tops and bottoms are very infrequent and they are reliable only when they occur in larger time frames like weekly, monthly, quarterly. And these are very good indicators of long term reversals and for identifying, long term investment opportunities like rounding bottoms. So, let's get started. So I assume that price is an uptrend. And then over a long period of time, some kind of price action occurs, which is like rounding in nature. There is no clear pattern. Slowly, it ends up being something like this, right? And it essentially ends in reversing this uptrend, long term uptrend to downtrend. So there is no clear pattern or something like head and shoulders where we can easily identify. Only thing is, these things happen over a long period of time, and initially, we will see higher highs and higher lows and then platens and then slowly, we'll start seeing lower highs and lower lows. So that's the pattern we need to look for, and they have a rounding shape. So we should be able able to draw a curvy line around this to kind of, you know, visualize it correctly. And bottoms are just opposite of that. So the price is in downtrend, and then at some point, the downtrend slows down and there is a lot of, you know, fluctuations in the price and slowly price start turning around. So the whole formation looks like arca rounding bottom itself, as the name suggests. So we are going to take a look at some charts. But as I said, these are very infrequent and I had actually some difficulty finding out these examples. So let's switch to the charts. So here, I have Tata Steel chart. It's a daily chart, but the longer time frame is preferable. Daily is also fine. So now here you can see the price was in uptrend from this point and then started slowing down and slowly it kind of started making this kind of curve. So I can actually try to use something like Rc tool, which helps us visualize these things in a better way. We can adjust in such a way that maximum number of points are being touched. Here also can do something like this. Now we can see that in this car or rounding top, we have most of the points covered. Then afterwards, what happened, the price reversed and you can do it like this, you can do it like this, whatever works. And then it went down. The trend changed, even though it was not really a very sustainable downtrend, but we did see that some kind of downside. Rounding tops, we need not look for them because even if you are looking for a long term thing, we will look for higher side or the upside, not the downside. These still could be some trading opportunities, but rounding bottoms are more practical and more useful. So this is how we can look for rounding tops. Now let's move to the rounding bottoms, which are much more useful. Now, this is a monthly chart of MMTC. And here you can see the stock has been in a downtrend from the beginning. And then after this sharp fall, it started slowing down, and it was still making lower lows till this point. And then it started making a higher bottom. And then this price has taken up, taken out all the previous highs. And if I try to do the same thing, I try to do care, it will help visualizing it in a much better way. I can see that, it looks like we went down, jumped from this, came here, jumped from here. Now, this will help us identify that now the reversal is near and how do you play this? So for rounding tops and bottoms, there's no guideline as such, but we can play it using standard technical analysis. So what we can do is we can draw support line here. Resistance essentially because the price was down below. I am drawing this support line using the highest close, and it also touches all these points one, two, three, four, five. Its a valid resistance line. Now if you see that this has been broken on a closing basis and the volume is also good. Now I can measure this part from this line to the lowest part. So I am taking the close instead of the low. So this comes around 80%. So now if I put it here at the resistance, so we can expect a move of this size around 80% move. So which will be like 348. It is currently at 84. Please remember this is not a recommendation for this particular stock. I'm just trying to explain how rounding tops and bottoms work and how do we measure the potential target. So here I have another example of a rounding bottom in a daily chart, where I have already drawn this arc. Here you can see it touching most of the points and it hasn't still broken out. But the foundation of this itself says that there is a likelihood that the stop will keep moving up from this point. But obviously, we should not assume always and we need to look for signs to ensure that it has indeed broken out before we take a position that's all about rounding tops and bottoms. 31. [Reversal Patterns] Wedges: In this video, we are going to take a look at wedges, which is another important reversal pattern. So there are two types of wedges, rising wedge, which has bearish implications, and then another one is falling wedge, which has bullish implications. So how do these wedges look like? This is a rising wage. In case of rising wage, what happens is before this formation occurs, we are in an uptrend, like this. Then at some point of time, price reverses comes back down. And then goes back up again. This happens two times, three times, sometimes even four times like this. The result is the whole pattern ends up looking like a contraction where the moves or the swing highs and lows are contracting. As you can see, this is forming a triangle, but this has a rising slow. It's not like a triangle like this. It's not a triangle like this, it is a triangle which has a rising slope, something like this. That's the reason it is known or it is called a rising wedge. Once this wedge formation occurs, chances are once this lower trend line is broken, the price will reverse and it will go down from here. We are going to take a look at this in action in charts, but this is how it looks like. Now, there are some variations of it, which also we will look before that. Let's take a look at falling wedge as well. Here we have a falling wedge, which is an opposite pattern of rising wedge. We have a triangle which has a falling slope. Before this formation, we are typically in a downtranT one and then at this point at some point, the price reverses goes back up and then this contraction pattern occurs. So these swings highs and lows, they are forming a contraction and uh once this upper ten line is broken, the chances are prices will move up from here. This is how wedges are look like. These are perfect illustrations, but in reality, they might be a bit hard to identify and it might take some time for you to understand how do these form and how to identify them in charts. Before we go to charts, let me also show you some variations. So what we saw is something like this, We have these swing highs and they are forming a contraction pattern and then this price goes down from here. Now, in a perfect pattern, all these swing highs and swing lows, they align perfectly with these strand lines, but that's not how it works. Many a times you will find that you have a pattern like this. Where some of the swings like typically the last one in case of a rising wedge goes above this trend line and then comes back down. It can also happen that this last swing high, it may not even touch this line. There can be number of these moves one, two, three, four, but very commonly, we get five moves, which can be identified as typically as A, B, C, D, and E. Same here. A, B, C, D, and E. After E move is done, typically the price moves down after breaking a ten line. Same happens in case of falling wedge. In case of a falling wage price comes down, goes up, goes down, and start forming this contracting swing patterns. This is again a perfect pattern where all these swing highs and lows are aligning with the trend line. But again, sometimes this may also happen. Then the last one or even the second one, it depends, there is no set rule, but overall pattern need to look like this. This swing low could actually go down below the train line and then move up. Similarly, sometimes this could also be where the swing low is, doesn't even touch the train line. It could just do this and go from here. These are some of the variations of it and similar to rising wedge, we can identify these things swings as ABCD E. ABCD is typically the most common number of swings like these five swings. But sometimes there can be more swings as well. But when you see this, you should be able to understand that even if this is not the final pattern, this some rising or falling wedge in this case is forming. Once this breaks out, then we say, it is now materializing. Let's take a look at some charts now. I have bitcoin chart here. As you can see, it's a D chart. Here at this top, wedges formation was done. Here we can mark this as A, B, C, D, and here you can see the E did not go till the upper end line and just from here itself, it went down. After that, the price reversed and kept going down. In the same chart, if I go back, we can see a falling wedge. What we saw earlier was a rising wedge which had bear simplications, and the falling wedge has bully implications. Now, here the price fell to this point. Which we can probably mark as A, then this was B, then C, D, and then E and from there, the price reverse and start going up. So let's take a look at another chart. Here it's a sho Clel it's a weekly chart, and here you can see the wedges formation, rising wedge is actually forming right now. Here, the reason why I wanted to show you this is because here you would see a variation where you can't easily identify A, A, this could be A. Basically, you can see now this whole thing is essentially the starting phase of the wedge. You can mark this point as a or this A doesn't really matter. What matters is the form of this pattern, which is essentially the same. We have swings, his slowly going up, but contracting at the same time. Now after this is done, we could say this is A, B, C, D, E, and now if this breaks the trend line, then we would assume that good chances that price will go down from this point of time. Let's take a look at some more charts. Here we have Netflix Di chart. Here you can see a rising wedge formation. Once the trend line broke, the price briefly went down. It did not really completely reverse. After going down a bit, it reversed. So um, the reason I chose this chart is to show that all the patterns that we have seen head and shoulders, rounding tops, bottoms, even wedges. None of the pattern works 100% of the time. Sometimes they work as expected, sometimes they work partially, like in this case, and sometimes they fail miserably. So once you see a pattern, you should not assume that this pattern has formed now it's going to work 100%. It never happens. You always have to manage your risk accordingly, which we are going to cover in one of the latest actions. For now, so you can see this is a rising wedge pattern and then it broke down and price went down a bit and then reverse it's a partial thing. It's not a fully um it did not basically the price did not fully reverse and kept going down from here. So now take a look at currency pair. This is pound USD, and here you can see, we have a falling wedge formation in place. Price went down to this point. Went up, went down, touched the upper line, came back down again, and then it broke out of this. You could say this is A, B, C, D, and E did not fully came back till down and from here itself, the pattern broke out and worked as expected. Uh, lastly, I would also show the same thing in a commodity chart. We have covered stocks, crypto currency pair for X, and then lastly we are looking at silver, which is a commodity. I wanted to make you understand that all the chart patterns, they work across asset classes. It's not like the pattern one like hide and shoulder will work only in stocks or wedges will work only in crypto. There is nothing like that. These formations, they are common across all kind of asset classes, and you can apply them everywhere. So here, you can see this is a falling wedge, and this is a bit different because we cannot identify the five points here, A, B, C, D, E, but there are multiple swing highs and lows. As I was mentioning earlier when I was showing you, this slides, that there could be multiple swings, multiple touch points. This is one such example. But eventually, the pattern is same, and once it broke out pattern, the prices kept going up from there. This is wedges for you. Another important thing, I think, which we need to discuss is, how do you trade them? Or how do you set a target once the pattern has broken out? If we take, let's say, rising wage, Let's say this is the pattern. Now, how much down we can expect this asset to go. What we do is we measure the size from the first formation and the second point, first swing to second swing. I height. Let's say this height is 20 points or let's say 5% in terms of percentage, whatever it is. Once this pattern breaks down, we expect this to do 20 points or 5% of the stock price. That's how we measure the target for a rising wedge. Let me show you a chart. I go to sing this one did not work, but let's do this. I'm going to take a price tool. If you use highs and lows, you can use this pattern size from highs and lows, but I use closed prices, so I will take it as per my closed prices. As per my estimation, the height of this first point and second point is 15%, roughly 45 points. So once it broke down from the point of breakdown, my target should have been this 258, but it was not achieved and it reversed before that. But if I go and look at some other I think here we have. Let me try to do the same thing. I will measure this the height, first point to second point. Then once it broke down, I would expect this to go to this point, which I did eventually. I even went down further. Similarly, in case of a falling wedge like this, we do the same thing. We take the height between first point, A and B, second point, and whatever is the height, that is a target for this. In this case, you can see it worked out beautifully. Let's also see this. This is silver. Here I take the price tooling view, I measure from close to close price between the first and second point. And then we do the measurement here, you can see the price actually went to this target and beyond that. That's how we can identify targets for wedges and how to treat them. 32. [Consolidation & Continuation Patterns] Triangles: Mm hm. In this video, we are going to take a look at triangles, which is probably the most commonly occurring pattern in charts. There can be different type of triangles. We are going to take a look at all of them. What exactly is a triangle? When we say triangle, it essentially means that two lines are converging towards a point. Now, these two lines could converge in different ways. One could be horizontal, one could be slanting this way and both could be slanting. A right? And it could be even wedges essentially are a type of triangle itself. Triangles are either consolidation or continuation formations. What exactly is a consolidation? Consolidation is what happens when a price has moved in one direction and then it takes a break and it stays in that in small zone somewhere, goes sideways and typically form some kind of pattern. And once the pattern breaks, then the price could either reverse from there or could continue in the previous direction. For example, if the price was moving like this and then this zone, something like price stays in this zone for some time and form some kind of pattern. After this consolidation is over, price could either go down reverse or could keep moving up. This phenomena like this pattern occurring of this pattern, where price stays in a zone for some time, that is known as consolidation. We say price is consolidating. Or continuation formation. Continuation is a polyt of reversal. In case of continuation price is moving in one direction, let's say, upside and some pattern occur, let's say, some triangle pattern occurs and then price continues in the upside direction. We say that after this pattern, the price is continued in the original direction or if the price was moving downward and then some kind of pattern occurs and then price continues moving down after that formation, this is also a continuation so triangles are either consolidation or a continuation pattern. Depending on pattern and position of the triangle where it formed into uptrend or downtrend, we try to determine if it is a consolidation or it's a continuation. But essentially, even continuations are kind of consolidation. So you don't need to get it, confused. So you just um, remember that triangles are essentially consolidations, and we typically, try to see where in which direction breakout breakout or breakdown is occurring before we take a position in it. Sometimes it could be continuation sometimes it could be reversal. Sometimes it could be like, you know, we may not be able to determine unless till the breakout has actually happened. So, um, here are the common type of triangles, ascending triangles, which are bullish, descending triangles, which are bearish, symmetric triangle, which we don't know whether they will turn out to be bullish or bearish till a breakout or breakdown occurs. So I'll show you those things. We also have some irregular shapes where, you know, we just know that true trend lines are converging towards a point so it looks like a triangle, but there may not be a proper name for it, it could be a regular shape. Talking about the ascending triangle, this is how an ascending triangle looks. In case of ascending triangle, as you can see, we are able to draw a nearly perfectly or even horizontal trend line using the swing highs, in this case, these highs. Then using the swing lows, we can draw another line the difference is the swing lows are slightly moving up, even though the swing highs stays at the top around at the same level. Once this formation occurs, it is an ascending triangle and the likelihood that this would break out on the top sides are very high. You can think of it this way that you know, here, at this point, there are a lot of sellers and buyers are trying to take the positions, take this price of the given security above this. So they push the prices higher, but the sellers sell it, and then buyers try again, sellers are again selling it, and this keeps happening. But every time buyers are getting more and more aggressive. The swings we are getting basically higher highs in the lower swings. That basically means more and more buyers are coming to push the price forward and eventually sellers give in and the price breaks out on the top. This is an ascending triangle. Descending is the opposite of ascending triangle. Here, we should be able to draw a nearly horizontal line using the swing lows and swing highs basically are declining. If we connect the tops of the swing yes, we can draw a descending line and eventually this formation occurs. This also can be explained in the same way that at this point, there are a lot of buyers. So whenever the price come to this point, buyers are pushing the price up and then at some point, sellers are selling it, then this keeps happening a few times, but every time, sellers are increasing and they are not allowing the price to go back up from the first swing. Swings keep coming down, that means more and more sellers are coming in and eventually buyers give in and the price breaks down. This is how descending triangle works. And then we have something called symmetric triangle. In symmetric triangle, both the trend lines, as you can see, are nearly at the same angle and price is consolidating between it. We don't know in which direction the price will break on the upside or on the downside. We have to wait and see till the actual breakout on the upside has happened or the breakdown on the downside has happened. Once it is done, then we can take a position plan to take a position in that particular scenario. So here I have Bitcoin Daily chart open. So as you can see here, here if we connect these swing loads, this one is two and swing highs, this one, and this two, we can draw these two trend lines which gives us a descending triangle essentially because this line is largely horizontal and these swing lows are slowly declining. Then we can see that this breakdown occurred and the price went down. This is essentially the same pattern. Which we discussed, swing lows keep getting lower, but lower line remains most largely horizontal and at some point of time, these buyers give in and sellers take over. The price keeps going down. In the same chart, here we can see an ascending triangle. So if I connect these swing highs one, two, three, and these swing lows one and two. Remember for drawing a trend line and drawing a trendline for any pattern hidden shoulders, wedges, triangles, or anything else, we need minimum of two points. So once you connect them, you can see that this is largely a horizontal line, and this is landing above with all swing lows. Making higher highs, this one and then this is a higher high. At this point of time it broke out on the upside and the price kept moving up. In the same chart, we can find a lot of triangles. In fact, as I said, triangles are one of the most commonly occurring patterns, you would be able to find triangles in any chart and frequently. Now again, this is a descending descending triangle formation because this line is largely horizontal and these swing highs are declining slowly and then this breakdown occurred and the price went down. Here, this is more like a symmetric triangle because both lines are slanting and in this case, we don't know where exactly the breakout will occur or breakdown will occur. Price here you can see the price went in a very, very narrow zone here and there was no clear breakout or breakdown until very late, even after the prices have moved out of the triangle and then after that only, the prices kept moving up. So this is an example of symmetric triangle. Here you can see this is a wedgesh formation. This looks like a wedge because both the lines are slanting upwards, so this could be called a rising wedge. But if you remember, rising wedge is a reversal pattern. Prices are moving up and that span this pattern occurs and then price reverses from there. But in this case, the prices are moving down earlier. This is not technically a rising wedge. This is what I mentioned that some irregular pattern. You could call it a wedge, but this is not really a reversal pattern. Here, we will wait and see in which direction breakout or breakdown is occurring. In this case, the breakdown occurred at the lower trend line and the price kept going down. Here is another one. This again, looks like a falling wedge. These two examples I included just for clarity's sake so that even wedges are triangle. But falling wedge, that again is a reversal pattern. If you remember, prices are falling as an example and then this pattern starts forming. And then prices reverse from there. But in this case, this ended up being a continuation pattern. Prices were moving up and this consolidation occurred and then price continued moving up. It is not essentially technically falling wedge because the prices were not falling before this formation occurred. This is another triangle essentially a breakout occurred on the top and price kept moving up. And here I have Euro USD open. Here you can see at this top, this is a descending triangle because this bottom trend line is largely horizontal when I connect these swing loads, and this is declining or lower swing highs formations. Once I connect these things, I can draw this and then you can see the breakdown occurred and the price went down from this. Do I have any more examples? No. I guess, this gives you enough information. So I suggest you to sign up for trading Ve free account if you have not already, if you already have one grade. And whatever patterns we have studied so far, like triangles, wedges, head and shoulders, you try to identify those patterns and in all time frames because these patterns do not occur, let's say, only in weekly or daily, they occur in all time frames, even in 5 minutes charge, 15 minutes, 1 hour. So you can do this exercise. I will really help you in recognizing the patterns. A 33. [Consolidation & Continuation Patterns] Flags: In this video, we are going to take a look at flags, which is another important and commonly occurring pattern. So flags are essentially trend continuation formations and they form during strong uptrends and down trends. Flag consultations, they offer a good opportunity in case we missed the initial uptrend or downtrend. They keep providing us opportunity if the trend is strong, enter at a later stage as well. Flags are typically of two types, bullish and bearish. This is what a Bullish flags looks like. You are in an uptrend and before this assume there was some consolidation from this price broke out and this trend came here, another consolidation started and then price broke out from this. This is how it looks. And here you can see there are like, you know, we have shown one, two, three touchpoint. It's not necessary. Sometimes there could be just two touchpoints. And as you remember, for drawing a trend line for any pattern or, in fact, just a pure trend line, we need at least minimum of two points. So there have to be two points at least. But it's not necessary that there will be only two point or three point or four point. There can be a number of points, and consolidation could go on, you know, for a much longer period if it has to. So this is a bullish flag. Sorry. Yeah. Opposite of that is a bearish flag. Price is down trend from some consolidation, price breaks down, price comes down and then this flag formation occurs and eventually price breaks out. If the price breaks out downtrend, then the price keeps on moving down. This is how a bearish flag looks like once we have identified a flag, bearish or bullish, we also need to know what to do with it and how to take advantage of the formation. To do that, we need to understand how do we measure the target for the move once this formation has occurred. For that, what we typically do is we take the price, uh, when the move started, let's say we are looking at a bullish flag, se move started here. Maybe there was some consolidation or maybe some downtrend here or whatever it is. So this move started from here and then we take the um, size of this move to the highest point of this bullish flag and this will be our potential target, we place this target from the bottommost part of the bullish flag formation from there, the same size would be our target. And opposite is the same opposite is true for the Bears flag where from the point the move started, we take this point in this case, and the bottommost part, this one, we take this size, and then we put the same size here at the highest point in the Bears flag and from there, we can get the potential target move. This we are going to take a look at the real charts, and I think that will be more clear. So this is a target and then so far we have seen a lot of different patterns like triangles, wedges, flags now, pennants. Pennants are also flags or triangles, when instead of a parallel flag, we get a pointed flag, we call it a pennant, not much different. It's important that you understand all these patterns are some consolidations, you don't need to get confused with the nomenclature and remembering all these names flag, pen and wedge bullish, wedge, rising wedge. You just need to focus on the price action. Once you understand this price action and you have spent enough time reading charts, you will be able to see that this is some consolidation and after this consultation, there could be a uptrend continuation or a downtrend continuation or a reversal or focus on the price action part and not just these formations or the name remembering the names of these formations. Okay, now that we have seen some theory of the flags, let's move on to the charts. So here I have the gold spot chart open, Daily chart. So here we can see a flag formation, the price has been in a downtrend. It's making lower highs and lower loans, as you can see. And then at this point of time, it started making this flag formation, right? And then it eventually broke down from this formation. So now, how do we take advantage of it by taking the potential size of this formation? So now we can see that this trend this move started from this point, right? So I will take the close value let me remove this. Now, if I take the size of this to the lowest point or the lowest close of this and then I take the size, I take it from the highest point. This is my potential target once the price broke down here. If I took an entry here, Zoom in my trade, short entry here, then they should have been my target. As you can see the target was met. In fact, target went slightly the price went even below the target and then it reversed. So this should have been a good trade. Let me look at Bitcoin chart now. This is also a daily chart. Here you can see the price has been an uptrend, and then this flag formation occurred. After that, the price broke out. Again, we will do the measurement. So here you might be confused like, you have to take size from here or here. So I typically try to be conservative about my targets, so I take the smallest possible move in this case, this one. This itself is a one complete move from here to here. I take the size of this, even this comes about 25%, which is not small, and I take this from the lowest part of this flag, which is in this case. Now, it comes around this. When the price broke out, I would have expected this to go at least till this point, but it went even more than this point. So this uptrend lasted for quite some time. And then here you can see another flag formation. Now, you can see that this flag is a bit expanded. It's not like, you know, parallel completely parallel. So this is what I was saying that you don't need to pay too much attention to the exact formations or the nomenclature, the naming of these patterns. You have to look for consolidation. If it is an uptrend and then consolidation occurs in this form, then, um, you should know that there is a good chance it might continue on the upside. So now once it broke out from this, you can see the price kept on moving up. In this case, if I take the measurement, I could possibly this will be too small to take a meaningful tread. I could take its size from here or even here. Maybe let me take it from here and see if this was 125% move. I put in the lowest part or the lowest close of this. In this case, you can see the price target was not met, even though the price went to kind of, you know, um, very close to the target level. That's the reason I was saying that we should be always very conservative. Even if let's say the target, and I'm not talking about flags, it could be any pattern, right? So once we take a target, so let's say the target is 50 points. So we should not really plan for 50 points capturing the exact one because um technical analysis is not science. It does not work in exact way. So you should be conservative. You have to, you know, maybe, you know, reduce ten to 20% depending on your comfort zone and kind of, you know, accordingly. So maybe it's 50 point should is your technical target, then maybe you should only aim for maybe 40 points, 45 points, something like that. That might work better for you. So now from here, you can see the downtrend started and then uptrend resume for some time, then again, this plaque formation occurred. In this case, also, if you have to measure the size, you will take the again, I can take it from here. This is what I would prefer. But you can also take it from here. If you want to be more aggressive, I would take it from here and we'll go to the highest point and then we'll move this target to the lowest point. Here you can see the target easily achieved in this case. And even if probably if they took this from this lowest point, I don't know whether it was done or not. No, it was not. That's the reason I think we should always be conservative about, coming up with the targets. So now here the down trend resumed and here you can see in this downtrend, this is another flag. Now, you could argue that this is some expanded formation. This could also be called a triangle. So yeah, that's why again, like I said, do not pay too much attention to the naming of these things, pay attention to the consolidations. And in a downtrend, this kind of consolidation means that it's a possibly a trend continuation pad. Here again, if I measure the potential target size, I will probably take it from here. Because this move this move then take it from here or even here, it was easily met if I could possibly taken even a bigger target in this case, and that would have worked as well. Okay, so I guess that's enough and when there is a strong trend, you will um, keep finding these flag formations, frequently. These formations give us good opportunity to enter because for example, if I did not get to enter here in this case, I can actually get in here in this downtrend. Now you can also see here also, you can see this was another kind of this is also a flag pattern at a much bigger level. Now, I noticed this and in this case, in this case, I would have taken a target from this point. This is a much bigger and then if I take it here, I can see that the target was easily met. Flag formations occur frequently when the trend is strong, be downtrend up trend and we have to take advantage of it. 34. [Consolidation & Continuation Patterns] Box/Range: Box or range formation is also a commonly occurring pattern, which you can find in most of the charts across stocks, cryptos, forex, commodities. And boxes and ranges are typically long consolidations and breakout and breakdowns from these consolidations can provide good trading opportunity. Typically, the longer the range in terms of time, the better the move. So if we can find a good range in let's say weekly or monthly charts, you can expect that a very good move could happen once a breakout or breakdown has happened from that. So in the context of boxes, I would like to mention about Nicholas Davis, who was a professional dancer and a self taught investor. We came up with Darvas box theory where he used the same principle of stocks trading in a tight range before breaking out and then forming another range. So he has described his trading strategy in his popular book, How I made $2 million in stock market. So I, um highly recommend that you read this book in PDF in paperback or whatever format you can find on Kindle because this would give you a good understanding of trend following and momentum. So this video is not about Darvas box theory, but I think this is relevant, so you might want to take a look at this. Now, coming back to range formations, you can see that ranges are typically formed when price kind of, you know, goes to level, comes back, and then goes back again to the previous level. And then it kind of keeps, you know, going to and fro within a well defined range, right, like this. And if you imagine, you can imagine, some kind of box around this. And that's where the box comes, you know, when we say range or a box, right? So now after this range has formed, there could be a breakout or could be a breakdown. We don't know, so we have to wait and see where the price action occurs and, you know, what kind of clue we are getting depending on that we can take a position. So now that we have a box formation or a range formation, how do we measure how much move we can get once there is a breakout or a breakdown? So in case of these ranges, we typically take the height or the size of the range itself, in this case, this one. So this is the height or size of this range. So now if a breakout occurs from this range on the upside, so the same height or the size would be our potential target. And if there's a breakdown occurring where the price breaks below this range, then the same size this one, we can take as a target on the town side. So that's how we can measure the potential target if there is a breakout or a breakdown from a range. So, yeah, I mean, this is the same thing like, don't get confused with Darvas box theory because that's a trading method, well defined trading method, you know, based on trend following where there was Nicholas Darvas used 52 week high stocks with good fundamentals, and then, you know, started tracking them at how they are moving. And as soon as there is a box consolidation, he will take there is a breakout from a box consolidation, he will take a position and he will start trailing his stops price has moved from that box to the next box, next consolidation, and then he will keep on trailing it until the price breaks down or hits his stop. So to learn more about it, I have added a link in the resources which you can refer to. But this video is primarily meant for range formations. So now that we have learned about range, let's go to the charts and see. So here. So here I have a Google Di chart. So now here you can see the price has been uptrend here, and then it has formed a base which looks like kind of, you know, a rectangular shape. And then after this consultation occurred, the price broke out, took support again on this box or range and then moved up. And then it formed another range here. Which is kind of, you know, a rectangular shape because there are multiple touch points here, one, two, three, on the upside, also, one, two, three, four. And then same thing happened. The price broke out from this box, and then it formed another consolidation, and then eventually price broke out from this. So, in fact, this is somewhat similar to how the Darvas box theory also works, but there is some difference in the stock selection method and everything. Now, here is Nvidia. So here you can see this box formation occurred where you got to touch point on the upside, two touch point on the bottom side, and then price was in the uptrend, and after this consolidation, price kept on moving up after the breakout. So here you can see, the target of this range was easily achieved, in this case. In fact, the price kept on moving. So I also have a Bitcoin example here, which is a pretty recent one, December. There was a breakout from no December around October, yeah. So you can see this kind of box formation occurred and this range and then price broke out from this and kept on moving up. And in this case, also, you can see the target was easily achieved. Yeah, that's about range formations and how do we take advantage of these formations in trading. 35. [Consolidation & Continuation Patterns] Cup & Handle: Hi. In this video, we're going to study a very interesting pattern called cup and handle. So as you can see here, it is called cup and handle because the shape of it is like a cup and then there is a small handle. This handle is typically in shape of a zigzag, which you can also call a flag. That looks like essentially a cup and handle. How do you measure the target for cup and handle? For measuring a target of a cup and handle pattern, we take the height or size of the cup. So this is the height from the neck line. This is what our potential target will be if there is a breakout. That's how we measure the target. There are a few other important things which we need to be aware of while working with cup and handles. Cup should ideally have a nice round bottom. Wider formations usually provide more reliable signal. When we say nice round bottom, essentially should look like a cup and it should not too zigzaggy and uneven. And wider formation usually provide more reliable signal it essentially means a cup which has taken a lot of time to form is more reliable than a cup which has taken probably shorter time. Wider formations usually provide better signals. Another thing is we should avoid cups with V shape. A cup which is form something like sharp down and then sharp move up something which looks like a V. Such cups, we should avoid. We should also avoid cups which are too deep, like it is pretty deep correction before the cup formation has occurred. We should also avoid such deep cups. And handle should be roughly half or less of the cup size. For example, if this is our cup, handle should not be much deeper or more deeper than roughly half of the cup size. So once our cup and handle formation meets all these criterias, we have a fair chance that it might work is expected. Now that we have seen the theory, let's jump onto the charts. Here I have NVDA, Dili chart, and here you can see the stock has been in an uptrend, so it's a trend continuation. Then we have a nice cup formation here. And then we have a handle formation, which is roughly half the size of the cup. And you can see as I was saying that this handle formation typically occurs in a zigzag or a flag kind of formation. So which is why this looks like, you know, the whole thing looks like a handle of this cup. And then after the breakout has happened from this, it has moved up. Uh, like this. For measuring the size, we will take the price measurement tool and we will take the height of this. It is about 11%. From the breakout point if I do it here, we can see the target was easily achieved and the price kept on moving up even after that. As you're going to study more indicators, more information, you would study about moving averages. In moves like this, we don't have to exit here and we can trail the move using moving averages. We are going to cover that in technical indicators soon. So now let's take a look at another one. This is in bitcoin, and here you can see it as a nice long formation. It's not very smooth kind of cup, but it has a long formation and it qualifies as a cup. It has two touch point here, and here on this neckline, and then there's a small handle, which again, looks like a flag. Then there's a breakout and then the prices moved up. And for this, if we do the measurement, this is the most bottom part of it. This movie is about 30% projection and from this point, as you can see, this target was achieved and the price kept moving up even after that. That's cap and handles. 36. Introduction to Technical Indicators: Hi. Now that we have covered the price action, candlestick patterns, chart patterns, let's move on to technical indicators. So what are technical indicators? Technical indicators are essentially derivatives of price and volume data and open interest data also. Open interest, we are not going to cover because that's part of futures and options, which is not in the scope of this course. Coming back to technical indicators, technical indicators are mathematical calculations based on historical price and volume data. They are used to forecast future price moments and identify potential trading opportunities. Technical indicators help traders analyze market trends, conform trade signals, and manage their risk effectively. So we have different type of technical indicators. We have trend following indicators, then we have oscillators. We have momentum indicators, and then we have volume based indicators. So we are going to take a look at all of them briefly, and then we will dive into individual indicators along with chart. Okay, so moving on with trend following indicators. Trend following indicators help traders identify the direction of the prevailing trend and potential entry and exit points. Examples of trend following indicators are moving averages, trend lines, trend lines we have already covered. So in this section, we are only going to talk about moving averages. Then we have oscillators. Oscillators measure the speed and magnitude of the price movements. They help identify overbought and oversold conditions in the market. So basically, when we say overbought, it means that there has been a lot of buying, and now it is exhausting and selling might come. And when we say oversold, it means there has been a lot of selling and selling might exhaust at this point of time and some buying may come. So basically, these are signs reversal signals. So there are a lot of oscillators, and some of the popular ones are relative strength index, also known as RSI, and then stochastic. There are many others, but in this course, we are only going to stick with some primary indicators. NN, we have momentum indicators. Momentum indicators measure the rate of change in price movements. They help traders identify the strength and direction of the price momentum. Examples of momentum indicators are moving average convergence divergence, popularly known as MGD and rate of change ROC. Finally, we have volume based indicators. They help us analyze trading volume to confirm the strength of price strengths and identify potential reversals. So if you remember, in the volume video, we mentioned that volume is a very important metric to identify the strength of trend and whether there are enough buyers to take the price higher. So volume based indicator analyze all the data and help us make more informed decisions. So some of the examples of volume based indicators are V we volume weighted average price and OBV on balance volume. It's important to note that most of these indicators, they are derived from price and volume data, hence they are lagging in nature. Basically, most of the indicator follow what the price is doing. They do not give you any advanced signal of price, what price might do. You have to keep this in mind. So you have to always give more weightage to price action. When I say price action, we mean candlestick patterns, chart patterns, support resistances, trend lines, whatever we have seen so far. So you have to give more weightage to those things because they give you a more real time picture of what might happen. There could be a breakout, there could be a breakdown or the price might remain in range or, you know, and then use these indicators to confirm your thesis that hypothesis that we are in uptrend, there might be a breakout or we are in down trend and after consolidation, there might be a downtrend resumption. So use these indicators to confirm that alongside price action. Price action should be your primary um information for making a trading decision. Now that we have covered some theory about different type of indicators, let's move on to some of these individually in depth, stay tuned. 37. Moving Averages (Part 1): In this video, we are going to discuss about probably the most important and most widely used technical indicator called moving averages. Moving averages are essentially trend following indicators, and as you can guess from the names, they are nothing but the average of the price for a given period. If we say 20 period moving average, it is nothing but average of the last 20 period or when I say period, it depends on the time frame. If I'm using a five minute time frame, it means average value of 20 candles on a five minute chart. For this, we typically use a closed value. Moving averages help readers identify the direction of the prevailing trend, filter out noise in the market, and generate buy or sell signals. There are different kind of moving averages available, which are typically used in stock markets and other asset classes. The most common and most widely used are simple moving average and exponential moving average. Then there are weighted moving average, smooth moving average, and there are many others. But most of the time, most of the traders typically either use SMI, simple moving average or EMA, exponential moving average. What's the difference in these two? Simple moving average is your regular average. If I say, give me an average for a period of ten, that basically I'm saying that I want to average the last ten close values of a given time frame. It could be day, it could be week, it could be hourly, 5 minutes, 15 minutes or whatever period. When you take a average of the given period, N in this case, then that becomes your simple moving average. Readers often use the SMA to identify the trend direction. When the price is above that SMA, it is assumed that we are in an uptrend, and when the price is below the given SMA, we assume that the current trend is downward. Let me try to lot this simple moving average. Here we have a Bitcoin daily chart. I will go to indicators, type SMA and you can see we have moving average simple. I added to the chart. By default, it has given me a nine period SMA, as you can see in the settings. Period length is nine. It essentially means it is taking the average for the last nine days because this is a daily chart. Close values of the previous nine days and it plots them on the chart. Here you can see this moving average is plotted for you. That's the reason you don't need to worry about how any technical indicator is calculated. You might want to just know it for information purpose, but you don't really have to worry about knowing the details of how it is calculated as long as you understand how it works and what exactly it calculates. This is your simple moving average. The next one is exponential moving average, EMI. It is a type of moving average that places greater weight on the more recent data points. For example, if I'm taking the same nine period moving average, in simple moving average, we are simply taking a sum of the last nine values and dividing it by given period. But in case of EMA, we also give a weight or a smoothing factor. That is applied in a way that it gives more weightage to the more recent data. And the reason for doing that is exponential moving average, they have become more responsive to the changes and more responsive to the changes that have occurred in the more recent time frame. Traders often use EMA for shorter term analysis and for generating trading signals. EMA react more quickly to price changes because we are giving more weightage to more recent data points. Hence it is useful for identifying short term trend reversals or even entry and exit points. For calculating EMA, we use this formula, close minus previous EMA multiplied by a smoothing factor. This smoothing factor, we use this formula where smoothing factor is calculated as two divided by N plus one where N is avoid given period. If I'm using let's say nine day period, then it would be the value of N will be nine in that case. Then we add the previous EMA value to it. For the first period, there will not be any previous. For first period or for initial period, we use the SMA for the given period. That's how EM is calculated. Again, you don't really have to remember this or understand, uh, know that EMA is different from SMA in a way that it gives more weightage to more recent data. Hence, it's more responsive to recent price changes and because of that reason, it works better for smaller time frames. Here are some commonly used moving average periods, be it SMA or EMA doesn't matter. These are some of the most commonly used moving average periods, nine and ten. As you can see the default was nine when we've just plotted the chart. A lot of people use ten and that could be ten day moving for nine day, nine week, ten week, it depends basically on what kind of trading you do. If you do intraday trading, you might be using five minute, 15 minute chart, even hourly charge. If you are into swing trading, you might be using hourly chart, four hour chart, daily charge. And if you are into positional trading for longer period, you might be using daily, weekly, monthly kind of charge. It depends basically what kind of training you are doing. But these periods are probably the most common ones then 20, 21 period, 40, 50 period, 100 period. And then 200 period, 200 period is probably the most widely used MA, which is used to understand the long term trend of a given security. So 200 period is very important because a lot of people are watching it, be it the retail traders or even large institutions. Everybody watches that 200 period, it could be 200 day, 200 week when a price closes above a 200 period. It is assumed the price might be changing trend from down trend to uptrend and stays above 200 period, it is assumed that the price is an uptrend, and when the price crosses below 200 period, it is said that the price now is crossing from uptrend to downtrend, and if it stays below 200 period, then it is said that the price is currently in a downtrend. Apart from these fixed periods, a lot of people also rely on Fibonacci periods. Fibonacci series, if you are aware, is one, one, two, three, five, eight, 13. Fibonacci series has a lot of importance in breeding and also in nature. And as we will see later, um, a lot of people prefer Fibonacci periods, uh, eight, 13, 21, 55, 89. It depends and it's not necessary that you have to use any of these periods. You can use any of the period that you like and you feel that it's working for you. It could be let's say 15 period. It could be maybe 45 period. It could be any period, essentially. So it's not like you have to stick with them. But these are important, the reasoning because a lot of people use these things when a lot of people are using the same periods, that means a lot of people are deciding whether to enter exit or remain in a trade based on these moving averages. You might want to stay with the majority. That is the benefit of knowing the commonly used period and using them. Now that we have seen how these moving averages are calculated, how do we use them or how do we apply them in our training? One of the main reasons for using moving averages is to identify or understand primary trend. If I move on to the chart and let's say I use make it length 200 period. Now you can see it has lotted a 200 period. In this case, 200 day simple moving average. Now if the price is above 200 day moving average, and we can assume that the price seemed to be currently in an uptrend. As you can see, the price once crossed above it kept going up. Here it went down, but did not go down. A lot and crossed again and now also it's holding above this. By looking at this, here you can see, once the price crossed below 200 moving average, it stayed down for a lot of time and kept on going down till it crossed above 200 moving period. That's how you can use moving averages too. Understand the primary trend. Right now, for example, if you ask me now, based on moving average, what is the current trend? It looks bullish or it looks up. Let me also do one more thing. Let me also add EMA of the same period, 200 Let me also change the color to red so it's more easy to differentiate. Now you can see both are 200 period moving averages, but EMA, as you can see in the red one, it is responding more quickly to these changes. It's a bit faster than your small your simple moving average. So it's again depends on your personality and your trading style, which of these you want to use or you want to use probably both of them, it's up to you. There is no hard and fast rule that you should only use SMA or you should only use EMA. It depends on you. So a lot of people prefer to stick with simple moving average because it takes its time and it gives lesser fake signals because it's, you know, slow to turn. But even fast moving average, it's quick to respond and sometimes it could give you signals which are very quick, but again, turns against you. So each has their own advantage and disadvantage, so it's up to you, how you want to use. Going back to the presentation, um, second application is filtering noise. If I'm using, let me disable both these things. If I'm just looking at this chart, on its own, without any indicator. Then here you can see too many prices going up coming down, green bar red bars. In this region, I could feel that there is a very strong red bar here and with volume, lot of volume. I might feel that maybe I should the trend is now changing. But basically what I'm trying to say is a lot of noise here. But if I plot a moving average here, I can see that yeah even though this has all happened, there is so much of noise, but the trend still remains up the price came down a bit and then kept moving up as long as the price stayed above this moving average. That's how you can use moving averages to filter out the noise. Third, moving averages often act as dynamic support and resistance in trending markets. This is important that this happens in trending markets and could be up and down when the market is sideways or very slow to move then these support and resistance may not work that well. Now let me show you so here you can see price broke below this thing and it tried to cross this moving average, but it could not cross here it came back down. This basically moving average here offered resistance. Then you can see, again, it tried to cross it. Here again, it acted as a resistance. The price came down, but then the third attempt, it broke above it and then kept on moving. Now if you let me use a smaller period moving average to show you how this behaves in a trending market. Here you can see, now you can see that this is a clear uptrend here and once this uptrend started, it has taken support on this here, one point, here, here, here, here, I broke down a bit here, but again, kept on moving. Then it finally broke down. This moving average acted as support from here to here, right? This could be a good way of trailing when you are in a trade. That till this moving average is not broken, you might want to stay in that trade. So that's how similar way in a downtrend this would act as a resistance. Here you see here you can see a downtrend. Now this moving average acted as a resistance here, then here it was breached for a brief period, but then again, the downturn continued. Finally, it was breached more decisively multiple times and then price reversed from there. That's how we can use moving averages for identifying dynamic supporting the restance zones. Another important application of moving averages is to generate buy and sell signals. One common way of doing it is MA crossover. For MA crossover, we use two moving averages. One of them is fast and when fast essentially mean a smaller period time frame, smaller period moving average, and then a slow moving average, which is a longer period moving average. Let me go to the chart. Now I already have 20 period SMA apply to this, let me also add, let's say, 50 period. These are some random moving averages I'm taking. I will change the color of this to say green so now you can see there are a lot of crossovers between these two moving averages. For example, here at this point, when the 20 period crossed above the 50 period, basically the fast moving average crossed above the slow moving period, I could probably enter in this and the price from here, it kept on moving up. Then there was a crossover here, the price went down. This will be my entry and this will be my exit. Here again, crossover and then here, I exit. This is very basic strategy. I do not recommend you using anything now similar to this, but a lot of people use it in a longer time frame, but I would not advise you to just make your decisions based on um moving average crossovers. Here also you can see the crossover and work decently price went from here to this point, uh that's how you use it. In particular, there are, um two moving average crossovers, 50 period, and 200 crossovers which hold special significance in trading. And when these are applied, let me change this 50 we already have, let me change at 22 200. Now, when at 50 period moving average crosses below 200 day moving average, it is called death crossover because it is assumed that now the given asset or security might be going in a wear phase or a downtrend. As you can see here, once this happened, the price remained here for some time, but eventually went down quite a bit. And then there was a crossover of 50 above 200 and then flies went up for some time before it gave a false signal here briefly and then we again got a golden crossover. When the 50 moving average crosses above 200, we call it a golden crossover and when 50 moving average crosses below 200 moving average, we call it a death crossover. That's how you can also use moving average to generate some buy and sell signals. 38. Moving Averages (Part 2): Now that we have seen some of the applications of moving averages, let's also take a look at some of the problems which comes along with moving average. So as I was showing you, moving averages work great in trending markets, but they will start producing whipsaw signals like crossovers and then cross unders and likewise and slow in sideways and slow moving markets. Hence knowing when to rely on moving averages and when to ignore them is very, very important. You have to rely on moving averages, primarily when you know that there is a strong uptrend or downtrend, then that's a time when they work really best. When the market is flattish sideways, you should avoid relying on moving averages. Secondly, they lack the price action and hence produce delayed signals. Since moving average are essentially average of the previous values, previous 20 or 50 or whatever. It's always a lagging at indicator. It will only give you what price is doing. It will only tell you what the price is doing based on the historical data. So many times, what happens is the signals it produce. They are very late. By the time you see a price crossing above moving average, let's say, a lot of move has already come. In the price that you have missed because you have been waiting for price to go above, let's say, moving average or below moving average. So you will get many of times late entries and same thing might happen for exits. When price if you are in long trade, the price has already fallen a lot before it goes below moving average. So whatever profits if at all you are making, those are already gone, most of them. You will get late entries and late exits if you're relying too much on moving averages. And finally, moving averages do not help you in any way to predict future price moves. So they do not have any kind of prediction capabilities. Some of the other indicators, even though they are lagging indicators, but they could still give you some kind of forecasting capabilities, but moving averages, they do not do that. Now that we have seen, uh, some things about moving average, let's also cover some practical aspects of using moving averages in trading. Now different assets. Different assets they may respond differently to different periods, and also to type of moving average exponential or simple moving average. You should not stick to let's say if you're using let's say ten different or 20 different assets, maybe you're using cryptos, maybe you are also using stocks, trading stocks and forex and everything. Cryptos, by nature, they are more volatile. A specific kind moving average might work well for crypto, but the same moving average may not work. That well for stocks because stocks are relatively less volatile. Not all of them, but most of them, right? As an example, for more volatile acids, we should prefer smaller periods and EMAs because EMAs are quicker to respond to volatile moves and get timely signals for less volatile acids, you should stick with higher period. When I say higher period does not mean ten times higher period. It could be as simple as for more volatile acids, you might be using, let's say, nine, ten period and uh um, less volatile acid you might be using 20 period, 21 period kind of. Then another thing is slope of a moving average, it provides a lot of clues about the strengthening or diminishing. When the moving averages go flat, I mean, let me show you in a chart. So here in this zone, you can see this 200 period moving average, but this is a very large period. That's why even despite this being flat, there has been a lot of activity here. But you can see during when this first flat, there were a lot of all signals like price, there was a cross under here, then above here, then again, here. These signals are whipsaw signals. When you see a moving average going flat, you should avoid relying on moving average signals because that means there is no clear trend. You should always use that slope. Now you can see that there is a slope nice slope here, downward slope in this 200 period moving average, and the stock has moved nicely. So here we can see there is a positive slope and then stock moved up fairly not very well, but it was okay and then continued moving up despite this fake crossover here. Slope provide a lot of clues, so you should always pay attention to the slope of moving averages. Um, you can also use multiple moving averages, one short, medium term, and another longer term to validate current trend instead of relying on just one MA. For example, we say that, when the price is above 200 MA, we are in an uptrend. Instead of just doing it, you can also use two moving averages, just like in this case, we are using 50 and this. When the price is above both of them, then you should be bullish. As soon as the price goes below any of these, you say that trend might be changing. Right now, if you're using only 200 moving average, you will exit when the price goes below here. But if you are using two moving averages, you will exit here itself because you saw that the trend is probably diminishing here. This is the way you can make moving averages more effective by sticking with, you know, two moving average. For example, here in this case, we are using both of them. Do we know that trend is downward. But as soon as the price goes below both of them, here, in this case, you can take an entry and stay in this trade till it goes above any one of them. Here it came above this. From here to here, you would have got a nice move. And then you will not go long here because this trend is still down. You will only take short short rates here in this case. When the price crossed below, this 50 moving average, you could again take a position. In this case, it may not have worked that well, but you get the idea. Using two moving averages is probably better than using one moving average for conformations. And, uh, finally, avoid using sorely moving averages for generating buy and sell signals, combine them with either price action or other indicators. That's the same thing as I was saying earlier that using moving averages on their own may not work well most of the time because they work only well in trending markets and markets are typically trending only 30%, 40% of the time, maybe less than that. Russo of time, the markets are mostly sideways and moving very, very slow. So you should not use them even though you can, if you want to by using crossovers and all those things, but you should still not use moving averages for generating bi sell signals always give attention to the price action and combine moving average along with that. If it confirms that, what you were thinking is also being shown in the moving average, then definitely go with it. That's all for moving average. I know it's been a long session, but there was no other way we could have made it shorter because it's very important. See you in the next session. 39. Moving Average Convergence Divergence (MACD): Hi. In this video, we are going to discuss MGD, which happens to be my favorite indicator. MGD stands for moving average, convergence divergence. It's a momentum indicator which also happens to be an oscillator that measures the strength and direction of a trend based on convergence and divergence of moving averages. Too many words don't get confused. When we say convergence and divergence of moving averages, it simply means MGD is essentially nothing but a difference between two moving averages. We're going to see how we calculate MGD. We'll come to that and before that, we need to understand why MGD is so useful. That's because MGD helps trader identify potential trend reversals, confirm trend strength, and even generate buy and sell signals. What are the components of MGD? MacD essentially has three components. First one is the MGD line. MGD line, as I said, is calculated by subtracting two EMAs, longer term EMA, and a shorter term EMA. Longer term EMA is 26 period EMA and shorter term EMA is 12 period EMA. These are the default settings, you can change them, but I've seen that most of the time people don't tweak these settings. Second component is signal line. Signal line is a nine period EMA of the Magdine. Signal line is nothing but a nine period average or exponential moving average of the Magdine. Basically, what this does is it smooths out the Magdline and helps us generate trading signals, buy and sell signals. Third component is histogram. Histogram is a difference between the MGD line and the signal line. Positive histogram value indicates bullish momentum, while negative values indicate bearish momentum. Now that we have seen the different components, let's see them in action. I will go to the chart. I have SNP 500 open. I will go to indicators, search for MGD. Can see moving average, convergence divergence. And to the chart. Now the indicator is added at the bottom. Eight. Let me span this section so you can see it clearly. Now here you see two lines, blue one, orange one, and then we have this histogram, a plot of difference between these two lines. I said earlier in the video that we use MGD for generating buy and sell signals for confirming the trend strength and also for forecasting reversals. Let's start with generation of treading signals. Now, we say a bio signal is generated. When the blue line, the MGD line crosses the signal line, the orange one and this should happen when the value of both these lines is less than zero. Basically, this is a zero line, the center line, you can see here, zero. When this crossover happens below zero line, we say a biosignal is generated when the MGD line crosses below the signal line, we say a cell signal is generated when that happens above the zero line. I explain it, let me use the vertical line. Here you can say the crossover happened here. And then the cell signal occurred here. After this, there was a whipsaw signal, but this is not a valid by signal because this has occurred above zero line. We say signal, a valid by signal should happen below zero line and a valid cell signal should occur above zero line, right? You can see that here the bio signal was generated and then here we got the cell signal. Here you can see the S&P move nicely till this point. Let's look at some more signals. Here we can see. We got at this point, we got a crossover, and then we got a cell signal. Here. So in this period also, the price moved up. And as you can see here as well, the same thing occurred. Signal occurred here and we got the cell signal somewhere here in this time also, the price moved up. After this cell signal came, you can see the price went down. Here the cell signal came, the price did not go down, but it would have worked as an exit signal for us if you are taking a trade from here to based on MGD. This is how we use MGD to generate aid signals. Now, what is the use of histogram? Histogram is a difference between signal line and the MGDiline as the value of histogram increases, it shows that the trend is strengthening. Here you can see the smaller bars initially and the dark green bars and they are increasing in size. That basically shows the strength of the move is increasing. Then we still have some green bars here, but they are reducing in size, that basically means now the trend is diminishing slowly. When it has gone below zero, we say that now the momentum is gone. The bullish momentum is over now. So that's how we interpret this thing on the downside, same thing, as the downtrend momentum increases, the value keeps increasing in the negative zone. It keeps as you can see, these are dark red bars. Till this point momentum was increasing, then momentum started diminishing a bit. It increased further again till we finally got a bullish crossover. That's how we interpret MGD and use it for generating trading signals. I have also seen some people use it in a way where they use this this crossover as a long signal and stay in the trade till MAGDi has crossed back below the zero line instead of exiting at this point of time. So this would sometimes work pretty well when the trend is really strong, but sometimes it could actually, you end up, you could end up losing whatever profits you made. Like for example, in this case, if you exited here, you would have entered here roughly and exited here. Basically, you can see that, you know, whatever you made, it was all gone in this move. But same thing if you entered here and did not exit here on this cross under and stayed in this till the Magine cross below zero at this point. Here you can see this was a large move, even though you took this negative a bit of loss here, but even then the overall, this was still a quite profitable trade. This thing might work pretty well when there's a strong trend, but in regular days and regular market, exiting when you get a crossover might make more sense. We have seen how we can use MGD for generating bi and cell signal and also how we can confirm the strength of the trend by looking at the histogram. You can also interpret it in this way that when these two lines, MD signal lines they're expanding, they're basically diverging from each other, then the trend is strong and as soon as they start contracting or converging, the trend is basically slowing down. That's where it got its name from moving average convergence divergence. When they expand or increase their difference trend is increasing or improving and when they start converging, the different start reducing the trend is basically slowing down. Now, how do we calculate MGD? For calculating MG, we have this formula EMI short minus EMA long. EMA short is a 12 period EMA. EMA long is a 26 period EMA. This gives us our MGD. And then we calculate signal, which is nothing but a nine period average or exponential average of MGD, this value that we have calculated earlier. And then finally histogram is the difference between the MGD and signal line. You don't really have to remember it, the chart does it for you, does all the calculation, but you need to understand how it works. Here are the applications of MGD confirming the trend strength that we have seen, which we can do using histogram, generating bien cell signals that also we have seen. When a crossover of MGD happens over signal line below zero, it's a bias signal, sorry when MGD signal crosses below the signal line and when that happens above zero line, that is a cell signal. And the lastly and one of the most important application of MGD is its ability to forecast potential reverses using a concept called divergence. What exactly is a divergence? We say divergence occurs when the price in the MGD indicator, they move in opposite directions. Bullish divergence occurs when the price makes lower lows while the MGD makes higher lows that indicates there is a possibility of bullish reversal. That we're going to see in the chart that will make it more clear. Then bearish divergence occurs when the price makes higher highs, but the MGB makes lower highs indicating its point of potential bearish reversal. Let's go back to chart and see how it works. So let me remove these lines. Let me find some divergences here. Now, here you can see, we use the trend line. This is a higher high. The price has made a higher high. But if I look at MGD for the same period, MGD has not made a higher high. In fact, if you see closely, it has made a lower high. Right. When this happens and when this crossover happens of MGD below signal line, that might be an indication that the trend is possibly reversing from here. That's why MGD is so important because it even despite being a lagging indicator, it can forecast what might happen. As you can see, after this, the price went down, price reverse from there. This is a bearish divergence. Price made a higher high, but MGD made a lower high. Let's look for some more divergences so it's clear. Here also you can see Price made a higher high. Sorry. But MGD has not really made a higher high. It is around at the same level. This is also a divergence when MGD is not doing exactly what price is doing. It's slightly negative. This lower high, this is a lower high. If you will put a line here, you can see it's a lower high. After that, you can see the price reversed from this point. This is again a bearish divergence. Now here you can see bullish divergence. Here, you can see this is a price has made a low or low. But for the same period, MGD made a higher low. After this divergence happened on the bullish crossover, you can see the price went up. The price reversed from this downtrend to uptrend. This is a very important feature of MGD using which we can forecast I assume that if we are shot SNP 500 at some point, then after seeing this divergence, we should be alert and when we get a crossover and we see signs of reversal, we should exit the trade. That's how we use divergences and divergence is a feature not specific to MGD. It occurs in most of the oscillators as we are going to see even in RSI. Let's also take a look at another chart. I have Tesla daily chart open here. Here you can see the and cell signals have worked here beautifully. When we got a crossover here, the price started moving up, kept on moving till we got a bearish or exit signal somewhere here. And in this signal here also, you can see here signal we got the signal quite late in the move. I started here, but we got a crossover here. There was not much to make here and it would have been possibly losing trade or maybe a break even trade. But here, this one, if you see, we got a timely signal here, and this was a long move and we would have got an exit somewhere here. So this was a nice move, right? Same thing here. You can you got this nice buy signal here, and then if you stayed in this trade, you would have exit somewhere here. But despite seeing all this, I would still advise not to depend on any single indicator just like moving average for taking your buying and sell decisions. You should be doing multiple things. You should be looking at the price action most importantly and then combine the price action along with these indicators, one or more of these indicators to make buy and sell decisions. That's all for MGD. In the next session, we are going to look at SI. 40. Relative Strength Index (RSI): In this video, we are going to take a look at RSI, which is one of the most widely used indicators along with moving averages and MGD. RSI or relative strength Index is a momentum oscillator that measures the speed and change of price movements. It compares the magnitude of recent gains and losses over a specified period to assess whether security is overbought or oversold. We'll discuss what exactly is overbought or oversold shortly. RSI helps trader identify potential trend reversals, confirm trend strength, and generate bio cell signals. If Remember, MGD also did exactly these three things. RSA also does the same but slightly in a different way. First, we will see how RSI is calculated. RSI is calculated using the average gains and average losses over a specified period. By default, this period is 14. You can obviously change it if you need to, but 14 is a default and that is again, most widely used period for working with RSI. The formula involves dividing the average gains by the average loss and converting the result into a value 0-70. So this is the formula, RSI is equal to 100 -100/1 plus RS, where RS is the relative strength, which is calculated by dividing average gains by average losses in the given period. You can think of it this way that if the period is ten days or given time frame, like, 10 hours or ten weeks or whatever, in that period, how many periods were positive or gain price, and how many periods lost or in red, basically, where the prices went down. We take this average and then using this formula, we convert it into a value between sorry, 0200. The higher the value, the higher the momentum or the strength on the upside, the lower the value, the lower the momentum or, you know, weakness in the given security. So how do we interpret these RSI values? First, RSI value above 70, it is typically considered overbought. Ob suggesting that the security may be due for a pullback or reversal. When we say overbought, it essentially means that there has been a lot of buying, a lot of gains recently, and there is a chance a pullback or even a reversal might come here. Conversely, a RSI value below 30 is considered oversold, indicating that prices might reverse on the upside from these levels. As we are going to see overbought and oversold signals do not work always. They work in specific conditions. So we should not rely on RSI for generating buy or sell signals using overbought and oversold conditions under normal circumstances. Second thing or second way of interpreting RSI is using divergence, which is pretty similar to what we saw in MGD. When the prices are making higher highs, but RSI is making lower highs, that means there is a B divergence and when the prices are making lower lows, but RSI is making higher lows, then that's a bullish divergence. We are going to see again this in charts, so you don't need to remember. Third way of interpreting RSI is if the value of RSI sustains above 50, then that's considered bullish. If the value of RSI sustains below 50, then it's considered bearish. The first interpretation, that is the one which is typically used to generate bin cell signals, but as I said, we should not rely on RSI to generate reliable by in cell signals using overbought and oversold conditions, always. Divergence is for identifying potential reversal levels and sustain RSI values above or below 50. Are used to confirm the strength in the trend. Application of RSI, which is the same thing that we just saw. We can use it for confirming a trend strength. We can use it for generating B and cell signal and we can use it to identify potential reverses. Divergence is similar to MGD. Generating Ben cell signals, it uses overbought and oversold signals, whereas we saw in MGD, we used crossovers below zero and cross unders above zero for the same for confirming trends strength in RSI, we use RSI values above 50. If they sustain above it, we say, Okay, the trend is sustaining and the uptrend is sustaining, and if the RSI values stay below 50, then we say it's a downtrend sustaining. Whereas in MACD, we used histograms for the same. Here are a couple of things which we should be aware of. During strong trends, overbought and oversold readings or signals do not work as expected. So when there is a strong trend, price can stay in overbought zone for a long period of time. If you're expecting that now the price is overbought region and it should reverse, it may not happen till that momentum or that strength in the asset or the security lasts. Similarly, when there's a strong downward trend, the price can stay in oversold region for a long time, if you're expecting that now the price is an oversold region is should reverse from here, it may not happen. In the trending market, overbought and oversold reading do not work and you should not rely on RSI to generate reliable signals. Having said that, RSI overbought and oversold signals work really well in sideways or ranging conditions. Sideways or ranging conditions where markets are moving slowly and from one specific point and then coming back to some levels some Scott of support, then going back to the previous resistance. If you remember box scenario or the range scenario. In those conditions, RSI overbought and oversold signals work really well. Now that we have seen the theory part, let's jump onto the charge to see it in action. Here, I have 50 50 index. I'll go to indicator, IRSIRlative strength index, and now it is added to the chart. Let me expand it. Here you can see, there are three lines. The above line is at 70. Middle line is at 50 and the bottom line is at 30 levels. RSI value above 70 are considered over bought readings, RSI value below 30 are considered over sold readings. Here if you see price RSI value came below 30 then from this point, you can see, let me yeah. Price went up slightly, RSA value again came below 30 in the oversold region and from there, you got a reversal. Then price went in the overbought region, they stayed there for some time, and then when the RSI value came below 70, you know, prices moved down but after some time, it did not happen immediately. Here you can see again the price went in the overbought region and then we got a good reversal from. And here you can see, we got a reversal, but the price, but the RSI did not even go to 30 levels. I kind of turned even before touching 30 zone. Sometimes it'll work, sometimes it will not work, and I do not recommend using RSI overbought and oversold signals for buying and selling. Especially when you see that markets are trending in this kind of scenario, markets there is a strong trend. Second thing we discussed about RSI is identifying the strength. For example, here we can see the price stayed above 50 during this period of time during this period, we got a very good trend momentum in the security. When the price came below 50, there was a pause in that move. That's how we can also identify the strength of the trend using RSI values. Finally, we will look for divergences, which is probably the most useful way of using RSI. H. So do we see any divergences here? Yeah. I think we can see something here. There you can see price made far high, but RSI made a lower high. After this, you can see the prices reversed. This is a bearish divergence. Now here we can see the prices made a lower low, sorry. Yeah. But during the same time, RSI may fire log. After this, you can see the prizes reverse from here. This is a bullish divergence. It's similar to what we saw in MGD, and it works pretty well for both RSI and MD, divergences. I strongly suggest that if you are using RSI or MD for trading, then the most important aspect of using them is, um noticing or observing these divergences and relying on potential reversal levels. That's all for RSI, see you in the next session. 41. Rate of Change (ROC): Hello. In this video, we are going to talk about rate of change indicator known as ROC and also as momentum indicator. It measures a percentage change in price over a specified period. Period could be anything which we can define, it could be ten, it could be 14, and period is essentially a bar in a given time frame, right? ROC helps trader identify the speed and direction of price moments. It helps us identify potential trend reversals, confirm the trend strength, and anticipate price momentum changes. How does it work? Let's first check how we can calculate ROC. As I said, it essentially is a change in the price movements in terms of percentage. For calculating ROC, we subtract the price N periods ago, N could be anything from the current price, divide by the period ago price and multiply by 100 to convert it into a percentage. So essentially, if you think about it, the higher the value, the higher the change from the previous value, the bigger the number. And as the number increases, that basically means the momentum is increasing. Similarly, the lower the number or maybe the negative value essentially mean the price changes is a negative and, you know, the price is going down. So once we have calculated ROC, how do we interpret it? A positive RSC value indicates upward price momentum, while a negative ROC value indicates downward price momentum. The magnitude of the ROC value reflects the strength of the momentum. As I said, the higher the value, it means the price is going up quickly. In a way, you can also say that ROC measures the slope of the change. If it is the slope is very steep on the upside, the momentum is very strong, and if the slope or the ROC value is steep on the downside, that means the downward momentum is strong. ROC can confirm the strength of an existing trend. Basically, when the value of ROC is above zero, it essentially mean the trend is likely upward and when the value of ROC is below zero, that basically means the trend is on the downside and rising value will confirm the strength of that, uptrend or downtrend. Third way of interpreting ROC is divergence, and that works pretty similar to how we saw in MCD and RSI. Using ROC also, we can identify potential reversal levels using a divergence. Applications of ROC confirming the trend strength and ntifying the potential reversal using divergence. There are a couple of practical tips as well. We'll come to that. But first, let's jump to the charts. Here I have daily chart of Apple open. To add ROC indicator, I will go to indicators, type in ROC, rate of change, click on it. And now you can see that the ROC indicator is direct to the chart. So here, the default value is nine. We can change it to anything. I will use the value of 14. So now the changes have been applied. Here you can see the ROC has a scale of values. The middle line is zero and above values are positive and below values are negative values. ROC can be used to confirm the strength of the trend. So here you can see the slope of this. I mean, when the prices when the slope is very steep going up, you can see the move on the upside, right? Same thing here. And wherever you can see the slope is very steep, you can see the momentum is rising. And when the value as long as the value of the ROC is above zero from here to let's say this point, you can say the price has been an uptrend. Once the value switches to below zero, then the trend changes and it becomes a bearish thing. That's how we can use ROC to gauge the strength of the trend and also whether the trend is bullish or bearish. The last thing was divergences. Here, let's try to find some divergences. Here we can see the price made a higher high, but for the same period, ROC made a lower high. That's a bears divergence. After that, we can see after this divergence was made, the price went down. Here itself, you can find that the price made a low or low but ROC made a high or low. That's a bullish divergence. After this happened, you can see the price reversed and went up. So that's how we can use ROC along with McDan RSI to find potential reversal levels using divergence. Now let's go back to the slides. So here are a couple of tips. ROC can also be used to determine oversold and overbought levels, though RSI works better, definitely. So how do we do that? Because we don't have any predefined levels for ROC. So for doing it, usually what we do is you have a Di chart, you just zoom out the chart and identify the highest and lowest levels where price F and mark them. So, in this case, these two levels are high. Similarly, I can mark them here and here. So and this would vary basically from security to security. For let's say for Apple, it might be different values for Bitcoin, it might be different. If you're trading like Euro USD or some other stock or a commodity, that levels might be different. So after you have ntified these levels, you know that once the price reaches these levels, you have to be cautious. So this could be a overbought reading. So here, you know, after this level was reached, it did not reverse actually, but there was a pause here. So if you were long hair, you could have possibly kind of exited your price to kind of, you know, because it could have been a deeper reversal as well. And here you can see there was a pause. Similarly, when this happened, in this case, it did not immediately, you know, reverse. There was a divergence first. The price made a higher high ROC made a lower high and then only prices reverse. But this level will give you kind of, you know, early hint that, okay, at this point, maybe, you know, I have to be cautious. Similarly, you can see this level, the line we have drawn here. At these levels, price reversed from here, then the price came around this level, then again, we need to be cautious, and prices actually reversed slightly, not slightly, actually, the trend reversed for some time. And so this is how basically we can, you know, use ROC for identifying over sold and overbought levels as well. Though, again, I mean, this is kind of a bit ineffective compared to RSI because it requires some work. You have to manually, you know, identify these levels for each security differently. And whereas RSI does it for you automatically for all of the different securities. Another thing is you can also use RSI, sorry, ROC to generate buy and sell signals by applying a moving average to the ROC for smoothing the signal. So now, let me remove these lines first. So we have ROC here. What I will do is I will go to this option and this indicator and I will add indicator strategy on ROC. Essentially, what I'm doing is I'm applying indicator on an indicator. We already have an indicator ROC here, on top of it, I'm applying a simple moving average. Simple moving average of, let's say, let's keep it nine itself, let change the color to red to differentiate. Now, what this SMA is doing, it's basically nothing but nine period moving average of this ROC value. At this point, the value of this moving average is the average of last nine values of ROC. So now you can see these two lines. And here, when the ROC crosses above the moving average, that could be used as a buy signal, and then you can see price moved up slightly. Similarly, when the ROC crosses below, the average, you could treat it as an exit from long or a cell signal. So here also, you can see this was pretty good signal. After this crossed over, then you got a very good move. Yeah. But again, I won't recommend using ROC to generate buy and sell signal, by all means, use it to confirm the trend and use it along with other indicators to confirm, you know, your hypothesis about whether it's a bully scenario or a beer scenario or a signal. Don't use ROC on its own to generate buy and cell signals, though it might work. But if you have to use any indicator for generating buy and sell signals, then in my experience, MCD works best, but even then I don't use MacD alone. I always use MACD along with the price action. 42. VWAP: In this video, we are going to talk about VWAP, volume weighted average price indicator, which is very useful for intra trading. VWAP is a trading indicator that calculates average price a security has traded at throughout the day. Weighted by volume. That's important. It's commonly used by traders and investor to assess the average price paid by all market participants. For price action, volume is an important component along with price. And this indicator combines both of them into one, and that's why it's very, very important, and it gives us a very useful insight about where the current price is with respect to the overall volume being traded. We were perhaps a traders to identify potential buying or selling opportunities by comparing the current price to the average price over a specified time frame, considering volume as a key factor. This is how we calculate VWAP. VWAP is nothing but sum of price multiplied by value for all the bars in the given period. For example, if we are into intra day five minute chart and the current bar is, let's say, 20th bar of the day. So I will be 20 here, and N will be the total number of bars in a given day. That's how we calculate. Basically, if you see VWAP is summation of or addition of price multiplied by value for all the bars divided by the overall volume for the given session. That's how we arrive at VWAP. Now that we know how to calculate, how do we use it in a more simple way. When the current price is above VWAP, it may indicate a bullish sentiment, suggesting that the security is treading above the average price paid by the market participants. Conversely, when the current price is below VWAP, it may indicate BR sentiment. VP can confirm the intraday trend direction. So more often than not, VWAP is used in intraday trading. So when the current price is above VAP, it may indicate bullish momentum in an intraday session, while the price below VAP may suggest bearish momentum in intraday session. VWAP can also act as a dynamic support and resistance levels. Similar to what we saw in moving averages, VAP also acts as strong intraday support and resistance level. Raders often observe how price interacts with VWAP during the trading day with VWAP acting as a reference point for assessing market sentiment. As I mentioned earlier, primarily, VWAP is used in intra trading as a confirmation for bullish or bearish bias. There are different ways in which VWAP is applied to trading. So first, use is VWAP as a benchmark. Traders typically institutional traders, they often use VWAP as a benchmark for assessing the performance of their trades. A trade executed below VWAP may be considered a good buy and a trade executed above VWAP may be considered a good sell. So you might be confused here that why a buy trade below VWAP is considered good. That's because when a buy trade is made below VWAP, that essentially means it was made at the lowest possible price or at a very low price. So the trader managed to buy the price below VWAP, that essentially mean the trader managed to buy the security at a price lower than what most of the market participants were willing to pay. So that person, that trader got the better price, and the opposite is true for selling way is VWAP reversion to mean. Mean reversion traders use deviations from VWAP as a signal for potential reversals. When price moves significantly away from VWAP, traders anticipate a return to VWAP, providing trading opportunities. Mean reversion is nothing but when you think about moving averages, right? Sometimes price will move very far away from moving average when the trend is strong. But eventually it will come back to touch the moving average. Same thing happens with VWAP as well. When the price is stretched, are too much beyond VWAP, then at some point of time, you know that okay, the price cannot stay because that's abnormal for price to stay away from. VWAP, which is the volume weighted average price for so long and the prices should come back near or maybe even back to the VAB. So that is called mean reversion of the price is stretched away, people will sell and wait for price to come down if the price is on the upside, if the price is too much away on the downside, then they will buy hoping that the price will move near the VAB. Third way to use VP in trading is breakout trading. Breakout traders look for instances when the price breaks above or below VAP it's significant volume. That might signal a potential trend continuation or a reversal. Now that we have covered theory, let's go to the chart and see VWAP in action. I have NVDA five minute chart. We'll go to indicators, VA So now VWAP is aid. VWAP has these bands as well, upper and lower band, but can ignore it for now. We can just focus on this blue line which is the VWAP. So now, here you can see the price opened above WAP, sorry, closed above EAP and it has stayed above VWAP throughout the day, throughout the session, right? And in the next session, price opened closed above VWAP briefly, but it came back below and then stayed below VP throughout the day. And when it came near, this is what I was talking about mean reversion. When the price has stretched too far away from the VWAP, it tries to go back to the Vb. And here VAP acted as a good resistance. You can see here, then again, here, this level. These two times price came to VP but reversed from here. So here the VB acted as a resistance. In the next session, it was kind of a whipsaw day where the price kept moving below and then above VWAP, and then it broke down below and then stayed below. And here you can see after breaking down, the price went above to touch it or test the VAP again, where it acted as a resistance, and then price came back below. In the next session also on the price break above. So this is essentially a breakout trade. Like here also, you can see the breakout trading when the price breaks above or below, then you take a trade in the direction of the breakout. Here, it will be a cell trade. In this case, there will be a by trade. But nothing works 100% of the time in as per technical analysis. So you have to look at multiple factors, and you have to make a piece with the fact that whatever you do, how much technical Assis you apply, there will be times when it will not work. So for example, if you took a breakout trade here when the price closed above, and the volumes were okay, not too bad. But the price came back and closed below it, right? It happened a few times, and then the price did not really go anywhere. It remained in a sideway trend. So here next day, the price opened around VWAP and then remained below VAR for some time, then broke out above. So this could have been a good breakout trade. And then you can see, again, the same thing that since the price has moved too far from VWAP, on the signs of reversal, like this big red candle, we could have taken a mean reversion tread here, hoping that the price will come back and touch VAP, which it did. Eight. So next day, again, similar thing, but here, this is again a whipsaw day went down, price went up. This is another good example of nothing works 100% of time. So this day if you took any breakout rates or you were waiting to it to confirm the direction, it wouldn't really have worked much because for this initial day it was like whipsaw then it remained bearish for some time, then kind again kept moving around were. So that's how you can use VWAP for intraday trading and try to figure out the trend can do breakout rates and also use it as a dynamic support in resistance. 43. Bollinger Bands: So far, the technical indicators that we have seen, they either follow the price determined trend, help us identify oversold over bought levels or identify momentum in a given security. But here is another indicator, ballinger bands, which helps us measure something very different, and that is volatility. Bollinger bands is a popular technical NASS tool that consists of a simple moving average and two standard deviations lotted above and below the SMA. Bollinger band is used to measure volatility and identify potential trend reversal. In case you are wondering what standard deviations are, we will come to that. Bollinger bands help traders identify overbought and oversold conditions, spot potential trend reverses, and gauge market volatility. What exactly is standard deviation? Standard deviation measures the dispersion of data points from the mean. It indicates how much the values deviate from the average. The graph below you are seeing, this is known as normal distribution bell curve. The significance of this is, here we have Mu, which is your mean, consider average. We have average value here, let's say 20 period average. Then we have Sigma, which is our standard deviation. Now, the mean value or the average value if we subtract and add one Sigma on both sides, then we will know that 68.26% of the values fall within one standard deviation. One standard deviation is essentially adding and subtracting one standard deviation to the average value. This is one standard deviation. 68.26% of time in terms of security price will remain within this range. And if we use standard deviation two, which means we are adding two standard deviation, and then we are subtracting two standard deviation from the average value, essentially this part, then 95.44% of the values will fall within this range. That's an important metric. That's what Bollinger Bands helps us with in figuring out what are the chances the value or the price of the given security will remain in what region. It plots a band using this standard deviation and the moving average. This is the upper van and this is the lower van and this is two standard deviation, by default, you can change it, but by default, this is. The price will remain 95%, 95.4% of the time within this range. In case it is not clear, don't worry. When you will see Bolinger vans, you will have better understanding of how it works. So how do we calculate ballinger bands? Barner band has three components, upper nd, middle band, and the lower nd. Middle band is nothing but a 20 period moving average by default, which you can change, configure it. By default, it is 20 period. Then upper band is your MB middle band, which is nothing but your moving average, plus K into standard deviation. K is by default two. SMA plus two standard deviation is the upper band and SMA minus two standard deviation is your lower band. How do we interpret ballinger band? As I was saying, prices tend to stay within the bands most of the time. Since we are using two standard deviation, 95.44% of the time, prices will remain within these bands and deviations outside a band may signal potential trading opportunities. When the price deviate from that band, we know that something is happening. It could be a breakout, it could be a reversal. When prices touch or exceed the upper band, it may indicate overbought conditions, suggesting that the security is trading at a relatively high price level. Conversely, when the prices touch or fall below the lower man, it may indicate oversold condition. Volatility contraction, indicated by narrowing bands often precedes periods of volatility expansion, indicated by widening bands. This is something which we are going to see and this is probably one of the most important feature of Bolinger band. Bollinger band helps us track the volatility in a given security and when the volatility is less for a long period of time, we expect that the volatility will expand. That means a large move might come. These things can be tracked using Bolinger nds very easily. Traders use ballinger bands to anticipate potential breakout or breakdown moves when bands contract or expand significantly. Some traders use ballinger bands as a mean reversion indicator, looking for prices to revert back to the middle band after touching or exceeding the outer bands. This is similar to overbought and oversold levels. From those levels, we expect that the price will revert back to the mean, which is a 20 period moving average in this case. Based on what we have seen so far, here are some of the applications of ballinger bands, reversal trading. Readers look for price to reverse direction after touching or exceeding the outer bands entering position in the opposite direction of the initial move. This is, again, same thing as overbought oversold or mean reversion. Second is breakout trading. Traders anticipate potential breakout or breakdown moves when the price exceed the upper or lower band. Entering positions in the direction of the breakout. You might feel that reversal and breakout conditions seem similar because in both the things we are saying that when the price goes above upper band or lower band, we look for mean reversion, and when this same thing happens, we look for breakout as well. How do we differentiate when it will be a breakout, when it will be a reversal? We'll come to that once we will see these things in the charts. Finally, confirmation with other indicators. Readers often use ballinger bands in conjunction with other technical indicators such as volume analysis or momentum oscilators to confirm signals and enhance trading strategies. This is something common across all the indicators. You should use multiple indicator indicators to confirm your trading signals. Now that we have seen the theory, we will look at the charts. Here I have Bitcoin daily chart. We'll go to indicators for BB Bollinger bands. Now you can see, we have the boll Bollinger and plotted on the chart, and it has three lines. Above, the top one is the upper nd, the bottom one is the lower band, and the middle one is the 20 period, simple moving average. Let me go to the settings. Here we can see the default length for the averages or the middle nd is 20, and we are using simple moving average. You can also use EMA, smooth moving average, weighted moving average, and others, but the default is SMA, and we can also configure the standard deviation. By default, we use two standard deviation. If you want to use three, we can do that. We want to use one, we can do that, we want to use some other value, we can also do that. We will go with the default settings. Now, as we said, that 95% of the time price will remain within the bands statistically. Whenever the price goes above or below the band, then we know it could be a breakout, the 5% scenario, or it could be a opportunity to do a mean reversal. So another important thing is we talked about volatility, contract extension. Here you can see the bands have tightened, the binds have here, the band have widened, but here the bands have contracted. Think of it like a spring. When you compress a string, you can compress a string a spring for some time, but then once you leave it, it will expand violently, something similar happens when there's a volatility contraction in price of any security. Here you can see the volatility was reduced, the price kept moving in a narrow range, and once the price broke above, the volunteer band, the price kept moving up. This is a breakout opportunity. Similarly, here also, you can see the bands contracted and then there was a breakout and the price kept moving up. Here also bands contracted. The breakout occurred, but the breakout did not work as expected. Here again, you can see there was mild contraction, but the breakout still worked. So the longer the contraction period and the narrower the contraction, we can expect the, you know, bigger the move when after such a contraction. Like, in this case, you can see this was a narrow very narrow contraction and the move was very violent or very large. The single bar was around 7% bar, right? And if we were paying attention to this, um this bar broke below the lower an which gave us an indication that there could be a breakout occurring and we could have, um, made some money treading this bar. Now we'll come to another thing. We also said that we could use Bollinger Band for mean reversion rates. Now, here you can see the bands have already widened and then the price broke above this band. Now we know that since there was no not much contraction here, the prices or the band was already widened. This could be a mean reversion opportunity, not a breakout opportunity. So this is how we need to differentiate. In this case, it did not really work well, the price went sideways rather than coming down directly to the mean. But this is how we differentiate as a rule of thumb, when there is a contraction like this, this was a very narrow contraction and we got a good breakout. When after a contraction, you get a price closing above or below the upper and lower band. That should be a breakout opportunity. But if the bands are already wide and when then that scenario, the price in this case, price closed above this, but the wide the bands are wide, this was a mean reversion opportunity. Here you can see after this, the price came back to this. This is how you're going to differentiate when to do a breakout trade and when to do a mean reversion trade. Here again, this is a narrow band and then it broke down and then the price kept moving down. Son bands are wide. You have to look for mean reversion opportunities on, you know, when the price closes above or below the upper or lower nd respectively. And when the bands are very tight, narrow, there's a volatility contraction, then you have to look for breakout rates. I hope that make things clear and how you can use ballinger bands to your advantage. 44. Pivot Points: Mm hm. In this video, we are going to talk about pivot points. Pivot points are popular technical analysis tool used to identify potential support and resistance levels based on the previous day price action. Pivot points help traders identify key price levels that may influence future price movements, aiding in decision making for entry, exit, and stop loss orders. Since pivot points are essentially support and resistance levels, you can use them to take positions, start new trades like trade at a support, go along at support or sell at resistance or do range trading. There are different type of pivot points available in most of the charting softwares. Standard pivot points consists of the pivot point along with support and resistance levels calculated based on the previous d's price action. Then we have Fibonacci pivot points. Fibonacci pivot points Fibonacci retracement levels to calculate support and resistance levels, providing additional reference points for traders. We briefly talked about Fibonacci pivot levels in one of the videos earlier. We're going to cover Fibonacci more in detail when we come to Ait waves. For now, you can just understand that there are different types of pivot points available and Fibonacci is one of them. Then we have Camarla pivot points. This is a different formula to calculate support and resistance levels, focusing on intraetrading and tight ranges. So how do you calculate these pivot points? This calculation that you see in this slide, this is for standard pivot points. Pivot point is calculated as an average of the high, low closing prices from the previous trading. And then we calculate support and resistance level using different formulas as shown here. The standard pivot point is calculated as high plus low plus close value of the previous trading day divided by three. Then we use this pivots value for calculating different support and resistance levels, as one, two multiplied by pivot point minus high and so on. We can have multiple these. We have shown S one is two as three, but there can be multiple support and resistance levels. How do we use or interpret pivot points? Pivot points act as support when the price is above the pivot point and they act as resistance when the price is below the pivot point. Breakouts above resistance or below support may signal potential trend continuation or reversals, providing trading opportunity. Application of pivot points, we can use pivot points for doing range trading. Traders may buy near support and sell near resistance anticipating price reversals at pivot point levels. They can do breakout trading when a support or senesslevel or pivot level breaks on upside or downside. When confirmation, traders also use pivot point to confirm the prevailing trend direction and adjust their trading strategies accordingly. Price below pivot is considered bearish and above pivot is considered bullish. Now that we have taken a look at theory, let's go to charts. So here I have intraday 15 minute chart of EuroST open. Go to indicators. Here you can see pivot point standard. Now you can see there are a bunch of support and resistance levels added to this chart. Let me try to show you the settings. Here, in a type, you can see the traditional, which is what we just saw. The formulas for. This is a traditional one and then we have Ivanaci, Woody, classic DM, camarla. If you want to understand which one to use, I would suggest that it would depend on what kind of securities you trade. For example, if you want to trade cryptos, then you have to apply these different kind of wts on the securities that you often trade. For example, if you trade Bitcoin, you apply these different kind of pivots and see which one works better on pivot point which pivot point type, you are seeing that supports and resistances are being held respected by the price. Depending on you can find out the best fit and then start using it. I usually stick with the traditional one for most of whatever I trade and I don't use most of the support and resistance level. I only use the pivot level just to identify direction of the trend. For example, in my case, I only use Pivot. If the price is above pivot, I will only look for bullish traits, bullish setups, and if the price is below pivot point, I will only look for bearish setups. But that's depends on you can definitely use these. Let me reenab them and show them how they might work. This is today's session. Here you can see the price went to pivot level and reverse from there. I acted as a resistance. Then price again went touched and then came back third time again, same thing happened. Four also briefly breached the pivot, then came back. Finally, it broke out and you will notice that when it broke out above the pivot, there was huge volume. When breakouts happen with huge volume, you have to pay attention. And when this breakout happened, the price went up and then it found the RON resistance, and it did not really breach RON. That's how you can use these pivot levels as, you know, support and resistance one level is breached the next one comes into play. This one is breached the next one comes into play. That's how you can do range reading, breakout reading using pivot points. Let's take a look at another day. Here, the price has been hovering between pivot and rwn and it briefly touched, not really, but almost here it touched the pivot point, went nearly RV came back from there. Same thing happened again, took support at the pivot and then it breached this pivot level. Again, the volumes were good during the breach and when it broke, S one come came into picture. S one acted as a support prize briefly um, stayed around this level, did not really go down immediately and then you kept hovering around this level only most rhodi. Here you can see the prices were between pivot and S one, S one broke here and once it broke, S two was your target and the target was met. When S two broke, S three should have been your target. S three target was also achieved from ST the price reversed went back to S two level and then S two to S one. This is how basically these levels work. If you are mostly doing intraday trading, these levels could help you figure out where to initiate a long or short position and where to cover your position. That's how these pivot points work, and I hope you found this session useful. 45. Introduction to Elliot Waves: Hello. In this section, we are going to talk about Elliott waves, which is an advanced form of technical analysis. If done correctly, it could provide much more reliable results compared to other forms of technical analysis that we have seen. Having said that, it's not very straightforward. It could get very tricky and it's easy to get confused with the wave counts. What I've covered in this course is a crash course of Ait waves. With that, let's get started. Elliott waves were formulated by Ralph Nelson Elliott in 1930 and are based on the concept that market price movements follow repetitive pattern of five waves in the direction of the main trend followed by three corrective waves in the opposite direction. His theory is based on the idea that market psychology drives price action in recognizable wave patterns. His reasoning was that the market behavior or rather the behavior of the market participants is predictable and that reflects in the waves in forms of waves in the charts. So this is how Elliot wave structure looks like. If the primary trend is upside, there would be a move in five waves, one, two, three, four, five, in the primary direction that is the uptrend in this case, followed by a three wave move, A, B, and C in the counter trend direction. That's how a typical it wave structure looks like. There are certain rules which have to be met when we are looking at or identifying elite waves in a chart. The first rule is wave two never retraces more than 100% of wave one. Essentially, the low of wave two should never come close to the low or the starting point of wave one. The second rule is wave four never enters the price territory of wave one. This essentially means that the low of wave four never coincides with the high of wave one. Wave one territory and wave four territory should coincide. They should never meet. Third and the most important role is wave three cannot be the shortest of the three impulse waves. We will cover what exactly is impulse wave. But for now, just understand that wave three cannot be the shortest of the three waves which moves in the trend direction. In the trend direction, if you look at this, wave one is moving in the trend direction, wave two is a counter trend. Wave three is in that trend direction, wave four is a counter trend, and wave five is in the trend direction. We have one, three and five waves moving in the trend direction. Out of these three waves, wave three can never be the shortest. That means wave three cannot be shorter than both wave one and wave five. Here we can see those rules. Wave two can never retrace beyond wave one. As you can see, wave two is a counter trend move in opposite direction of wave one and Wave two should never go down as much as the starting point of wave. Second is wave four cannot enter wave territory. As I was saying, the low of this wave four should never come in the zone of this is the wave zone. Wave four should never come into this zone. The third point is wave three. This is your wave three and this is the height of wave three. It cannot be the shortest. Wave three will never be shorter than both wave one and wave five. It can be shorter than one of them, but not both of them. Typically, wave three is usually the largest of the three. It's not a rule, but this is what generally happens. Let's jump to the charts and see how these waves actually look like. Here I have an hourly chart open of S&P 500, and this is the current chart. Now here you can see If we take this as a reference point for counting waves, we always have to take a reference point and we usually take more recent uh high or recent low. In this case, I'm taking this low as a reference point for counting. Here you can see this is all green. This is wave one, then we have red counter trend move, which is wave two, then we have another up move which is wave three, and then we have a down move, red war, wave four, and then we have an upmove so this essentially becomes one, two, three, four, five. This is your up move. Now, once this five way move up is over, we are in a counter trend move, which is A, B, C. Here this is all red till this point. This is A, and then we have a green bar, this is B, and then we can see the C seems to be starting. So this will be A, this will be B, and this might be C. As we will see later on, this crection is very difficult to predict how it will evolve, and there are many different forms of this ABC collection. But overall, we can see that the primary trends seem to be up in this case, with five waves up and then a three waves down seem to be evolving in this case. This is how we try to look at charge and identify waves. We also need to see whether these five wave moves follow the three rules that we talked about. The first rule was wave two in this case, this is your wave two should never retrace beyond the starting of wave one. It has not reached anywhere near the starting of wave one, the first rule is fine. Second rule was wave four should never come in the tri territory of wave one. This is the high of wave one and the wave four low is much higher above it. It's this rule also holds true. We can also put a line around this horizontal line just to see that they do not coincide on the same line. This is the wave one high and as you can see, wave four low is very much higher above. The third rule was the wave three cannot be shortest. So we can measure the height of all these waves. This is your wave one, which is 72 points and we can measure wave three from the bottom of wave two. This is 74 points, so this is greater. We will also measure the height of or the size of wave five. This is 43 points, right? We can see because it was 74 points, wave one was 72 points and wave five is 43 points. Wave three is in fact the largest of three, not the shortest. All the three rules also satisfy in this case. 46. Law of Fractals: In this video, we are going to understand an important aspect of it waves, which is law fractals. Before we can understand law fractals, we need to understand different kind of waves. We have two different waves in it waves. The first one is motive waves and the second one is corrective waves. Motive waves are in the direction of the primary tend and they are five wave structures. For example, if the primary trend is up, then it will form one, two, three, four, five wave structure on the upside. In that structure, wave one, three, and five, which are in direction of the primary trend, those are motive waves. Similarly, in ABC counter trend move, waves A and C are motive waves within ABC collection because when ABC collection is occurring, the primary trend is downward and wave A and C occur in the same direction as a primary trend, which is downward, in that case. Corrective was corrective waves are the counter trend moves. For example, in one, two, three, four, five move on upside or downside, wave two and four are counter trend moves or corrective moves. Similarly, in the ABC correction, wave B is corrective wave. Let me go to a drawing volt so we can understand it more clearly. So let's say the primary trend is on the upside, right? So in that case, we get a move like this. So where this is wave one, this is wave two, wave three, this is wave four, and this is wave five. So now, the primary trend is on the upside. Wave, this one, wave three, this one, and wave five, this one, they're all in the upside. These are all motive waves. Now, similarly, when ABC correction is happening, let me use a different color. This is A, this is your B, and this is C. When ABC correction is happening, then in this case, primary trend is on the downside. A and C, they are also in the primary trend direction. A and C are motive waves here. On the contrary, when the primary trend is up, in this case, when this five wave up formation is occurring, wave and wave four, they are in the opposite direction of the primary trend. We are talking about this trend, This uptrend. Talking about this uptrend, wave two and wave four are in the opposite direction of the primary trend, hence these are corrective waves. When we talk about EBC correction, A and C are in the primary trend direction which is downward in this case, and B on the upside, which is a counter trend move. This one is also a corrective wave. This can also be seen when the primary trend, let's say, is on the downside. We have a five structure forming like this where we have one, two, P wave four, wave five, followed by ABC correction, which is A, C. In this case, when this block is occurring, this trend is occurring, then the primary trend is on the downside. Wave one is on the downside, wave three is the downside, wave five is on the downside. One, three and five are always motive waves. One, three, five. Similarly, when this ABC correction is happening, now the trench changed to upside from downside and A and C are in the prime trend direction, which is the upside, A and C. These are always motive waves. And on the other side, wave two, wave four, they are in the counter trend on the upside in this downward trend and downside in this upward trend. Wave two, four, and B, these are corrective waves. Is that clear? Now, let's go back to the presentation. Now that we have some clarity about motive waves and collective waves, we will look at law fractals. As per law fractals, smaller wave patterns are repeated within larger wave patterns. As an example, wave one of a motive wave itself is a five wave structure of a smaller degree in a smaller time frame. Similarly, wave two, which is a corrective wave is found with a smaller degree three wave structure. If I go back to ring board, what we are saying is if we are saying this is our primary trend on the upside and there's a five wave structure, then wave one. Wave one itself is form of five wave structure and wave two is also form with a three wave structure which are visible, if you will, zoom in to a lower time frame. In higher time frame, let's say in hourly timeframe we can see one, two, three, four, five, but if you will probably go to 30 minutes or maybe 15 minutes, we can see that this structure will look like this. Five, three, five, three, five. This is one, two, three, four, five. Basically, these larger waves are subdivided into smaller waves. Same thing happens for collective waves. Motive waves will be five wave structures, collective waves will be three wave structures. B is a corrective wave. In this case, this is three waves. A is a motive wave, it's a five wave, C is a motive wave, it is a five wave. So here we can see the same thing that earlier we saw that this is one more, two, three, four, five, and A, B, and C. But when you will drill down to a lower degree time frame, you can see that each of these move also is made up from a motive wave is made up of a smaller mot wave, corrective wave is made up of a smaller corrective wave and so on. That is your law of flactans. Based on this, we have some cycles defined, which were defined by Arn Elliott. And these cycles are like this grant super cycle, which is a multi sanctuary um cycle where you are probably looking at um, you know, yearly or five year or ten year chart time frame, supercycle, which is a multi decade of 40 to 70 years. And then we have a cycle which is one year to several years and we can keep drilling down and until we get down to minutes. So from practical purpose, this essentially means that Ait waves works across time frames. I'll work in five minute, ten minute, 15 minute, 1 hour, daily, weekly, monthly, and so on. And more importantly, you can try to identify the internal structure of a move to better understand that whether the wave counting you are doing, whether you're counting one, two, three, four, five, or ABC, whether those are internal, they're correct based on the internal structure of those waves. For example, there might be five wave up move. You'll expect that one, three, and five should be made up from five wave each. But when you will go to a lower time frame and you might find that, okay, this is not five wave internal structure, it's a three wave structure. That means your counting is probably wrong, what you're thinking of, you know, primary move on the upside, it might actually be a corrective move as a whole. Those things we are going to see in this presentation later on. But for now, two things you have to understand. First thing, At waves works across different time frames as per the law of fractals and we can use this law of fractal to identify whether we have counted the waves correctly or not. Here I have daily chart of Nifty index open, 50 50, and here we will see the fractals in action. Now, this is a single up move and this is a counter trend move. If I have to understand what kind of move, is it a primary move in the upside direction, which should be a five wave structure or is it a corrective structure? From daily time frame I can go to let's say hourly time frame. Before I do that, let me also mark these levels so that we can correctly I use bar chart when I'm doing working with allied waves. It helps me visualize the waves in a better way. It's up to you whatever you want to use. Now if I drill down to this, I can see this is one wave, then this is ABC correction, which is two. And then this is three, this whole thing, this is four, and then you have a fifth wave up. I can see that this one single wave is actually made up of five wave up. If I have to mark them, I can use this tool, do something like one, two, three, four, and five. Now I know that this is a move with a five wave structure on the upside. That's how we can see and understand how the internal structure of a wave looks like, and those structures are helpful when we are working with waves and specifically trying to use them for training. 47. Motive Waves: Mm hm. In previous video, we took a brief look at motive waves while studying law fractals. In this video, we are going to take a deeper look into motive waves. Motive waves are essentially waves in direction of the primary trend and are typically five wave structure. There are three different type of motive waves. First is impulse. Second is leading diagonal. Third is ending diagonal. Let's take a look at impulse first. Impulse waves are the motive waves that follow the primary rules of iot waves. Wave to in this case, this is wave two cannot go beyond 100% retracement of wave one. Wave two cannot go below wave one. Second, wave one and four cannot overlap. This is wave one. This is way four. They cannot overlap. One has to be lower than four. These two levels cannot be at the same cannot overlap essentially. Wave three cannot be shortest. This is your wave three. This cannot be the shortest wave. Typically speaking, wave three is usually the largest wave, but does not hold true always, but it is guaranteed that wave three cannot be the shortest wave when we are looking at a primary trend. Another thing with impulse is one of the waves could extend or subdivide. For example, if you take this five wave rise, this is one, says two, this is, four, five fifth. In this, you can see we have within wave three, we can see five wave subdivision, which is essentially a fractal thing. But many times this is clearly visible. Within the primary timeframe that you are looking it waves at. In this case, what happens is when we say five waves, it is a primary trend up, but in this case, you will have one, two, three, four, five, six, seven, eight, nine, four waves are added into this. It is possible, sorry, that these motive waves could have five legs like this, could have nine legs like this could also have 13 legs. We keep adding plus four. Two to the count, how it could become 13 from nine. For example, in this case, this itself is a five wave moti wave This third wave could also subdivide into five. Now it will give us nine plus the four legs extra. You keep adding four to the previous one and it will still remain a valid wave. Five, nine, 13, 17, 21. E. Let's also quickly take a look at a chart to see impulse in action. Here I have PCL stock chart open, weekly time frame. Here you can see this is the most significant low in this and from this most significant low, we can see a five wave rise. In form of if we zoom in, you can see wave one, two, three, four, five. Here you can see the wave three was actually subdivided or extended. Within wave three, we can see one, two, three, four, five. Here you can have nine legs, it was followed by AVC collection, AVC, and then the move continued above. So from any significant low, if you see a five wave rise, it gives us a possibility that trend might be changing. Similarly, if you see a five wave down from a significant top, then it could mean the trend could be changing to downward side as well. Next type of motive wave is leading diagonal. Leading diagonals typically have a wedgish structure, sometimes strangled as well, and leading diagonals always occurred in either wave one or wave A of ABC. They have a wedges shape, as I said, waves one and four may overlap, in this case. Here you have a one, two, three, four, here you can see this is wave one, this is wave four and they have overlapped. In case of our leading diagonal, one and four can overlap, though it is not necessary always. Division or the subdivision of the wave looks like five, one, two, three, four, five, three down, five up, three down, five up, five, three, five, three, five, or it could also be 33333. A. This is how leading diagnos typically form. What's most important thing is, they always form in either wave one of 12345 or wave A of ABC. Essentially, we say leading diagonal because it essentially means that it's a leading indicator of a new wave or new trend starting. It could be a one, two, three, four, five, it could be a ABC. Now let's take a look at a chart to see leading diagonal in action. Here I have Nifty weekly chart open and you can see this was the COVID fall. After this fall completed, we saw this rise in form of a leading diagonal. Here you can see in wave one, this is one, two, three, this is down, this is one, two, three, again, this is down, one, two, three. You might say this is not a three wave structure. I'm in a weekly chart right now. If I drill down to daily, I would be able to see the three wave structure. Even here you can see that this wave down, then this was a higher up and then this is down. You don't always have to look at waves exactly in terms of green and red. Sometimes you can also visually make out that okay this is how the structure looks like. Here also, if you will drill down, you will see that this is a corrective structure. This fourth it's not a motive structure. Here, after this form and then it was followed by ABC collection, this was a very good indicator that after this fall, COVID we are probably starting the higher leg or new leg up. The trend is reversing from here. The last type of motive wave is ending diagonal. Ending diagonal they occur either in wave five or wave C. Now, if you will notice the leaning diagonal occur in wave one or wave A, which is essentially start of a new trend or a new leg, ending diagonal occur at the ending waves like wave five of one, two, three, four, five or wave C of ABC. They indicate a trend is now ending and, uh, the counter trend will start. So in terms of structure, they look very similar to, um, leading diagonals or they have a wedge shape, triangular shape, but they occur in fifth or C waves. That is the main difference. Here again, wave one and four can overlap though it's not necessary. In terms of the structure, internal structure of these waves, you can have five, three, five, three, five, or you can have three, three, three, three, three. That's ending diangal for you. Let's also take a look at it in the charts. So here I have uroUSD open weekly chart again, here you can see this is some degree of one, two, three, four, five waves and here the fifth wave actually formed in shape of a triangle, this right? And after this ended, so this is the ending diangle for you and when this ended, the fifth wave ended, correction started in form of which looks like ABC to me, right? That's how we can understand the wave structures and what's happening, what waves are starting, what waves are ending, using leading and ending dangles. Again, you might ask that it does not look like 333 structure to me. Here, this one is definitely three and this one is also three, pay four. These one, two, three, four, five, six, seven, this is seven legs. In motive waves I said, you could have five, nine, 13, 17. Similarly, in corrective waves, you can have three, seven, 11. You can keep adding four legs to collective waves three ABC and that would still remain a valid collective wave 33 plus 47. You add four more legs. It will be 711, 15 are collective and five, nine, 13, 17, and so on are motive waves. You can also look at it in a higher time frame and then you would be able to see. This is a three wave down structure, 3333. That's how we can identify in digans. 48. Corrective Waves: In this video, we are going to discuss about corrective waves. If you remember, we said in one, two, three, four, five, wave move, wave one, three, and five are motive waves and wave two and wave four are corrective waves. Similarly, when we say ABC correction, so this is wave A, this is wave B, and this is wave C. In this case, wave A and C are motive waves and wave B. This one, this is a corrective wave. Essentially, corrective wave is a wave which goes against prevailing or the current trend. Corrective waves is probably one of the most difficult aspect of working with allit waves because you never know how these corrective waves would evolve, and this is what actually makes working with it waves or counting it waves very, very difficult. So with that, let's get into collective waves. There are five primary to type of corrective moves. First is zag zig zag is the most common kind of correction or corrective wave. It's a three wave structure labeled as A, B, and C. Internals of A BCR, A is five waves, B is three waves, and C is again, five waves. A and C are essentially impulses or diagonals, so in this case, C could be a ending diagonal, A could be a leading diagonal or A or C could be impulse or any of those things. B would be typically three wave or any other corrective structure. Let's take a look at a zig zag correction in charts. Here I have a monthly chart open for a stark remine. Here we can see a five wave up move. So one, two, three, four, five, which is followed by ABC correction, A, B, and C. Here, if you see after the fifth wave, we had a zigzag correction. This is your A, this is your B, and this is your C. Here you can clearly see C is five wave structure. If you will drill down into smaller time frames, we can also see that this will also be internally a five wave structure, whereas B would be a three wave structure. This is how we can identify zigzag zigzags typically have a slanting nature in this case, the five waves are up followed by, uh, three waves down. So in this case, it looks like this. But if, um, it was a five wave down structure, then ABC wave would look like this. Basically, they are always kind of, you know, have a slanting kind of presence, like this. Second type of corrective structure is called flat. Flat is a three wave correction, like A, B, and C. Subdivision of wave C is impulse or a diagonal. C is typically five waves, not typically, it's always five waves. It could be a diagonal leading diagonal. Uh Sorry, it would be an ending diagonal or it would be an impulse, whereas A and B is of any kind of corrective structure. When I say any kind of corrective structure, it means it A could itself be a zigzag, B also could be a zig zag or A could be a flat, B could be a flat or A or B could be also double or triple zigzag. Flats could further be subdivided into three variations, regular flat, expanded flat or running flat. So before this, if you remember, in the last video when we were discussing about, um, zigzag, I was saying that zig zags typically have this slanting nature, where they are slanting towards down or towards up. Was flats are flat kind of corrections like this. You could draw a flat channel horizontal channel around them. For example, if it is a five wave up, the flat correction would look something like this. Was the zig zag would be something like this where C is typically always much lower than B. In this case, in case of flat, B and C R and even A and B are they are more a flattish structure around same levels. Here also you can see regular flat, we have A is equal to or at least 90% of wave and B and C are typically equal to each other. It's a very flat structure, regular flat. In case of expanded flat, as you can see, this is expanding structure. If I draw some lines, you can see this is expanding structure. In this case, wave V is larger than wave A and it goes beyond the origin of wave A. A, this is the origin point of A. You can see wave V cross it or went beyond it, and wave C is bigger than wave and goes beyond the origin of wave. This is the origin of wave V, as you can see, wave C went beyond it. It's easier to identify this expanding flat structures finally, we have running flat. Running flat wave B is longer than wave A, but wave C is shorter than wave B. I expanded flat, we saw that wave B is bigger than wave A, which is similar in this case, but wave C is not bigger than wave, it is shorter than wave V, it ends before the origin of wave B. In this case, it ends before this. That's how these flats are formed. You don't really have to get confused with these three different variations. Just remember that whereas zigzag codection looks like this where C is below B typically and in flat, we have A V C around same level. I could actually B could go a little above or below it and C little above or below A point. Essentially, when you look at a flat structure, you can draw a nearly horizontal channel around it. Whereas if you are looking at a zigzag, the channel would be slanting because the structure itself is landing like this or if it is this kind of structure, then it will look upward slanting. That's a difference. Both are ABC collections, but they have a different slant. Don't get confused. Just remember that if it is a 335 flat or 535, they are basically both corrections. They just look different slightly and have a slightly different internal um structure. Let's quickly take a look at a couple of examples of flat in charts. So here is a four hour chart of stocks and Gobin. Here you can see this is Mtwave followed by A, B, here you can see, you can draw nearly parallel channel around this, right? So this is essentially technically speaking, this is a running flat because C is slightly shorter than B, but it doesn't really make a difference. So it could very well be called as a regular flat because the difference in B and C is very, very little. You could call it a running flat or it could call it regular flat. Important thing is you identify it correctly as a corrective structure because after a corrective structure, next impulse could start, you can see this move started and it kept on moving up right after this after this structure was complete. Let's take a look at another example. So here we have a Nifty index daily chart open and from this low, you can see how impulse is developing. I could say one, two, three, then this structure, four and then five or five seems to be subdividing in this case, where five itself is one, two, three, four, and this whole thing is four and five is developing. But here, if you notice the wave four, wave four is a three wave structure, but here you can see, wave B is bigger than wave A and wave C is bigger than wave B. If I draw it like this, you can see C goes below the origin of B goes above this basically this point. Essentially, it looks like expanding structure. Third type of corrective structure is triangle. Strangles are sideways movements with low volatility and decrease volume activity. They are a consolidation. Subdivision of triangle waves is 33333. It has five legs, which are marked as A, B, CD, E. And triangles could be in any shape like it could be a symmetric tangles descending, any triangular structure. That's trangular collection and these collection typically occur in wave four of one, two, three, four, five move or wave B of AVC. It could also occur in X waves of WXY and WY X Z. Let's take a look at an example of triangle. Here I have Bitcoin four hour chart open. From this low point here, we can count one, two, three, four, five. Here you can see this long consolidation is in a triangular shape, which is wave four essentially, it evolved as a triangle and the fifth Five move advance was followed by ABC collection, which, if you will, B goes beyond the origin of A and C goes beyond the origin of B. This essentially is expanded flat collection. But here we are talking about triangle, let's focus on that. Here you will see this is a four hour, you may not be able to see all the three waves internals, but you can still see some of them. After this three, we have one this down, then one, then let me mark them. This is your A, then this is followed by one, two, three, B, then this is C, this is here you can see, one, two, three structure, D, and then here you can see again, one, two, three, E structure. That formed your triangular. If you go to lower degree time frames, then you would be able to identify the internal structures for these waves as well. But here you can see this is three waves clearly. This is also three waves and this movie is also three wave and same thing we can find for if you drill down into um for these two legs. That strangles for you. With that, let's move on to the other corrective structures which are known as complex corrections. The next corrective structure is called double zig zag or WXY correction. It is essentially a combination of two different corrective legs. Here you can see this is W and X X is a connecting structure. It's a connecting leg for two different kind of collective waves, and then Y different is a correction in itself ABC correction here this is a, three and five, this is a flat. W and Y legs are typically zig zag flat, double zigzag, or triple zigzag of smaller degree and X could be any corrective structure. Essentially, W and Y could be of any kind of corrective structure except triangles, whereas X could be anything including triangles. That's important thing. Now, if you look at it, double zig zag is essentially a correction within a correction. If I had, let's say, one, two, three, four, five, and after this was formed, I might feel that, my ABC is complete after this, and then the next leg will start, but that's not the case. After three legs, correction continues and this evolves in a complex correction, W, and then we have X, and then we have another leg of correction. And when we will look at zag, we will see after X after Y, there is another X and then there is another leg, which is. Let's take a look at triple zag also. Triple zigzag is an extension to WX Y, double zag. Here you have your WX Y, and then we have another X followed by another collective structure, Z. Again, like, WX Y, W and Y could be of any kind of corrective structure other than triangles. Similarly, Z also could be anything other than triangle, and then X could be any kind of collective structure including triangles in this case. So these kind of corrections sometimes in larger time frames can last for, like, you know, years, uh, and it can really test test your patients. And, so that's what kind of makes it very difficult to trade, these kind of corrective structures. In fact, trading any kind of collective structure is difficult and not really recommended when working with the lid waves, but it tells you that, um, this is a time where a consolidation is occurring, and you should probably stay away and wait for the right moment and wait till the point where you see a clear five wave rise or five waves down depending on in what direction your collective structure has been evolving. Now, let's take a look at triple zigzag and double zigzag in action. So here I have SPX SNP 500 monthly chart open. Here you can see from this 2020 COVID laws, we had a five wave rise. Wave, wave two, wave three internally has five wave structure. This is an extension as we discussed in motor waves. This is wave three, followed by four and then five. This was followed by a collective pattern, right now, this structure had at a high level five legs, one, two, three, four, and five, which we marked as W, X, Y, X and Z. Now if you will drill down deeper into it, we will be able to see how this complex correction WX y XZ evolved. This is monthly time frame. We'll switch to weekly time frame. Here you can see W itself is three wave structure. One, two, three, which looks like an ABC followed by X, which was three wave structure, and then Y again, was a three wave structure. Then we had another X, which again turned out to be three wave structure. One you can see, there's a small ABC within this within this wave B of ABC. Then wave Z evolve in what looks like a five wave down. But if you look at the internals in daily, we will realize that this is not really a motive wave. This is seven waves actually, and this is also seven waves this cannot be a motive or primary trend. This is still a corrective structure indeed. If I go down to daily time frame, this is the last leg. The last leg, you can see we have one, two, three, four, five, six, seven. This is a seven leg structure. If you remember I said three, seven, 11, 15, they are corrective structure, five, nine, 13, 17, 21, they are motive structures. This is a corrective move followed by X. Again, internally, this is a W. This is X, and then we had one, two, three, four, five, six, seven, another seven leg structure, which is smaller Y and then followed by X. Then finally, we had Z structure. This z itself, if you see is a corrective structure, W X YXZ. This is one, two, three, four, five leg structure. That's how these corrective structures form and we have to drill down and count the waves to ensure our view is correct, how we are counting the waves and these corrective structures could continue forever, as you can see, this one leg itself is internally a complex correction. So till you actually see a five wave rise in this case after this correction, until that point, you are not expected to take any action. So a WXY essentially a subset of XY, XZ, triple zigzag. Hence I'm not covering it specifically separately, but a WX correction, if you're looking at it, it would look like this let me go to the weekly. Three, in this case, three and three till this point. After this, another motive structure or a different trend would start. If the corrective structure ends at WX Y. 49. EW Guidelines: Mm hmm. For this video, I have uploaded a PDF document which lists down the rules and regulations for different waves for motive waves, impulse rules, and you can see the guidelines. Remember that rules are the criteria that have to be met for being a legit impulse in this case, but guidelines are non essential criteria. Those are based on observations and those are something which have been observed over a long period of time, things that tend to happen more often than not. Guidelines are just indicators of what might be happening based on historical observations, whereas rules are the essential requirements or essential criteria for a given, in this case, impulse to be true. This document has rules and guidelines for impulse, similarly for diagonals, corrective waves, zigzag, flat, contracting triangles, barrier triangle, expanding triangles, combinations are essentially complex corrections. Since this is a introduction course to Ait waves, it will not be possible to get into each and every of these rules and guidelines. Primary rules we have already covered. But in this video, I'm also going to talk about a few of the practical guidelines that I have found very useful while working with Ait waves. First of the guideline is the equality principle, which says that two of the waves in five motive sequence tend to be equal in size. In a motive sequence one, two, three, four, five, more often than not, two of the waves are equal. For example, wave one and wave five I have seen are more likely to be equal. Sometimes wave one and wave three are equal, sometimes wave three and five are equal. Here are a couple of more common scenarios if wave three is extended. Extended essentially means that you can see the internal divisions of wave three clearly in your primary time frame. Wave one is likely to be equal to wave five. Other observation is, if there is no extension, all three motive waves can be equal. Let's quickly go to the chart and see this. This is the Bitcoin four hour chart. We already saw this in the previous video. Here you can see the size of wave one is 6,600 points, almost 13%, and then wave three is also similar, almost 13% in size, whereas wave five is a bit smaller around 12%. So in this case, in this five wave sequence, we can see that two of the waves are equal. And this is something which you will find, you know, you know, often while working with it waves that two of the waves are equal, and this gives you a target criteria. For example, if you know the wave one was, let's say 100 point in size, then if you're planning to trade Wave three, then you know that wave three also could be equal to hundred points, so you can set your targets accordingly. Second principle is alternation principle, which says if wave two is a sharp or quick correction, then wave four is likely to be slow and sideways correction. It would be most likely a flat triangle or combination. Zigzag corrections are typically quick corrections. ABC they happen very fast. The fall, if it was a five wave rise, then the fall in ABC is typically a quick and if it was a five wave decline, then the rise in ABC is also relatively quick, but flat triangles and combination they take time. Also if wave two is smaller correction, then wave four is likely to have a deeper correction and vice versa. Similarly, if wave two is a deeper correction, which is more often the case that wave two has a deeper correction and then wave four is likely to have a less deeper correction. If we go back to the same chart, here you can see wave two was a very small correction. Or very quick correction as well, and whereas wave three took a lot of time. When we saw that the wave two was quick and wave one high was taken out by wave three, we know that when wave four starts, it could take time, it could be very slow. That's how these principles could help us. Moving on, Another common thing which has been observed while working with wave is that often impulse and zig zag are contained within a well defined trend channel. By defining by drawing a trend channel, we can estimate the next target level. So what does this mean? Me. Here I have a quarterly chart of ONJC. Here you can see from this bottom, there was a five wave rise, which is essentially a larger degree wave one and then wave two form. Now if we connect the laws of wave one and wave two, we have a channel in place. Now we can estimate that wave three could reach this point. Right now it's at 283. If I'm rereading this in long term because this is a quarterly chart, I would estimate that this might be reach or touch this line somewhere around this area. That would be my potential target. Similarly, when wave three is over and wave four starts, I would expect that wave four correction would likely hit this bottom line of this channel. That's how we can also try to estimate the size of waves based on these trend channels. These trend channels may not work in all the scenarios, but very often you would be able to especially when you are looking at higher time frames like monthly, even weekly quarterly charts, you will be able to see these patterns. Another important guideline is the depth of the correction. The corrections, it could be ABC, WX Y, a triple zig zag tend to retrace up to the fourth wave of previous move. If we have, let's say, one, two, three, four, five, this is our fourth. When this correction happens, it could be ABC, it could be any kind of correction. Let's discussion, let's say it's ABC correction. This depth of this correction, could be around this wave four. More often than not, this has been found that this correction typically re trace up to the wave four of previous move. Let's go to a chart. Here I have a Di chart of gold and here you can see here we have this wave one wave two. I have marked the internals of these waves. This wave one is one, two, three, four, five, then this is ABC correction. This is ABC, then we had another ABC and then followed by another ABC. This becomes a complex correction. This is a W XY naught, uh, ABC. This is a W XY correction complex, which is a double zig zag essentially? Now if you notice, this was the level of fourth wave when this decline. And if you notice the depth of this correction, it was around this same level. In this case, this correction retraced around the levels of wave four. Wave four could give you a potential target for the correction levels. We also have other mechanisms to identify collection levels, how much collection or wave could retrace that we are going to see in the next lecture, but wave four also work very well often as a potential target. So that's all for this session. See you in the next one. 50. Fibonacci Retracements & Extensions: In this video, we are going to learn about another important aspect of Elite waves, which is Vbnacci extension and retracements. What exactly is Fibonacci? If you are from mathematics background, you might be familiar with bonacci sequence. Leonardo Fibonacci was a 13th century mathematician who discovered the Hibernaci sequence. In this sequence, we take zero. And one as the first two numbers, and then we keep adding the previous two numbers. The next number will be one and zero will be one. Next number will be one and one, two, Next number will be some of these two, which will be three, next will be some of these three, which will be five, next will be some of these two, which will be eight, and so on. This is what Ebonacci sequences. Now, why do we do this? What do we get out of this? The important thing here is when you divide these numbers, a number in this sequence with the previous number. For example, if you divide 89 by 55, or you divide 55 by 34 or 34 by 21 or the other way around, if you divide 13 by 21. We get some fixed ratios. So it doesn't matter how big this sequence gets. These ratios, there are some fixed ratios that you encounter, one of the most common ratio that you get is 1.618, which is also known as golden ratio. As an example, if you divide 89 by 55, this is when you get this. You will also get this by dividing some other consecutive numbers in this sequence. So before talking about the significance of Fibonacci sequence in reading or technical analysis, you need to know that Fibonacci sequence has a lot of significance in nature, in architecture, and as we'll see in financial markets as well. If you look at this slide, this is a way of visualizing the Fibonacci sequence and the ratios. If you notice the most inner block, this is one, then you draw this, which is two, then you take this both and then draw this, this becomes three, and then you do this, it becomes five, five, three, eight, 85, you get 13. These ratios can be visually represented using this spiral. Now if you see this light, you can see that this ratio is very common in architecture. Here's an image of Taj Mahal and you can see that this has been built to perfection as per the Fibonacci ratios. The same thing, the same ratios are applied here. If you see any tree and its branches, they also follow the Fibonacci pattern. You have this stem which is one, then it divides into two, and one of them divides into further two branches and so on. If you keep adding or keep seeing the number of branches at each level, you will find that they follow the Fibonacci sequence. It's not just trees, your own body shape of your ear, that also follows the Fibonacci sequence and not just a ear, you will see here the whole dimension of your face, your nose, your chin, your head, everything follows the Fibonacci sequence. And in this image, you can see even the storms, they also follow the Fibonacci sequence, and this one shows our Milky Way galaxy, which again, follows the size of it follows the Fibonacci sequence. On the extreme bottom, you can see, it's a flower petal. So the seed and these petals, the way they grow, they also grow in a Fibonacci sequence manner. So Fibonacci sequence, as you can see, it's everywhere. Everywhere you look around, you'll find it everywhere. And, uh, that's how I guess, um, Fibonacci realized that this could be applied to other respects in life and then it became a popular mathematical concept. Coming back to Elliott waves, we use Fibonacci for identifying the retracement and extension levels of the waves. What exactly is a retracement? Fibonacci retracement denotes a corrective phase within the market, commonly referred to as a counter trend move. As an example, if I have wave one, then wave two. This is a replacement of wave one, even if there is a wave three and then there will be some sort of connection, which is wave four. This again, the retracement down in wave four is your retracement. Which is anticipated to conclude a specific support or stance zone indicated by significant Fibonacci levels. Subsequently, the market is anticipated to reverse direction and continue its primary n trajectory from those retracement levels. Next is Fibonacci extension. Tensions signify the market's continuation along the primary trend into zones characterized by support and resistance at crucial fibonacci levels where traders gauge their target profits. Traders utilize Fibonacci extension to ascertain their desired profit targets. Again, if you take wave one, we get a retracement in wave two, then how large wave three will be the extension of wave three that we can try to identify using Fibonacci levels. That is your extension. Now what are these Fibonacci levels? Here you can see some of the most common Fibonacci ratios or levels. On the left, we have the retracement levels. On the right, we have the extension levels. Retracement levels are meant for identifying the correction levels and extension levels are for identifying the continuation levels or the target levels of the next wave in the primary direction. The most common retracement levels are 23.6%. 38.2%, 50%, 61.8%, 76.4%, 100% 100% is essentially means the wave retraced exactly to the same level where it started. These two are the same level. 23.6 will be somewhere here, 38 will be somewhere here. These are some approximations, 50 would be somewhere here, 61 will be here, 76 point here, maybe somewhere here. These are all the levels to which this move can retrace. On the extension side, the minimum extension we typically expect is 100%, which is same as the previous move, then it could extend to 123.6%, 161.8%, this is a golden ratio. And, um, many times wave three is typically 1.618% times of wave one. For example, if wave 100 points, chances are wave three will be 161 points roughly 1.618 times. Then 200%, which is twice the size of the previous wave in the primary direction, then 261.8. Then you will also finds at times u wave could be 323.6% of the previous sphere. So in this in my experience, on extension side, 100% is very common. 161.8% is more common compared to these two are more common compared to other extension levels. On retracement sides, 23.6% also happens, but more often than not, these three work more than 50% of the time, 38.2%, 50%, at least in my observation, I might be wrong. But from what I've seen, more than 50% of the time, these three levels hold very well on the retracement side. Now that we know some of the common retracement and extension levels, how do they relate to it waves? Fibonacci ratios are useful to measure a waves move within a Ait wave structure. For example, in an impulse wave, wave two is typically 50%, 61.8%, 76.4% or 85.4% of wave one. Wave two will typically retrace more than 50% of wave one. That's what you have to understand. Wave two wave two are typically deeper. They typically retrace 50% or more. Wave three is typically 161.8% as I was saying of wave one. This is very common that wave three would typically extend to this level this many times of wave one. Wave four correction is typically shallow compared to wave two. Wave four correction is typically 14.6, 23.6, 38.2. In my experience, I have seen um, these two, sometimes even this level work very well for wave two and for wave four, 23.6 or 38.2% levels work very well. Wave five is typically inverse 1.236 to 1.68% of wave four. Wave five, the size of wave five is typically 1.23 62, 1.618 times of wave four. Wave five could also be equal to wave one, or it could be 61.8% of wave one plus three. The total of one plus three and 61.8% of that would be the size of. These three are some common targets or predictions levels for wave five. If you remember I mentioned about a rules and guidelines document PDF, which is attached in the previous video. So it has all these guidelines. So you can go through a document and identify, but the most common ones are already listed here. Traders can use this information to determine the points of entry in profit targets when trading using Ait waves. Now quickly, let's take a look at some of the charts to see these replacement levels and extension levels in action. Here, I have the gold Daily chart open. So if you are in trading view, you go to this option and then you will find waive retracement option here is selected. If you want to see the retracement of any leg, in this case, I want to see the retracement level of this wave one down. I will click at the lowest point or the origin of wave to the topmost point, which is here. And click. It will give me all the different levels for retracement. First one, you can see 23.6%, second is 38.2%, third iszero 0.5%, 50%, then we have 61.8%. Now you can see in this case, wave to retract almost exactly around 38.2%. If I want to see the retracement of wave three in wave fort, then I will select the origin of wave three to the topmost point of wave three, which is here. And then I click here, I can see these levels and here again, we can see that fourth wave in this case, moved again around 38.2% levels. This much for the retracement. Let's also take a look at some other charts. So here, I have a monthly chart of SNP 500. If you can see this was a five wave move and then it reraised to 50% levels, almost around the same thing. When we say these levels, it does not mean that price will retrace exactly to these levels, but these levels work as guidelines that it might come around this level. And here also, you can see the 50% level is 35 11, but the exact low that was made was 305-30-4901, right? I will not be exact, but it will give you an indication that, okay, this could be a good point, and this is where you can start looking for reversal signs. Okay. Let's take a look at another one. From this bottom, we can see a five wave rise and then this one we raise in wave two. This was wave one, this is wave two, and this was a deeper retracement, which retraced up to 78.6%. Right? That's how we can anticipate that, um, this was a good retracement when it retraced here, the 61.8%. At this point of time, it would have been, a decent assumption that okay, maybe the retracement is over because it has already done 61.8% and now the up move will begin, but that did not happen. Then there was a corrective rise and then followed by another wave down in wave in leg C of ABC. And we should raise up to 78.6%. We always have to anticipate and see the price action to understand what is happening here and what are the chances of reversal or a continuation. And based on that, we have to trade accordingly. 51. Trading Elliott Waves: Now that we have some basic understanding of allot waves, we can take a look at some practical things to understand how we can apply allot waves to trade. So first thing is wedges. Wedges are typically leading or ending diagonals in terms of ellitwaves. When you combine wedges along with diagonals or Elite waves, you would have chances of higher success rate. So if you remember, from our previous sessions, rising wedge is bearish, falling wedge is bullish, we already know these things and then we see that a wedge is form, then we can also try to look whether this wedge is part of wave one or wave five or wave A or wave Ct waves, we will have greater chances of success because we are combining two forms of technical analysis. Whenever you see wedge, you also try to see whether this wedge, if it is, let's say, a falling wedge and maybe that wedge falling wedge is an ending diagonal of a falling one, two, three, four, five wave and after that, a correction might start on the upside. Similarly, when you see a rising wedge, you can also try to see in the chart whether this rising wedge could be part of wave of a rising one, two, three, four, five, as an example. We said wave five This is a ending diagonal, A, B, C, D, E. When you see a wedge, you can also see whether this could be part of basically five wave move leading diagonal and ending digal could also mean wave A and C. When you will do this, you will have a better target or a higher target, bigger target when you're working without it waves. Similarly, whenever you see a triangle, you can also try to fit in the triangle and see that whether this triangle could be wave four or wave X or wave B of Elliott wave within the current price action. If that you will have more clarity about what might be the next outcome. Triangle always occurs in a position prior to the final wave in the pattern of one larger degree. Wave four in an impulse, one, two, three, four, five, one, two, three, four, five, one way before the ending, this could be a triangle. Similarly, wave B in ABC if it is, let's say, ABC, B actually could take a triangular form or it could even be X wave in double triple zigzags. I think most oscillators, including RSI and MD, you can also use other oscillators Tkastic as an example. They all will show divergence with wave three and wave five highs and lows, because wave fifth is the ending wave. After that trend changes. Wave five is typically higher than wave three, if it is a rising five wave pattern, and wave five will be lower than wave three if it is a downward five wave pattern. So when you will combine your wave analysis with oscillators, you will see typically that wave three and five will show negative divergence, which is an indication of potential trend change. If you go to a chart, So here, I have this gold chart, which we have seen earlier as well. So here you can see, we have a five wave decline is wave one, wave two, wave three, four, and wave five, right? Internals are also marked here. So now if you see three and five, this is a lower loop. But here in MGB, you can see it is making a higher high. Basically, it confirms that this wave five is now ending and we might be reversing the trend from here. Similarly, whenever you will see wave three and wave five, you might also notice that this divergence. This divergence itself you can use independently as a standalone indication. But if you combine it along with it waves, you will have higher chances of success. Moving on. If you're having difficulty counting waves for a leg, it's likely corrective. A lot of time it will happen that you are trying to count waves in a chart, but you are getting stuck, you're not getting any clear view pattern. So you're not able to count, let's say five or even three sometimes, you will have sometimes seven, nine, any any kind of number of legs and they're all overlapping. It's very difficult to figure out what's going on here. Anybody you run into such scenarios, that basically means that price action that you're currently looking at is very likely it's a corrective price action. It's not a motive or impulse price action. That will help you skip that part and you can take that whole thing as a whole as a corrective part, and then you can start looking at what might happen once that part is over. Motive waves are typically more clear. It's easier to count them. Another thing is large gap ups and gap downs are typically impulse waves. Sharp large moves are also typically impulse waves or part of impulse waves. If I go back to this chart, this is a hourly chart of S&P 500. Here you can see, there is a gap here. So now we can count one, two, three, four, five. You can see this gap was part of wave one, which is a impulse with wave two, then again, this gap was part of wave three, which is impulse, and then five. Even before this thing happened, you can see, there was a gap down here and this was part of wave A, A is a motive wave. B is collective, is a motive wave, n this gap down is part of motive wave. Gap ups, gap downs, large moves, sudden moves. They are typically even here also, you can see that this is also ABC correction after this one, two, three, four, five, got an ABC and this C is also a motive wave within the ABC correction and this gap also confirms it that this is a impulse move. Next thing is about how do you actually start using Elite waves to any chart? If you want to start counting Elite waves in any chart, you have to take most recent swing high or swing low depending on your time frame. For example, if you're looking at a daily time frame, then in the Daily timeframe, you have to find the most recent or most significant swing high or swing low and you have to start counting waves from there to understand what's going on. As an example, I have this NVDA chart open, which is hourly chart and this is a recent one. So here, if I zoom out, you can see that this is the most significant swing loop and this is the most significant swing high or maybe this one. But I am more interested in more recent price action because 1 hour is a swing time frame or even intraday time frame. Here I can see, I can count one, two, three, four. This seems to be a five wave structure and then followed by this three wave down, then one up and then again, down. This whole thing is this looks like a complex correction because this is ABC, which essentially does not end here and after that, another leg and then there is another leg. This is WX Y, complex correction, double zag. Then I can apply the retracement to this and see how much retracement has happened. Now when I apply this, I see that after this five wave rise, um, there has been a retracement of 61.8%, which is good, very reasonable retracement from this, there's a good chance it might continue another five way move up after this correction. Now here, if I see it seemed to have one, two, three, four, five, five legs which looks a wedge to me and wedges, if you remember, diagonals when it comes to elit waves. After a collection, what do you expect? After a collection, I expect that the five wave will start. This could be a leading diagonal, leading diagonal of next one, two, three, four, five. This could be wave one essentially. Then once this is done, what I expect is, there would be a collection in wave two and then there will be a wave wave up then four and five. This is what I roughly expect. What I'll do here, if I have to trade this, I would Get a rough retracement idea that how much this thing can retrace? Now, this one, two, three, four, five is over and it is retracing, it has done nearly 38.2. But if you remember, I said wave twos are 50% or more. Once it has done this much retracement, 50%, then I will start looking for reversal signs of reversal here, and then once I see that it might be reversing, then I would probably take an entry in this. Again, this is all our assumption based on what seemed to be going on here, we might be wrong and after this, it might actually fall down. We don't know. It's not like our analysis like it alli waves or any other technical assts will be true. So it's more like based on historical data, what we see. Based on those assumption we go and sometimes they will work, sometimes they may not. So we always have to keep that thing in mind and that's where our risk management and stop losses come into picture that we are going to cover in um later parts. For now, it looks like a leading diagonal to me. I will wait for wave two here, and then I would try to participate in Wave three, move on the upside. That's how you look at any chart. It could be even a five minute chart. It could be if you want to take more longer term outlook, you can go to a quarterly chart, even a chart monthly chart, and then form a view. The way I use AD waves mostly is I form a view based on the current wave counts that okay now, how does the outlook looks like? Is it a bullish outlook or is it a bearish outlook given the current wave count? You can use it to form a longer term view or even a shorter term view. Or you can also trade the wave. You can do both the things. I primarily use Alts for forming a view. As an example, I will show you a chart that I use on a daily basis or a regular basis. This is 50 50 index. Here, after this significant low during the COVID times, we started forming this five wave rise, and then we had a one and it tras into two ABC collection here. Then what we are doing in wave three we seem to be extending wave one, two are done, three seem to be done, four seem to be forming. Then after this, I know there will be a fifth leg here. So I am going with this assumption. Right now, every candle here represents three months of time frame and I know for next couple of months, next three months might remain on the bearish side, there might be selling pressure in the markets because this current candle is once this is done, then I would assume that okay now the market might be reversing and it will be completing wave three. Another thing here is we talked about retracements, I would use a retracement and extension. In this case, I will use a extension tool, FibonakiEtension tool and I will measure the size of wave one and then see how much Wave two has retraced it does retrace till this point. It gives me that if wave three is going to be equal to wave one, then it would give me a target of around 26,330. Right now we are at 22,147. This is what I expect that this is where wave three might go. But if you remember, wave three could be 1.6 time and if that happens, I could be looking at a target of 33,359. Right. So these are basically that's how we use retracement, extensions and waves to form, view or even trade. So in a more immediate thing, I see that we are forming a bear candle on a quarterly chart. So next couple of months, three months might remain on the bear side. And so I will be looking to probably shot if I'm doing interlarades, or if I'm just investor, long on investor, I will just try to avoid taking any long entries till this thing is complete. Finally, when you are in doubt, while trying to count, try to look at a higher time frame. Higher timeframe might give you more clarity about on the wave counts. But if you still don't get much clarity, then you can avoid that chart because At waves, even though they reflect the psychology of the people who are the market participants, how they are reacting to different price movements. So often what happens when you're looking at a chart, maybe there is not enough participation of the people, so there is not enough liquidity. The chart patterns may not be forming or giving you a very clear insight. Aidavs like any other forms of technical analysis works where the stocks are very liquid, like, a lot of participation from the people, there is a lot of volume. So stocks or commodities or any other security where participation is less, they may not give you very clear picture. If you feel that some chart, you are not at all able to count anything you can simply avoid that from it perspective and move on to any other chart. I guess with that, we can end Elliot wave module and feel free to reach out to me in case you have any questions about it. I understand this is a very complex subject to begin with, but it takes time, and once you start to get a hang of it slowly, you will be more comfortable trading the waves or forming views. But initially, I'm here for your help, um, do shoot me and message using the QN board in case you are stuck. Thank you. 52. Trading Psychology: In this section, we are going to talk about reading psychology. This is probably one of the most important topic in this whole course. I request you to pay attention to what I'm going to convey in this module of reading psychology and not ignore it as some theory which you might feel that is not useful. So with that, let's dive into reading psychology. First question is why do you need to discuss about treading psychology? Understanding tiding psychology is crucial for success in financial markets. It involves managing your emotions, controlling impulses, and maintaining discipline. In fact, you might have seen that a lot of traders, in fact, more than 90% of the traders end up losing money. And trading psychology, having the right mindset, not having the right mindset is exactly the reason why all those traders lose money. Technical analysis itself is not very difficult. It's pure mathematics. It's a game of probability. So if you understand that, you can make money. But despite that, a lot of people lose money because they fail to control their emotions. They fail to control their impulses and maintain the discipline which is needed in trading. Emotions such as fear and greed can significantly impact your trading decisions. So when I say fear, I might have taken a trade. Let's say I have bought a stock. And tomorrow morning I'm watching news and I see that there are some geopolitical events or maybe, like, you know, there are some industry specific news, which says that it's not good for the industry to which the stock belongs to or maybe there is some news which is not good for the stock itself. And so I get afraid. I'm fearful. And as soon as the market opens, I sell that stock, right? I sell it despite my trading setup being intact and my stock has not given me any kind of exit or a stop loss. I exit just because of fear. And then I realize that whatever, decision I took was a mistake and the stock kept moving up in the day. And if I stayed in the trade, I might have made money. That's one of the example, and we are going to see more. And similarly, greed can also significantly impact your trading decisions. So, greed is easier to explain, probably. When you when we see that everybody on the Twitter is saying that markets are going up, it's a bullish market. Everybody's buying. And even if my setup or my trading strategy is not giving me any clear signal, just because everybody is buying, I will also buy because I don't want to miss out. And I don't want to be the one who realize that I did not participate in this bullish really, right? So because of greed, you take some decisions which you might regret later because they are not planned decisions. Same thing goes for fear as well. Hence, managing these emotions is essential for rational decision making. Till you get a full control or complete control, complete control is something which is like, you know, almost impossible. I still make a lot of mistakes. These are these mistakes, which I'm going to discuss in this despite being trading for many years now. And in fact, there are hardly any traders, even, like, people who have been trading for decades who do not make these mistakes. The only thing you can do is you can try to control them as much as possible. Traders need to cultivate emotional resilience and maintain a balanced mindset. Apart from these emotions, there are some other biases like confirmation bias, recency bias, anchoring bias, and obviously over confidence as well. So when I say confirmation bias, what happens is, as a trader, we always try to seek information which confirms our theory or our hypothesis that, okay, this stock is going to go up or this stock is going to go down. So we tend to ignore information which contradicts it. So once we make a decision or a view that okay, this stock will go up now. I will only seek information which confirms my view, and I will ignore everything that says, which this is not true, and it could go down. So that's how we fall into a trap of confirmation bias. So we get selective in what we want to hear and what we want to ignore. And because of that, we end up making wrong decisions. Recency bias is something like, as an example, let's say, I have been making money for three days or five days in a row by shorting the market. So I feel that the market is going down and I've been making money for the last five days. So on the sixth day, also, I try to shot the market just because I've been making money by shorting the market, and the market goes up that day and I lose money. So even though there were signals maybe on sixth day that market is not going further down, I ignored them because of my recency bias because I have been making money, so that recency bias has been there in my mindset and I have been unable to come out of it. So because of such things, uh, again, we tend to make wrong decisions and we lose money. Anchoring bias is something where we get stuck with one of a reference or one of our hypothesis that, let's say, as a trader, I did some technical analysis and I assume that, okay, this stock, let's say, Tesla will go up, should go up from here. All the technical indicators are indicating that it should only go up, I cannot go down now. And then I buy it and I wait for it to keep going up. But in next few days, I see that the stock is going down. And I start losing money, right? But I am still believing or I'm sticking with my initial technical analysis that no, no, no, E might be just a pullback and it will go up because my technical analysis is correct. So we tend to stick to our initial thought process when we make a trade and we ignore what is actually going on in the market. And because of that, we tend to make wrong decisions and we lose money. Overconfidence is an obvious issue in trading as it is in other aspects of life. So when you get overconfident, maybe you have been making money, like, you know, for last five days, last ten days, and you know that you have probably figured out the market, and, you know, 11, 12 day, also you'll make money. Markets are not predictable. So they could do anything on any given day. So you might have a lot of confidence on your technical analysis skills, but it will rarely happen that market will confirm what you have been thinking all along. There will be times you will lose money, so you have to always keep your confidence in check and stick with what you are seeing on the screen rather than believing in your own theories or believing in what you think should happen. Recognizing and overcoming these biases is crucial for making objective decisions. So as it's evident that we have to understand that all these issues exist and we have to work on them. We have to work on eliminating or reducing these things as much as possible. So here are some examples of all these biases and fear and greed emotions. So one of the common thing which you have to deal with as a trader is fear of missing out for so as I was saying previously that, on a given day, markets are going up, right? Everybody is buying. And let's say, I've been following on a strategy. And that strategy has not given me any buy signal. But still, since everybody's buying, everybody on Twitter is saying that, Okay, buy this stock, buy that stock, buy this index, or buy this commodity or buy this crypto. And I don't want to miss out. And so basically, I just kind of go with the flow and I ignore my setup and everything and just go and buy it. Only to realize that I was too late to participate in whatever was going on. And as soon as I bought, the market started falling and I end up losing money. So point is you have to stick with your strategy, your own system trading setup instead of just trying to follow what everybody is doing and you have to come out of this for more emotion. Other common issue in trading is revenge trading. So what happens is, I start my day, let's say, and I take first trade, I lose money. I take second trade, I again lose money. Till then I think everything is fine. I've been following my setup and everything. And I take third trade, and I again lose money. That time I see that, okay, I am down for X amount of money for this day, and I'm not really able to come to terms with that, and I want to bring my day's PNL profit and loss to break even or maybe in positive. So I keep on going despite seeing that today my strategy is not working. Three trades have back to back failed, but I have uh, been overcome with this emotion that, no, I have to break even, I have to, you know, cover up these losses. So I keep on taking more trades, and I end up losing more money because on that given day, maybe it's not my day, maybe it's not favorable to the strategy that I've been trading. And typically, when people do revenge trading, they lose money. Other thing is over trading, impulsive trading. Over trading, is, like, you know, sometimes what happens is, like, we have been markets open and you wait that, okay, something will happen strategy will give you a signal, and it's not happening, and you get frustrated, you get bored, and impulsively, you just take you just look at, you know, price action and you feel okay now, this is going to work and I will take a trade. And that's how you kind of, you know, start taking unnecessary or unplanned trade, which are impulsive in nature and does not really have been planned or does not have been followed Esper or trading plan or trading strategy. So that's when you end up over trading or taking unnecessary trades or doing impulsive trading. You have to overcome that, you know, getting bored, feeling or maybe, like, you know, not you have to be patient and, you know, trade only when your system gives you a signal that, Okay, yeah, this is a buy signal or this is a short signal, and I have to now follow this. Another issue, which is very serious in nature is extending stop losses. So let's say I bought a stock at 100 rupees or $100, right? And I have set up initial stop loss of 80 rupees. Now the stock starts falling. But I have that anchoring bias that my technical analysis, my view is right. This stock is going to go up. And the stock has fallen to 80, and I should be out of the trade at this point of time because that was my exit level. But I still hope that no, I have taken 20% loss. I cannot, you know, get out of this and I have to stay in this trade. I have to make sure that I start recovering these losses, and I make money on this trade. So I extended stop loss. I bring it below to, let's say, 75 or even 70. And then what happens, the price keeps going down and it hits that 70 level also. And now I think, no, no, now the stop is too big. I mean, now the loss is too big. It's 30% now and I cannot get out now and it'll be too big too big of a loss. I have to now stay and basically what should have been a trade turns into a long term investment and you're stuck with it and it could actually take years before it gets to a break even stage because if something that has fallen that much, chances of that going up in near future are very, very in. You have to always, um, follow or respect your stop losses your risk management. We are going to talk more about risk management in, um, future sessions. But for now, I think, um, when you are taking a trade, always make sure that you have a stop loss at which you get out when the trade starts going against you and you have to always respect it. You should never try to extend it hoping that this trade will work. Hope is generally speaking a positive emotion, but when it comes to trading, hope could be your biggest enemy. Remember that. So I 53. Emotional Discipline: In the last video, we saw how emotions like fear, creed, hope, over confidence, and other biases can result in disastrous trading decisions which will eventually result in loss of money. Now that we know these issues exist, how do we overcome these issues? For overcoming these issues, you have to develop the right mindset for being emotionally disciplined. Discipline is vital for consistent training success. Without it, doesn't matter how good you are at technical analysis or even fundamental analysis for that matter. If you are not disciplined, you will not make money. And how do you develop right mindset or emotional discipline for training? There are a few steps. These are not the only steps, but these are the must steps which you should follow diligently to ensure that over a period of time, you get to a stage where you are in control of your emotions most of the time and you minimize the errors that occur due to lack of emotional discipline or by giving into emotions. The first step is adhering to your trading plan. You need to develop a trading plan before you start trading, and we are going to discuss in more details how our trading plan should look like in the next video. But in short, a trading plan is essentially a blueprint for how your trading activity will look like or how your trades will look like. As part of this trading plan, you typically have a goal. You have a time horizon and you have a well defined trading strategy that you are going to follow along with some risk management rules. Once you have defined this trading plan, you have to ensure that you strictly follow the trading plan. Second step is analyzing your traits. Once you take some traits, it could be end of day. If you're a swing trader, you could do it every week or every month. You have to regularly analyze the traits, all the traits that you take. Analyzing your traits will help you understand what is working, what is not working, what kind of mistakes you are making. And once you can identify those areas, the problem areas, you can work on them and over a period of time, you can measure and track whether you are making those mistakes less or you are continuing to make those mistakes. Analyzing your traits is a very important step in your trading journey. Third is exercising patients. We talked about giving in to our emotions for example, if I'm not seeing any opportunity for a long period of time, I will start over trading or I will take um, impulsive treats, which would most likely result in loss of money. If you will follow the advice of the most successful traders that we have seen, they all say that money is made while sitting. Money is not made when you are acting a lot or you are in action. Once you are into trade, you have to be patient and you have to wait til you get an exit or your target is hit, or if you're not getting an opportunity, just wait for the right opportunity instead of just jumping onto whatever you can trade by being impatient. Exercising patience is very, very important to maintain your emotional discipline. And then avoiding emotional reactions to market fluctuations. This is essentially kind of, you know, fear and formo. So fluctuations can cause fear in you, you are long, um, security and sudden fluctuation can kind of, you know, make you lose your confidence in your trade and you come out of it only to realize that, okay, this was a temporary fluctuation, for example. Or maybe markets are rising very sharply one day and you decide it's very strong trend is developing and I will also be part of a trend and you just buy something because markets seem to be going up even though your system or your trading plan does not give you a signal to do that. You have to avoid these kind of emotional reactions to market fluctuations. These fluctuations will happen very regularly every day. You have to make sure you don't give in to these kind reaction and you strictly follow what your trading plan is, what your trading strategy is, you just follow your system. These are some of the steps you have to follow and ensure that you work on improving these areas every single day to get better at being emotionally disciplined. 54. Trading Plan: In the last video on emotional discipline, I said, you have to adhere to a trading plan to be emotional discipline. What exactly is a trading plan? How do you create one? Trading plan is a comprehensive document that outlines a trader's approach to trading in financial markets. It typically involves the following things. First thing is the goal. When you create a trading plan, you have to define a goal. What is your expectation from this? Why you are doing it? As an example, I might want to trade for a living. If I am trading for a living, I would have some realistic expectations that I need to make X amount of money in terms of absolute or percentage, too, which is sufficient for me to live comfortably. Or I could have a goal to generate some um, passive income. By doing trading part time. I could have any expectation and depending on that, I would define my goals. Next thing I will do is I will define the horizon I want to trade. I want to trade positionally where my time frame could vary from weeks to months or even longer at times, or I want to do a swing trading where my time horizon could be one to two days to one to two weeks, or I want to do intra trades, I want to open positions and close them on the same. Then you have to define your trading strategy and rules clearly. So when exactly I'm going to enter into a trade and what are my exit points? At what point I will book my profits, at what point I will take my loss and say that, okay, this is a losing trade and I will get out of it. I also have to define risk management rules. This will help you minimize or control your losses so that you have enough capital to continue trading. In risk management, you define your risk appetite, how much risk you are ready to take, you define your position sizing, stop losses. We are going to discuss all these things in detail when we are going to cover risk management module. Finally, you also have to have a plan for reviewing your trades, which will help you track your performance, and you can understand what's going right, what's working, what's not working, depending on that, you can tweak your trading strategy, rules, your time horizon or whatever, depending on what you are observing. Here is a sample trading plan that you can take as a reference. This is a very basic one, don't go by this as it is. This is just to give you an idea of how a simple trading plan could look like. In this trading plan, the goal is to generate part time income from trading with an aim of generating 15% gain on the account annually. Time horizon chosen is swing, so it's a 1 hour time frame. It could be four hour or it could be daily depending on what kind of strategy you are following. In this example plan, I have taken 1 hour time frame and the strategy and rules are it's a trend following strategy, and it's a long only system, so I will not be taking any short trades as part of this system. I will only be taking long trades. Entry rules are whenever MD, there is a MGD crossover below zero line, I will go along, or I will go along essentially mean, I will buy and where I will exit when I'm in profit, I will exit when the price closes below 21 exponential moving average or my target profit of 123 risk reward is met. What exactly is one is 23 risk reward? It basically means if I'm risking one rupee or $1 as a stop loss on my trade, I want to make minimum of three rupees or $3 on that trade. I'm risking one rupee for a gain of three rupees. So when this criteria is met or when the price closes below 21 EMA, I exit from the trade. What is my exit stop loss exit is? I'm going to set my stop loss below previous swing low as my trade goes in my direction, I will keep trailing the stop losses below the next swing low. Once I have defined this system, I'm supposed to follow these rules strictly. I will only take a trade when these conditions meet and I am going to respect these exit targets. It's a profit target or is it a stop loss? Whenever any of these conditions hit, I will simply exit irrespective of what I feel or what my emotions tell me to do. If it is losing trade, I'm going to cut off the trade at my stop loss point. If it is a trade which is making money, I'm going to take my profit at my defined risk reward. Once you have this strategy and rules, the next thing I also have to think about is risk management. As part of risk management, I'm going to define rule that I'm not going to risk more than 1% of my trading capital on a single trade. For example, if my capital is let's say $100,000 or 100,000 rupees, then I'm not going to risk more than 1,000 on one trade. Why I am doing this, I'm doing this to make sure I have enough capital left, even if I lose multiple times. For example, there could be losses when you are trading, there could be a series of losses. You could have losses in five, sometimes even ten consecutive trades. If I am risking more, let's say, 10% of my capital and I have ten successive losing trades, then I will lose my whole account. So I cannot do that. So to ensure I limit my losses, I define that my risk per trade is 1% of my capital. So your capital could be 10,000, not 100,000. So depending on that, you have to define this thing. And for new traders, highly recommend that you do not risk more than 1% of your capital on a single trade. And then I have another second system to prevent further losses. I will stop trading for the day if loss exceeds 3% of the capital. So for example, I may get three or five signals in a day, right, as per my system. I take all of those trades and I lose three of them. That means if I lose three of them, I have lost 3% of my capital on those trades. That means I will stop trading now and I'm not going to start a new position for this day. That will ensure that this is kind of a um, second layer of protection, this rule. So first rule protects me, give me an initial protection on a per trade basis. Second rule give me another layer of protection on my account level. This will ensure that I'm not going to lose more than 3% on any given day. This could be actually given in a week as well, depending on your time frame. Even in swing time frame, you could say, if you have lost 3% of your account, you are not going to take any new trade in that week. So it's up to you how you want to tweak it. The point is you have to have these risk management well defined risk management rules in your system in your trading plan to ensure you are left with enough capital even when times are going against you, the trades are going against you. Finally, I need to have a review mechanism for my traits. I need to have a system where I can record all my trades, and then I can analyze so that I can analyze those traits and see what's working, what's not working, what mistakes I'm making, so I can stop or minimize doing those things. That's how your training plan looks like, and you can add any more things to it if you want, but these are some of the minimal things you need to have it. Once you have a well defined training plan, you have to stick to it and make sure you follow it to the T. 55. Trading Journal: Along with a solid trading plan, you also need to record and analyze your traits in a trading journal. That will help you understand how you are doing. It will help you understand your performance. It will help you understand the mistakes you are making. I will help you understand the things you are doing right and you can do probably better. So essentially, it will help you measure um, how you are doing and improve it over a period of time. Typically, a trading journal looks like this, where you record all these information, like time of trade, when that trade was done, at what time, what date, security asset, what was the stock or a crypto or commodity or a forex payer that you traded? What was the strategy that you employed? Then you also should attach or use a chart of it screenshot, which depicts shows that where exactly you entered, what was your thought process for taking the trade and where you exited as well. What was the entry price? What was the exit price? And you can also describe the reason of da apart from selecting the strategy. If you think strategy itself is sufficient, that's fine. But if you want to add some more inputs, you should add those things. Idea is to capture as much detail about your thought process when you are taking a trade. It'll help you understand what was going through your mind when you enter this trade and it will help you get better by learning from what you did right or what you did wrong. Finally, in a journal, you should also have an option to record your review comments after the trade has completed. Trade could have been a winning trade, it could have been a losing trade. It could have been a break even trade or something in Bitfin. But once the trade is completed, you should review what went right with that trade, what went wrong with the trade, whether you think it was a good trade, whether you think it was probably a bad entry, or you basically need to do that analysis and you have to enter that analysis in that section. Now you can do this trading journal in notebook as well, you can just write on paper and record them, but that would be very inconvenient to maintain and analyze. There are a lot of trading journal online trading journals available that you can use for this. In fact, I built a trading journal for my own personal use, trade Central for my own trading purpose, but once a few friends asked me to use them, I made it public. Now a lot of people use this. It's still free to use. You can also use. Trades central dot M and once you log in, you will see some stats about your trading. This is a demo account. Today's net pL, how much money you made or lost today. Profit profit factor essentially is a metric which tells you whether you are making money or losing money for calculating profit factor with some profits of all the trades that we have done and we divide by sum of all the losses that we lost. So if the profit factor is one, that basically means you have not made any money, you have not lost any money. So to make money, the profit factor has to be greater than one. This is also very mediocre profit factor. It's a demo account, as I said. Idally it should be as high as possible. Um, if it is greater than two or three, it's wonderful. Basically, your idea should be to improve your strategies, your entries and exits so that you can improve this number. Then it shows other things like what is the average winner amount. By on average in this account is demo account, you make $900. Average loser is $400, $425. Total amount of money that is made or lost is 33 k and $84 is average return on trade after averaging out all the profits and losses, on average, you make this much money. And what was the largest gain? What is a win percentage? Win percentages when you take 100 traits, how many of them end up making money for you? In this case, it shows that 38% of them made money and 62% of the trades lost money. But despite this, this account is profitable. For adding a journal, you have to go here. Here you can select a portfolio if you are trading different accounts or different kind of let's say you are also trading crypto, you are trading commodities, or you are trading stocks, you can create different portfolios for them and you can specify the same here. Then what is a strategy that you are using? Here I can see four strategies. You can add strategies and portfolio details in this section. To learn more about this, I will share a link, how to use this application in detail. So YouTube videos you can watch and understand. For this video, I will stick to just adding a journal entry because that's what we are trying to understand here. After selecting the strategy, you have to specify the date and time, when exactly did you take this trade? You select a date and then what was the time? What is the security that you are trading? It could be index, stock. Is it a intraday trade? You have to specify that. Is it a long trade or a short trade? Long trade essentially mean you are buying something short is you are basically selling something, you are essentially doing a short trade. Then you have to specify the entry point. Let's say I say that it is a long trade, entry is at 100, it could be 100 to piece $100. Stop loss, let's say, is at 95 and my target is let's say 110. I'm risking five rupees. Or $5 to make $10. Hundred, my stop is 95, but my target is 110. I will automatically calculate the risk reward for you of this trade, and let's say the quantity is 100. Here you have to provide a reason why you are taking this trade, what's going through your mind. You have selected the strategy great if you have selected a strategy and the strategies is very well defined. You don't need to enter much here, but if you think there are some additional inputs you should mention, then you should do it. Then you can add a link to this trade here. For example, if you're using trading view and let's say I create a trade here, which shows my entry and something in my exit point. Let's say this is a trade. This is where I entered and this is my stop loss and this was my target. This is some random entry. I'm just trying to show you. In trading view, you have an option to copy link. You can copy link and you can add it here. This link will look something like this when you will open it. This will show you the exact chart when you traded that thing. You can go back to this chart and understand whether you made a sound decision by entering this trade or were there any information in this chart that you probably missed and which you could have used to improve your trading in general or improve your entry or your exit. Or if you don't want to do this, you can also take a screenshot of the chart. So you can also take a screenshot using your Windows or Mac or Linux, whatever you are using screenshot, or they also have an option in trading you to download this image. You can download this image and you can upload it here, chart. Finally, you have to provide the exit price here. And then what was your exit reason? Did you exit because a target was met or did it because stop loss was hit or was it a trailing which got hit or was it a strategy timeout? So Strategy timeout is essentially something. When you create a strategy, you may have a time based timeout. For example, if within an hour, let's say if it's intraday strategy or if it is sing strategy, you say within a week, if neither your stop loss nor your target gets it, you will simply exit the trail. It could be time based timeout or it could also be a condition based timeout. For example, if the price closes above or below a specific indicator, let's say, if the price closes below 20 day moving average or 20 hour moving average, I will exit. You can have those timeouts as well. So that's what strategy timeout is. Manual exit, it could be due to any reason. For example, you are in a trade and then let's say you were long some stock and the next day results came of that stock and they were very bad and you knew the stock is now going to fall, um, and you see those things happening, so you can simply exit even though there was none of the criteria was met, no target, no stop loss, no trailing SL, no strategy timeout. You manually decide to exit manually. It's just a rough example, but there could be reasons, uh where you may have to manually exit without any proper strategy reason. And then Auto square of intraday is basically most of the brokers have an option to cut off your trade at specific time of day if it is a intraday trade. If you forget to close your intraday positions on your own, the broker will automatically close them. That's for that and if it is something else, most of the times you will end up selecting these things, but this is just an option given here just in case. And what was the exit time? I'll calculate. Once you have entered all this information, it will calculate the profit and loss point for you. And if you have configured your broker, it will also calculate the broker fee and it will give you the final profit or loss amount. Once everything is done, then you have to enter your analysis of the trade. Analysis of the trade in the sense like what went right, what went wrong with this trade, and what was good, what was bad. And then we also have an option in this case to select some tags. These tags also could be some good things that we did or some bad things or mistakes that we made exited too early or it was a perfect exit as planned, or maybe it was a late entry. You can also select these tags. These tags will help you understand the mistakes you are making or the right things you are doing. Finally, the status, is it a active trade? Is it the completed trade? Is it the planned trade or it was canceled? These are the different options that you can use to create a journal entry. Let me show you some existing entries here. I have a couple of entries here. It shows the strategy and this was exit price, PL points, PL amount, target exit reason was target was met risk reward was 3.6 and there is a chart image. This is how this trade looked like. You entry was here and then exit was here, trade reason as per strategy. Trade analysis in this case, nothing is entered because probably the trade was very simple and it worked as per the strategy, nothing much to do. And whatever tax you selected. So those you can analyze here. Here, I can see green ones are the positive things and red ones are the negative things. I can see that maximum number of mistakes that I'm making did not follow the strategy correctly, and late entry is another big issue. It has happened two times that I entered too late in a trade, and then over trading is also there, exited too early is also there, perfect exit is also there. These things will help you understand what kind of mistakes you are making more often and then you can work on them. There are a bunch of other things that you can use to analyze your trades and improve your trading game. So coming back to trading journal, doesn't matter if you're a new trader or an existing trader. If you are not journaling your traits, you should do it. Use anything out there, any software, paid free or use a paper if you need to. But you should definitely be recording your trades. It will immensely help you improve your trading performance. 56. Final Thoughts Trading Psychology: Now that we have seen that trading psychology plays a huge role in trading success or failure and how you can work on your emotional discipline and improve your trading by learning to manage your emotions well. Here are some final thoughts that I have, which I would like to share with you before we close trading psychology section. First thing is, you have to set very realistic goals. A lot of people get into trading with some very unrealistic goals like I will double my money in a month or I will double my money in three months they see a lot of this kind of information like misleading information being spread on social media that people are making thousands times within a month on cryptos and stuff like that. Maybe some people are doing, but that's luck, that's not a skill that you can acquire. Trading is a very, very hard skill to acquire. It takes time, and even then if you expect it to double your money or triple your money within a few weeks or months or even years, it may or may not happen. You have to take it as seriously as you take any other job and you have to be very realistic about what's achievable and what's not. So do not set very unrealistic goals within one year, I will become rich with X amount of capital. So don't do that. You have to get realistic. You have to work on your trading, test your strategies, figure out how much money you have been able to make. And what are the problem areas. Based on that, you come up with some realistic number that okay this is possible and this is not. Before you have tried anything in trading, do not set any goals at all. You do it for some time, you paper trade, you back test your strategies with some real money, but with very little capital just to get your hands dirty to see how it works. And then once you have had that experience, then set a very realistic goal of what I could do now with what I've learned so far. Second thing is, focus on the process, not the outcome. So as I said earlier as well, once you have come up with a solid trading plan that you think is a very reasonable trading plan and should work based on some back tested data. You have to follow that system and you should not worry about the outcome too much. There will be days where your system is losing money and it could be three days, five days, losing streaks could be there. But you should not give up on that system if you have tested your system properly and you are confident that this works, then you have to just follow your system and if it is becoming too difficult and take a break for some time, but do not change the process unless you are confident that this system is not working for you and that confidence should not come by trading the system for a week or even for a month. You have to test your system for a considerable amount of time before you can say this is working or not working. It should not be impulsive or decision coming out of frustration. Just follow on the process if you believe your trading strategy is good, your trading plan is good, there will be times you might lose money, as I said, in a sequence for many days, but you should not give up just because it has happened once or twice. Um, these streaks has happened once or twice, trust your system. If you have back tested it thoroughly, just believe in it. Another important thing is you have to focus on reading your strategy or treading your system, not your profit and loss. What does this mean? A lot of time, what happens is, let's say I'm doing intra trading, and in first two trades, I lost money. Now, I tend to focus on my profit and loss that my account is now down by let's say 2%, 3% or 5%, whatever amount. Now my focus is that I have to recover that amount. Now I'm not thinking about following my strategy and system. I'm just thinking about how I can recover. That is basically a diversion from your process or from your system or strategy. At these times, it's very often it happens with a lot of traders that they forget about the system and they just try to take some random takes that okay I have to recover my money somehow, I have to get back to zero or I have to get back to green. Then you divert from the stratagean system and you lose a ruse money. Never let profit and loss for a given day or for a given period be the guide of your trading activity. Your trading should always be done as per your trading plan, it should not get influenced by your profit and loss for a given day or a given period or by any kind of market fluctuations. Just trust your system, stay with it, if you know that this system has made money by back testing it in years, then it will make money very likely for you if you stay with it without um getting diverted. Another thing is manager risk strictly follows stop loss orders. If you remember, I mentioned about hope in one of the slides earlier, where I said that people keep hoping that, maybe even when the stock has come down or the security that I'm trading has come down, it would still go up. I keep hoping that and I keep extending my stop losses. Never do that. Whatever stop loss you initially thought of, just respect it. If it is hit, just get out of the trade without any second thought. Cutting off your losses is the most important thing. Protecting your capital is the most important thing that you can do as a trader. As a trader, making money secondary, protecting your capital is the first thing. Always remember that and always respect your stop loss orders. I whatever you are trading, it comes to the stop loss point, simply accept it and without any emotions, cut off your trade and move on to the next opportunity. Then you have to review your traits regularly to identify and avoid previous emotional mistakes. This is where trading journal would help you. This point we have covered in detail, but I would like to reiterate. This is very important. Reviewing your traits regularly, keep an eye on what mistakes you are repeating and how you can minimize those mistakes. Finally, these things are more process related and there are a few things which are directly related to your health, right? You have to make sure you are physically fit. You are active physically. Don't keep sitting in front of screen from morning to evening, just looking at the charts, take breaks, take frequent breaks, and make sure that you do some kind of exercise, you hit the gym, you go for running, you do cycling, you do swimming, whatever activity. If you are healthy, your mind will be fresh and you will tend to make less mistakes. You can also do deep breathing exercises, meditation. You can read about those things. A lot of people have mentioned a lot of traders have mentioned that they feel calmer after doing naam or deep breathing exercises or doing meditation every day. These things can also help you stay calm and make sure that you remain in control of your emotions. Apart from this, anything else that you feel could help you just do that there is no formula that works for everyone. Here are just a few things you must do, and apart from this, if you can think of anything else that might help you get better at controlling your emotions, definitely, do that. And with these things, let me close this section and in the next module, we are going to talk about risk management. 57. Fundamentals of Risk Management: Welcome to Risk Management module. In this module, we are going to learn about various kinds of risk associated with trading and what we can do to mitigate those risk so we can preserve the capital and be long term profitable. So with that, let's get started. So what exactly is risk management? Risk management is a process of identifying, assessing and mitigating potential risks associated with trading. Risk management is essential to preserve trading capital and to be long term profitable. Before we get into the details of risk management, let's go through an example. Let's say we have three different traders, John, Jane, and Jack. All of them have the same initial capital of hundred K and all of them use or all of them take the same traits. They use the exact same strategy. They also use the same risk and reward ratio, which is, which is one is to two. One is essentially mean risk reward means that they are risking $1 for making dollars. So essentially, their stop loss is $1 and their target is $2. We are going to learn more about stop losses in detail in this module, so don't worry if you are not clear about it. But the point is, you have to understand that all these three people or at least three traders, they have the same capital and they do everything same with the only difference of risk management. John risks 5% on every trade he takes. That is his risk management rule. Shane risks only 1% on every trade she takes. Jack, he does not have any risk management rules. He goes all in. So whenever he says in or sees an opportunity, he simply takes a trade and waits for it to work out for. So everything being same, other than risk management, let's see how it works out for these traders. On the right most side here, you can see this is how trades went when they started taking trades because all of them are taking same traits using the same strategy. This is how these traits worked out for them. This is the first trade. So first, second, third, four, five, six, seven, eight, nine, ten, 11, 12, 13, 14. In total, they took 14 trades and the losing trades are marked in red as L and the winning trades are marked in green with W. Here you can see how their capital changed. With all these trades. F five trades were losing trades. Let's see how it worked out for John. John started with the initial capital of 100 K. First trading trade was a losing one, so he lost 5% of the capital because he was risking 5% for a target of 10%. So after first trade, his capital is 95, second was also losing trade. I went down 90, third was also a losing trade. It went further down to 85 and then it continued till five trades. After five trades, John's capital was $75,000. Then there was a couple of winning trades. So after 75,000, next it was winning trade in which he made 10,000, which is 10% of the account capital. So that became 85 um, and then the next one was also again a winning trade. So that became 95. And then we had a losing trade, so the capital further went down to 90,000. Then there were three winning trades. Jack John's account, sorry, went to 100 k, then next we 110 k and then further to 120 k. Here you can see the account came in green. And then there were a couple of losing trades after 120 K then became 115 and then hundred ten last trade of the winning trade and then John ended this series of trades in green with 120 k in account, which is a 20% gain on the account. So this is a very simplistic case, and we are assuming these traders continue to use the same risk in terms of percentage on the capital on their initial capital. They are not changing their risk as per the dynamic capital. Like, for example, here the capital became 95 K. So if John wanted, he should have taken trade by risking 5% of 95,000 instead of 5% of the initial hundred thousand. This is just to explain to you how this risk management works out, so I've keep it simple, but you can change it and tweak it and see the results. How do they look? Now let's move on to Jane. Jane had the same traits, only difference, she was risking 1% of the account on every trade. So initial five trades were losing trades, one, two, three, four, five, so she lost 5,000, her account was 95,000 after this string of losing trades. Then two winning trades in every winning trade, she made $2,000, 2%. Net seven then teen 99, then there was a losing trade it became 98, and then there was a series of three winning trades. So account went 200 hundred 204. And then two losing trades, 13, 102, and finally, a winning trade, 104. So here you can see Jane made a total of 4% on the account after this series of trades. Now, Jack did not have any risk management rules. So he took the trade and hope that trade would work out for him. He went all in the first trade and the trade went against him, obviously, and he lost the whole capital and he did not have any capital left to trade further. Now you can see why risk management is important. And if you are thinking that I'm exaggerating this check scenario, I'm not. This is what happens to a lot of traders every single day, a lot of new traders every single day. They get into market and they take a trade hoping that their trade would work. So they take a position and stay in the trade it either makes money or they're kind of, you know, completely out of the account. In some cases, they end up exiting the trade, but by then, it's typically very late and they have lost majority of their capital. So don't be Jack. You need to have a risk management practice in place. So be either John or be either Jane. But here also, I want to show you some difference. Now you might feel that John was risking a little bit more and he ended up making more on his account in the same time by taking same number of trades because John made 20% and Jane only made 4% on the account. Surfacially, it looks like John is doing better. But assume instead of these five losing traits, what if there were seven or ten losing trads initially? Because it can happen. I will happen. So even with these five trades, John's capital went 100-75 k, which is 25% drawdown. John lost 25% of his capital in initial five trades. After losing this much money, $25,000, a lot of people will not have the courage to take the six trade itself. They may want to say they will say that, maybe trading is not for me, they will stop it and they will never do trading. Right? Or they will probably lose their emotional balance after losing this much money and they will start making mistakes. Maybe they will not follow their risk management, maybe they will not follow their strategy. They will be driven by the emotions of recovering all the lost money, and in the process, they will lose more and more money. So are you the kind of trader who is okay if you lose 25% of your capital? If you are, maybe you can go with higher risk like John did, even though I don't recommend risking something like 5% of your capital on a trade, even though he came up winning after this series of trade, 20% on his account. Now let's take the case of Jane. She was risking very little 1% even when the first five trates went down, she was just down 5% on the total account. 5% down is much more manageable and it will keep you and your emotions in check. So you will likely not fall into the trap of any kind of, you know, emotional issues as we saw in the trading psychology, and you're likely to continue with your plan because you have not really lost a lot of money, you've just lost 5% on your account and then you continue taking this and at the end of this, you still made money. I agree it's not as much as John, but making 4% on an account, assuming these were intraday or swing traits. Let's say these traits were done, 14 traits were done in a period of 30 days. In 30 days, 4% is not at all bad. 4% gain on an account in a month, let's say, is not at all bad. So you need to have realistic expectations, and Jane is likely to be more successful because she will not lose her emotional balance because she is not having wild changes in her account because of the tight risk management practices she is following. And once again, don't beat Jack. You have to have some kind of risk management practices in place. 58. Risks, Tolerance & Mitigation: In this video, we are going to discuss about the various risks involved in trading, understanding your risk tolerance, and how you can mitigate the risks involved. Here are some of the prominent risk involved in trading. The first is market volatility. So markets are volatile by nature, and there could be large moves on any given day on either side of the markets like up or down, you know. And because of these large moves, it's possible that you can lose a large amount of money if you have not placed a stop loss order. So if you are not limiting your losses, you are just into a position hoping that, okay, I will exit when it gets to predetermined level. Basically, the stop is in your head, but it's not in the system. And there is a volatile move, you can lose a lot of money. Other risk is unexpected news and events. These events and news could be political, could be geopolitical wars, what is going on with Iran and Israel and Ukraine and Russia. It could be a pandemic like COVID happen, and it could be industry specific news which might impact the trade that you have taken. So any kind of unexpected news and these kind of news can cause sudden market movement, which could be very sharp and very large. And again, such kind of moves are enough to take out the whole accounts. Like, you know, you can lose your whole account if you are not protected against your trade. And then we have economic conditions, new data releases, economic conditions keep changing. It may not be your own country's economic condition. It could be a major economies condition, or it could be a global macro factor. These kind of news these kind of changes in the economy and release of any new data, these things also can impact the markets and they also can cause unexpected moves in the market. You might be hoping that the markets are going to go up, everything is stable, but some new data comes in, which is not so good for the economy, and then the markets suddenly turn and going against your data against your assessment. So these things keep happening all the time. Then obviously, risk, one of the major risk is poor trading decisions. Maybe your strategy itself is not very sound. It has not been tested enough to prove that it is a profitable strategy. It could be a bad strategy or you could be using very high leverage. Leverage is essentially a money that broker can give you, so you can trade on a higher amount than what you have in your account. We are going to cover leverage separately, but using high leverage and having a bad strategy or any other kind of wrong poor trading decisions can also cause risk to your trading accounts. Another important thing is risk tolerance. So if you remember, in the previous video, we were reviewing three traders, John, Jane, and Jack. So we had John, who was risking 5%, and at the end, he made more money, gained 20% on the account, right? So John was a very aggressive trader. He was willing to take more risk to make more money. Then we had Jane. Who was risking very less and also making reasonable amount of money, not as high as John. You have to understand your own personality. You have to understand what kind of risk you are willing to take. Are you okay with taking the risk that John took? In that example, John's account at one point of time went 25% down. Art, would you be okay if you were in position of John? Are you willing to take that risk to make more money, or you would be more comfortable trading like Jane where your risk tolerance is low, you are willing to take less risk, and you are willing to kind of accept lesser gains on account. So you could have an aggressive trader mindset like John, or you could have a conservative trading mindset like Jane, or you could have something in between. So you have to figure out your risk tolerance, and, you know, accordingly, you have to define your risk management rules. Different traders can have different financial goals and trading experience. Depending on that, they will have different risk tolerance. As a trader, it's important to identify your tolerance for risk and define your risk management routes accordingly, as I was saying. As an example, again, the same thing, a conservative trader with a low risk tolerance like Jane will prioritize capital preservation and a more aggressive trader with a higher risk tolerance like John will seek higher returns at the expense of increased risk exposure. You have to figure out what kind of trader you are, what kind of risk you are willing to take depending on that, you can define your risk management rules and trade accordingly. So what are different ways in which we can manage the risk or mitigate the risks? The first and foremost is using stop loss. So when you use a stop loss, you place order in the system. W as soon as you take an entry in a trade, you also create an order order in the system, which gets executed when the security that you are trading goes down to a predefined level. Basically, you have a predefined risk. If the stock or crypto or for x, whatever you are trading, if it goes to a predefined level, you simply exit the trade and you take whatever predetermined loss, um that you had defined as perio risk management rules, it could be 1%, 2%, or even 5%, whatever. Uh. Second is position sizing. Now we have been saying that you should not risk more than 1% on a single trade or 2% on a single trade on your account. But how do you calculate? How do you determine what position I need to build? How much stocks or how many cryptos I need to buy exactly so that when the trade does not go as per my assessment, I lose only this much. So position sizing helps you there. It helps you understand, it helps you calculate what's the exact quantity that you should buy as per your risk management rules so that your risk is predefined 1%, 2%. Then there is diversification. Diversification is primarily meant for long term rates like investments where you try to mitigate your risk by diversifying your investment or not investing in one specific kind of asset, let's say, cryptos. You are also investing in stocks. You are also investing in gold. You are also investing in let's say bonds. So you are diversifying your um investments. Even if you are just trading, let's say, stocks, you are not investing in a specific industry within you are um investing in different kind of industries so that even if there is something goes wrong with one particular industry, other industries are still going to balance out your portfolio. So diversification is another way and finally, you need to strive for a healthy win rate or a healthy risk reward. Win rate and risk reward are not exactly risk management, but they are very much relevant to risk management and having a healthy win rate and a healthy risk reward can help you be more profitable in longer run. Let's switch to the drawing board to understand these concepts I covered win rate, briefly when we are talking about trading journals. Let's say you win three out of ten rates, that gives you a win rate of 30%. If you win five out of ten rates, that gives you winning rate of 50% pretty simple. Now coming to risk reward, When we are trading, we usually have a risk reward in our mind that if I'm risking $100 on my trade on a given trade, I should be making at least, let's say, 150 or maybe 200 or maybe even more, maybe 300. If I'm risking $100, I'm expecting at least I would make this much. If you take the first example, our risk reward is hundred divided by 150, which is one is to 1.5. I'm risking $1 to make 1.5 dollar. If I take the second one, it gives me a risk reward of one is two, two. I'm risking $1 to make $2 in this case, my risk reward is one is two, three, I'm risking $1 to make $3. Clear. Now, we need to understand how these two things win rate and risk reward go hand in hand. Now, a lot of new traders, when they get into trading, they think that they have to win, let's say, 80%, 90% of the trades, or they even think that it is possible to consistently do this much this high win rate, which is very, very rare in trading. So markets are like random. I mean, if you are speaking technically, they could be random. So technical analysis can help you identify some patterns which have happened in history, and they repeat more often than not. So that's how we rely on them, but still it's a game of probability. So when I say probability, it's as good as 50%. 50% of the time, you make money, 50% of the time, you will lose money if you do the same thing over and over again. So now if your winner rate on average is let's say just 50%, how do you make money? Because you're losing 50% of the time and you are winning just 50% of time. If my risk reward is one is 21. Basically, if I'm risking $1 to make $1 and my win rate is 50%, then I will not make money in the long run because 50% of the time I'm losing $1, 50% of the time I'm making $1, all in all, I'm a loser and I also have to pay brokerage fees and everything. Even with one is 21 ratio, it's not $0 that I will make, I will be in negative, so first thing to understand is our risk reward has to be at the bare minimum one is to one, which, again, is typically followed by very experienced traders who have been trading for years and who know that, okay, this one is two win is good enough because their win rate is very high. So they can afford this thing. But new traders, they should not think of trading anything below one is to two or even higher, something like one is 23. So now, let's say, if you are having a win rate of 50%. Well, let's say, since you are a new trader, let's say you have a win rate of 40%, even lower than that, and you are trading with a risk reward of one is to two. And then you do some trades, let's say, first is losing, second is winning, third is losing, fourth is losing, fifth is winning. And you have a capital of, let's say, 100. I mean, let's keep it simple. So basically, and you are risking 1% per trade, that means your target is 2%. But this is your stop loss, and this is your target. So now, your capital is 100, first is losing, you are at 99. Second trade is winning trade. You make 2%, which is one not one, and then you lose one, you get back to 100, then you get to 99, then you again make one not one. Now, if you see here, even though your winning rate was just 40%, but your risk reward was one is to two. Even with 40% win rate, you are at break even. You did not lose money. Where you had three losing trades and only two winning trades. Instead of this, let's say if your risk reward was one is 23 and the same winning percentage, what would have happened? First losing trade 99, second winning trade, one not two, we are adding 3% to it, then a losing trade, one not one, and then another losing trade, one red, and then another winning trade, 3%. Even with 40%, you made 3% on your capital if your risk reward ratio is high. All in all I'm trying to say is if your risk reward ratio is high, then even with lower win rates, you can make money. But ideally we should strive to improve both. We should strive to improve our win rate to make it as high as possible, and we should also strive to look for better opportunities in market which give us higher risk to reward ratio. So that will improve our probability to be profitable in the market in the long run. So that's the importance of win rate and risk reward. And with that, let me close this session. 59. Order Types: Before we go to stop losses, let's understand what are the different type of orders that are available by the brokers when you trade. So first is a market order. Market order is an order which is executed instantly at the current price. For example, you are buying Bitcoin, bitcoin is available at let's say $65,000 or $65,050. And when you execute it, whatever the current price is, it will execute there. It's a guaranteed execution, but it does not guarantee the price that you see on the screen. When you are executing, will be the price that you will get. I will give you the best available price regardless of the level of liquidity or the presence of other orders in the market. So market order essentially gets executed instantly at whatever price is available right now and it's a guaranteed execution. The second order is limit order. Limit orders are precision orders which are executed at a certain level or a certain price point. When you are placing a buy limit order, we have to place it below the current market price. The current market price, let's say, is 100. Then you cannot place a buy order above current market price above 100. You have to place it below the current market price, whereas the sell order limits are placed above the market price. Reason for this is when I'm buying, I would try to buy at as less price as possible. And when I'm selling, I would like to sell it at as high price as possible. So when I place limit order, let's say at 99, I am guaranteed that my order will not be executed at a price higher than 99. It will be executed at 99 only. And if I'm selling it, let's say at one not one, I know that it will be executed one not one at one not one only. So they give you precision. They give you control, which is what you need when you're working with risk management. So you can be sure about the exact amount that you are risking. But the issue with limit orders is they are not guaranteed to be executed. They will get executed if there is a matching order against it. Otherwise, they may not get executed at all. That's a trade off. You get the precision here, but you do not get the guarantee which you get in the market. In market orders, you get the guarantee of execution, but you don't get a precision of the exact price point at which you are trying to buy or sell. That's a difference. Then you have stop loss orders, then you have a stop loss order which is executed at market. This is exactly the same thing as a market order except it's used for stop losses. When we are using SL market order, it is guaranteed to get executed above or below, whatever the price if my stop loss is for a buy order, that means my order will get executed at a price same or below my SEL, but it's guaranteed execution. For example, if I bought a stock at $100 and my stop loss at 99. My market order will get executed 100% when the price goes to 99, but it might get executed at 99, it might get executed at 98.5 or it might even get executed at 98. That's a risk. That is called slippage because you may not get the exact buying order against your sell order at the same price level, that's a risk, but you are guaranteed that your stop loss will be triggered. And then you have SL limit orders, which again, it's a stop loss order, but it's a limit order. It gives you the precision. The exact price point, for example, if I want my stop loss to get executed at 99, it will ensure that it will get executed at 99 or it will not get executed. But that's a issue that there is no guarantee it will get executed. I may happen that this is a sharp price move and the price goes below 99, it goes to 98 97 and that means you are now losing more than you plan to lose. That's the reason um, stop losses should typically be placed using a market order, even though there is a risk that you might not get the exact price, but at least you are guaranteed that they will get executed. And the limit orders, you are not guaranteed the execution, but you are guaranteed the precision that if this order will get executed, it will get executed at the same price. Again, it's a trade off, but I recommend that you use a market order when you are using it as a stop loss. Ors. Finally, we also have trailing orders. Trailing orders are essentially used to lock the profits. For example, I take a trade $100 with a stop loss at 99 and my target profit is, let's say, one or $2. Now I can add a trailing stop loss order, which will keep moving up as the price moves in my direction or price moves up in this case. I could say that trail my stop loss with one percentage. If the price goes 100-101, my stop loss is also moved 99-100. Why price goes 101-102, my stop loss is also moved 100-101. We are trailing the stop loss that way we are locking our profits. We are ensuring that even if the price goes down from the current levels, our stop loss has moved up, so we will still might make some money or we lose less money. Trilling orders can be very beneficial and some brokers provide some brokers do not provide it, so you have to check with their broker whether they have a facility. If they have, you should use it and you can use it as a percentage. You can also use it as a number of points or if you are trading ForEx as PIPs, 100 PIPs or 200 PIPs. You can also do that depending on whether it's available at your broker. 60. Stop Loss: In this session, we are going to take a look at how we can set stop losses for our trades. Before that, just an overview again, stop loss orders are predetermined price levels at which traders exit losing positions to limit potential losses. As we discussed in the previous session, stop loss orders should be executed ideally at a market price instead of limit orders because limit orders may not be guaranteed execution. If there's a very sharp price movement, your order may not get hit and you might actually be in bigger loss than you expected. Now there are a few different methods based on which you can determine how to define a stop loss for a trade. Here are a few common examples or common methods which you can use. So the first way to determine a stop loss is as perio trading strategy. So if you're following a strategy, the strategy itself should have a built in stop loss mechanism so that you're using which you can identify. Typically, when you're using a strategy, it could be indicator based, or it could be based on something like moving average, SMA or EMA or a pivot point. Let's take a look at example of charts. So here I have Bitcoin 1 hour chart. Now I can see a pattern here. I'm using closed values for drawing this ren line. Let's say I only trade patterns. Now this is a triangle, ascending triangle. You could also call it a wedge, but what's important is, I'm going to rely on in which direction there's a breakout. Breakout is on the upside. I would be potentially looking for a long trade or a bi trade. Let's say after this breakout, I enter somewhere here. Now it's logical for me to place my stop loss somewhere below this or maybe even below this low. This is how I can determine if I'm trading something like a pattern or if my mechanism or my strategy is trend based, so I could also do something like I could add a moving average. It could be a simple moving average or it could be let's say 20 day or 20 hour in this case, if I'm in a long trade, and if the price goes below, closes below a moving average, whatever I'm using, then I will exit the trade. In this case, my stop loss will be defined by, this. And when I enter a position, let's say I enter a position, assume the same, um, trade. In that case, the same breakout trade, this candle. Then my initial stop loss will be below this candle because this is also below this moving average. In this case, I will exit somewhere here because this is when the price closed below the moving average. Like moving averages, you can also use pivot points for the same purpose. The other type of stop loss is volatility based stop loss, which is done using ATR or average two range indicator. Let's go to the chart again. ATR essentially tells you how much volatility is there in a given security. You can add your stop above or below that known volatility level. I have our chart of NVDA open. Now, you go to the indicator for ATR average true range. By default, the ATR that will be added or any indicator that is added will be of same time frame. The Jart is of 1 hour. ETR also will be of 1 hour. But we want to seeing daily range of the volatility. If you are trading let's say intra day, let me also change it to column, so it's easier to visualize. Now, this is a 14 period range. I can change this 14 period because a lot of people also use smaller range or very recent range, let's say for three days only. If I'm using something like three, that gives me a number of 49 80, as you can see here, 49 89, It is about a $50 range, Volatit range. Now, let's say I'm looking at this chart and I see there are multiple dogs forming and I wait for a breakout on either side. If there is a close above these doge highs, I might consider going long or if D's next candle or the candles after this closes below the lows of these dodges, I might consider going short. Given that trend looks downward, let's say the candle, this candle closes below the low and I go short. Now if I take a short position, let's say somewhere here, then from my entry position, I will take this ATR, which is 50 points and set my stop loss, something like this and target Bajon whatever. I think wherever this stock could go. So this is how you can set a ATR based or volatility based stop loss. If you are trading for a longer term, you could even use a multiple of the same ATR. So you could want to use three times of the ATR if you are, let's say, into a positional trade, or even five times of ATR. Basically, you are giving more space for a stock to move to ensure it doesn't get hit because of market fluctuations. The third type of stop losses, which are commonly used is based on a market structure. Market structure is nothing but your price action. How the market is moving and it could be the swing low swing highs and support resistances. Let's go back to charts. Let me remove ETR. Let's use the same chart. I can potentially draw a support somewhere here or maybe here. I can see 1.2 point, and this is almost, almost here, right? So now, if I'm taking a shot trade here somewhere here just like we took, I could or I may want to have my stop loss above this resistance level because this is a resistance because the price is below this, so it becomes a resistance. But this may not be a very good idea, but this is I'm just giving an example because when we are usually using support and resistances, we should try to take a position as close to these supports and resistances, so we have a good risk reward. Essentially, we stop loss is small, smaller. In this case, the stop loss will be very large. But just think of this as an example, and if you look in terms of swings, let's say, if I'm shorting because I see that trend is down and we have lower lows and lower highs are being made here. So let's say here is a support as long as the price is above it. I'm waiting that since there's a trend is downside, there's a possibility this support might break. I'm waiting for this support to break. Once this is broken by this candle and this low is also broken, I would enter somewhere here and I will use this swing high as my stop loss in this case, and then I will have something like one issue two or whatever it is, and then I wait for my trade to playout. You can use swing highs and swing lows. This is an example of a short trade. Let's say, let's take this example, where we have high low and this is where we have made another swing high. And then swing low. When this swing high is taken somewhere here, then this swing low, the most recent swing low, I will use it as my stop loss, and then I will trade this accordingly. In this case, you can see that apples reverse and trade did not work in my favor. But this is how you can set the stop losses using swing lows or swing highs and supports and resistances. That's all for stop losses. We'll discuss about position sizing in the next session. 61. Position Sizing: In this session, we are going to learn what is position sizing and how we can use it to effectively control and manage our risk. Position sizing is the process of determining the appropriate amount of capital to allocate to each trade based on risk management parameters. As an example, if a trader wants to risk 2% of the capital per trade, then the trader needs to calculate what quantity of the underlying security he or she should buy or sell so that if trade goes against the trader, he or she should not lose more than 2% of the capital. In previous session, we learned about how to define stop loss. We need to know the stop loss before we can calculate position size. The formula for position size is your capital multiplied by risk per trade in percentage, divided by your stop loss amount. As an example, if your capital is 50,000 and the amount of risk you want to allocate for each trade is 2% and your stop loss amount is $1.25, 1.25 whatever currency use. How do we calculate the stop loss amount by subtracting stop loss from the entry price? So once we have these three numbers, capital, your risk, and your stop loss, we can calculate this. For this example, this comes around 800. If you're buying a stock, if you have a capital of 50,000 and you want to risk 2% of the capital, then on this trade with a stop loss of 1.25, you should buy 800 stocks. All right. So let's look at a practical example. So here, let's take the example of the same rate that we saw. So here we are trading the trend lower lows and lower highs, and here we calculate the calculated stop loss above this swing high, which comes around 39.25, right? For this example, let's say our capital is 100,000 and we are willing to risk 1% of our capital on this trade. In this case, the stop losses, 38.25 or was it 309-30-9309 0.25. In this case, the quantity that we should buy or our position size should be 100,000 multiplied by 1%, that is 0.0 1/39 0.25 comes to 1000/39 0.25. It would roughly come around 25. So if you buy this quantity, as per your risk management rules, your risk would be limited to thousand or 1% of your account. If we go to this trade and here if we see the trade does not go in your direction and your stop loss is hit, the maximum you are going to lose is 1,000, which is 1% of your capital. So that's why position sizing is very, very important and every trade that you take, make sure you calculate the position and trade accordingly. Do not go with some random quantity based on your available capital. Always risk a predefined numbers per risk management rules, and you will thank me for it later. For simplifying this calculation, I have created Excel sheet for you. Which I have uploaded to the course as well in the same session, you can download and use it. So here, let's say your capital is 20,000, and you want to list 2% on every trade and your entry price, let's say, is 254 and your stop loss price is 252, then you should buy 200 stock or 200 cryptod whatever you are planning to buy or sell. So that's how you can calculate the position sizing using this sheet. And you can also calculate it easily by simply if you know your risk on trade, if your risk is, let's say, um, 1,000 per trade. You know that this is a typical risk that you take. It could be X percentage of your account, and in this case, you know that this is your stop loss, simply just tours division, get the number and buy or sell that quantity as per your trade. So that's all position sizing for you. See you in the next session. 62. A Note on Leverage: In this session, we are going to discuss about leverage or margin, which is one of the main reason why a lot of new traders lose every single penny they have in their trading account very quickly. What exactly is leverage? Leverage refers to the ability to control a larger position in the market with a smaller amount of capital, which is typically achieved through borrowing funds from broker to amplify trading potential. What it essentially means is, let's say you have a trading capital of 10,000. Broker can offer you ten times of your trading capital, even 20 times of your trading capital, so you can buy a larger quantity. So brokers offer from two X to 200 X, some even more. I have seen 400 500 X as well, especially in four X and cryptomrket, and some even higher leverage. As an example on a TenX leverage account, reader can trade 100,000 worth of securities with just 10,000 capital, which is essentially TX. If it was 20 X, then you could have traded worth 200,000 worth of securities with just 10,000 capital. What are the advantages and disadvantages of leverage? One obvious advantage is increased trading power. You control higher capital with actually having very little capital in your account. For example, if you take stocks like Google NVDA, NVIDIA is trading about $800 right now. If you have, let's say, a capital of 5,000, then you will be hardly able to buy five stocks of it, which will not really mean much. But if your broker is giving you let's say TenX leverage, your 5,000 becomes 50,000. Now at 50,000, uh, capital, you can buy 50 or more of NVDA stocks, right? So that basically it enhances your trading power. Second, advantages, capital efficiency. Even with a small capital, you can efficiently manage multiple trades, like if you have, let's say, the same example, $5,000, if you are just trading with 5,000, you might be able to just maintain one or two positions. But if you have let's say five x or tx leverage, you can even control or manage five to ten positions because your capital becomes that many times? These are some of the advantages. And coming to disadvantages or cons, magnified losses is the most important one, whereas you have access to higher trading capital using leverage, your losses also will be that much bigger. We are going to see it in an example and another disadvantages margin calls and over exposure, which essentially mean risk of losing more than your capital in the account. Let's take an example of leverage. Let's say your capital is, let's keep it simple thousand and your broker gives you margin ten X, also 100 X. You can choose whatever margin you want to apply on your account. Then you are looking at charts and you see a stock, which is, let's say, $100 and you are interested in buying it. With your original capital of thousand, you can only buy ten stocks. But with TenX margin, you can buy 100 of them. You use the TenX leverage and you buy 100 stocks. Now you get into the position. This is your chart, and let's say you enter here, which is the net price, and from here, the stock goes to 99. That's a one point move. Now your one point move is $100 worth of move. So when the stock goes 100-99, your quantity is 100, you lose in one point hundred dollars. At this point of time, you are down by $100, which is 10% of your original capital. With just a one point move. Now, let's say it goes to 98, which is two point at this point, you are down 200 points, which is 20% of your capital, you are down in this, whereas if you are just trading with your original capital, you would have been 2% down at this stage, which is much more manageable, which is in fact a decent risk management if your stop was 98, at 2% risk was okay, you could have exited here. But if you did not have let's say stop loss and the stop keeps going down, what will happen? When the stock goes to 90, your account is zero. This is with tx. Let's say you went with hundredx leverage. When you went with hundred ex Leverage, you're able to buy thousand quantity, it's $100 stock and you have capital available of 100000100000/100, you are able to buy 1,000 stocks with hundredex leverage. Now, same example. When the price goes 100-99, just one point move and your quantity is 1,000 now. That basically mean in just a one point move, you lose your entire capital. Minus or sorry, you are zero at this point, and if it goes two points down, then you are hundred dollar in negative. This is called over exposure. You are in negative account. This is when you will get a margin call when your account goes below zero and you would be expected to deposit $1,000 as soon as possible to continue this trade. That's how you can see how quickly with just minor moves, if you are over leveraged, you are using leverage to a high extent, how this can work against you very quickly. And you might get lucky actually and trade could go in your direction and you might actually make a lot of money. But the probability is 50 50. I mean, on any given day, it's 50 50, right? As a trader, your first job is to preserve your capital. Making money is secondary. If you do not have capital left, you will not be able to trade tomorrow. What's the point? You have to avoid the temptation of seeing these high numbers ten X, 20 X, 100 X leverage and assuming that we're using that much leverage, I can make a lot of money with just a small capital. Very likely what will happen is you will lose whatever little capital you have within minutes hours or whatever time, maybe in a day or two. That's what happens to a lot of traders. Avoid this temptation, avoid using leverage as a new trader. H Leverage works very well for large funds and even big traders experienced traders who already have a lot of capital in accounts running hundreds of thousands or millions of dollars. They also take little leverage, like five x NX leverage, not very high leverage, to control they are bigger position. But they know what they are doing. Right. So I would strongly suggest even if your broker is offering, you leverage high leverage, avoid that temptation and first of all, spend initial one, two years, a couple of years with your own trading capital, use it without any leverage, get better at trading. And once you are very comfortable, you have been consistently making money. At that point of time, you can probably think about taking maybe two leverage or five x leverage kind of thing just to see how it works. But till you are able to trade, profitably avoid using leverage. 63. Backtesting: Welcome to the trading strategy section. Now that we have covered almost everything that you need to know about technical analysis for trading profitably, let's move to trading strategies. But before we get into trading strategies, there is one thing we need to still learn, and that is back testing. What exactly is back testing? Back testing is a process of testing a trading strategy using historical market data to evaluate its performance and profitability. It involves simulating traits and analyzing the results to assess how the strategy would have performed in past market conditions. Essentially, what we do is we take historical data, past data, and then we apply our trading strategy on that past data and see how the strategy performed in past. If the strategy was profitable, then we might use it if the strategy was not making money, we will discard it. Why testing? BC testing allows readers to objectively assess the viability of trading strategies before risking their real capital. Before you trade any strategy, you might find a lot of trading strategies on YouTube and people will claim that these are 80% profitable, 90% profitable. Do not do that, do not use those strategy using your real money. If you are really interested in any strategy, B test it yourself first because the video from where you are using that strategy, they may have back tested that strategy on a specific instrument like maybe bitcoin, but you may want to trade it on, let's say, NIFTI or SPX 500 or maybe some Fox pair. Each strategy behaves differently for different assets. If a strategy works, let's say, 50% of the time for one asset does not mean it will give you the same result for some different asset. Even within stocks or within cryptos, a strategy might work for Bitcoin but may not work that well for let's say Theium. Similarly, a strategy might work for stock, let's say, Tesla, but it may not work for Google. You have to be test every strategy separately, independently for whatever asset that you are trying to trade before you actually risk your real capital. Back testing help traders gain insight into the strengths and weaknesses of their trading strategy, identify areas for improvement and refine their trading approach. Some strategies you might see that in some particular years or particular let's say quarters, the trading strategy worked really well, but in some quarters or some years, it did not work so well. You can try to identify what could have been the reason. For example, if you have been trading, let's say commodities, there in commodities, there is a seasonal effect. For some quarters like let's say during rains, some agricultural commodities might do well. And during other times, they may not do so well. This is just a hypothetical example. I'm just trying to explain that. So if you can do that analysis, then you know that when to use what strategy and when to avoid using some strategy. So using this B testing, you can get this kind of data and which will be very useful. By back testing, traders can validate their trading ideas, build confidence in their strategies, and make more informed decisions when reading live. That's the whole purpose of BC testing. I would again say it's very important that you back test a strategy and not just for a few months. If you are really serious about trading a strategy, then go for years of data. So how do we back test the strategy? There are different ways. The first way is obviously manual. In manual method, we take the chart that chart of whatever security that we want to trade or that we want to back test. And then, um, for let's say for last three years or five years or whatever time period that we want to test that strategy for, we go to that point in time. Let's say we want to test our strategy from start of 2022. We go to that point of time and then in chart, we try to see that where all the strategy triggered the signal, it could be biosignal cell signal, and we keep on marking those signals and we record them in some sort of excel sheet or somewhere. Once we have done this for all the complete period, then we analyze the data. Let me show you an Excel sheet. Here is one sheet that I created long back where I was back testing this data for from five years. I back tested this strategy, and you can see that I have recorded every single trade when it happened. What was the direction a long period, rather short period, and how much points that trade made sessions basically meant how many days it took for this trade to complete. Zero means same date was completed, four means four days, eight means eight days and so on. And I also wrote some observations here, which might help me optimize my strategy, um, and then here is the consolidated results for 2018, how many trades were done, how many were winning trades, how many were losing trades? What was the winning percentage? What how many points I eventually made? And then you can see that this strategy actually worked for all five years. It made some points, right? And this was all done on a single lot. If I bought a single lot, then this is what I would have it would have happened. So this is how you have to manually record everything if you want to go this way and analyze it. Second way is automated. In automated back testing, there are a lot of tools available out there which will help you create strategies and back test them, you can use them. Even on trading view, if you want to do it, you can do it using scripting. Trading view supports pine language, which is a creation of their own and you can write some code for back testing a strategy and it'll give you the results. You can also do the same thing using Python, if you are familiar with programming. There are a lot of libraries available for technical analysis and for B testing, you can use them. Then we have Monte Carlo simulation. Monte Carlo simulation involves generating multiple random scenarios based on historical data. I'll take your historical data as input and it will create a lot of random scenarios, a lot of different scenarios. Then you can apply your strategy on all those different scenarios to see how it behaves for all those different scenarios. It helps you identify in what scenarios, it works well, what scenario it may not work so well. Depending on that, you can control your risk management. For example, if you know that in certain scenarios or maybe during a certain time period, as I was saying about commodity example, that if for some quarter it may not work well. For those scenarios, you may want to trade with half of your quantity or you might want to change your position sizing, so you are not treading with your full quantity. That's how you can do this. There are some other methods as well. But for this course, we are going to just stick to either manual or automated. In automated, we are going to use rely on treading you Pine script. 64. Day Trading Strategy: ITR: Let's get started with our first intraday strategy, what I call ITR. ITR stands for intraday trend reversal. Trading timeframe for this strategy is 15 minute. You can also try it on different time frames like 5 minutes ten minute, but I use it on 15 minute time frame because it is a 15 minute time frame, it's more suitable for Forex and crypto as those markets are over 24 hours in a day. If you will trade this strategy on stocks, stock markets are typically open six to 8 hours, so you will hardly have maximum 30 candles available for trading this, not more than that. But if you are trading ForEx and crypto, you will have plenty of candles to work with. Now, using this strategy, you can take both long and short trades. And for long trade, this is how the setup looks like we have a doji in between. On the left, we have another candle, low of which is higher than the low of this doji. On the right side, we have another candle, low of which is also higher than the low of doji and high of both the left and right candles are higher than doji is high. Another thing is the right candle, it has closed above the high of this Dji. Once we have this kind of setup, we can look for long trade. If you remember this also looks like a morning star candleystic pattern. Once you see this setup, you can take an entry or you can plan to take an entry when the high of both these candles, the higher high is, in this case, the left candle high because this is at a higher position. So when the price goes above this high, let's say this high is at 100 and the price goes 100.5 or 100.05 or 100 point even one. Anything above this, that's when you can enter this trade. On the short side, we have a similar setup where we have a dog in between. The high of both right and left candles is lower than the high of Dji and the low of both the candle, right and left candle is lower than that of Dji is low and the right candle, it closes below the low of Dji. Once you have this setup, you have to wait when the price goes below, whichever is the lower in right and left candle. So in this case, this is a lower point. So assume that this is again let's say 100 and as soon as the price goes below 100, let's say 99.95 99.9, you can enter into this short rate. So that's the setup you need to look for to reiterate, here are the rules. These are long rules for buying. Middle candle should be a dodge variation. Low of both left and right candle should be higher and dog is low. Of both left and high candle should be higher than the high, right candle should close above the high of two th entry will be whenever the higher left right candles is broken, we take an entry there as an example, left candle high is 110.5 and right candle high is 111. 111 is higher as soon as 111 is broken. On the upside, let's say 111.05, 111.1, we take an entry. Stop loss should be below the low of Dog. If Dog is low is, let's say, one not nine, then SL could be anything below it, one not 8.95, one not 8.9. Target in this case should be twice the size of our stop loss. That is a risk reward of one is to two. I stop loss is two points, target should be at least four points. Similarly, we have the rules for short. Middle candle should be Doge variation. Low of both left and right candles should be lower than Dji high of both left and right candle should be lower than Dog's high. Right candle should close below the low of Dji entry would be on break of lower of the right or left candles low. Whichever is lower, we will wait for that to be broken on a downside and we'll take an entry. Stop loss would be above the high of Dji. If Dji is high is one not nine, let's say, then SL would be one not 9.05 0.1 or anything above it. Target should be twice the size of loss. Uh, if stop loss is two points, then target should be four points. With that, let's jump to the charts. Here I have 15 minute chart of Euro USD open. If you look at this chart, from the left, you can find a setup here. Here we have a doji in middle, which is a dragonfly doji and we have left and right candle, high of both left and right candle is high above is high, higher than the high of Dji. Low of both left and right candle is higher than the low of doji and the right candle has closed above the high of this Dji candle. Now what we can do, we will look for break of the high of this right candle because right candles high is higher than the left candles high. High of right candle is 1.0 8561. I could go for 1.0 8562 or anything higher than that. Let me remove this box, and my stop loss will be below, dog the dog low in this case is 1.08 490 anything below 1.49 008489 is also fine, and then my target would be two times of my stop loss. Now you can see this trade worked as expected. Now in the same chart, we can also see the short set If you focus on this area, here you can see we have a doji in the middle, left and right candle, left and right candles have a lower than the low of Toji. Both of these candles have highs lower than the high of Doji and the right candle has closed below the low of Dog this gives us the setup. Now we will wait for the lower of these two right left candle. The lower, I think is this one. So I'm just putting it approximately here. As soon as this low is broken, and our stop loss goes above this doji and our target would be twice, can see cravat ratio, two, and then you can see this trait worked as expected. Now, you might say, or you might have observed that here you have another setup, isn't it? Another long setup, which we have ignored. This we have ignored for a reason. I'll come to that. But yes, this also is a setup as per our trading rules. We have a doji and then right and left candles. This is a good long setup because the highs of boda candles are above the high of Dji lows of Bodhi candle is higher than the low of Dji, right candle has closed above the high of Dji. This is a setup, yes. But if you took this trade, let's say we just place it above the high here somewhere and our stop loss goes below this low of TG, and our target would be one is two, two, this is almost one issue two. But now if you see this trade did not work. Obviously, we did not know this in advance, but this trade, we can filter out based on one condition. Let me go back to the presentation. Here are some improvements in this strategy that we can do. First is combining the strategy with support and resistance would immensely improve the outcome. If you look for long setups at support, they will give you a higher probability trade. Similarly, if you would look for short, near resistances, it would again give you a higher probability trading opportunity. Irrespective of this particular trading strategy or any other, you should always look to buy at or near support and sell at or near resistance, never try to buy near resistance, never try to sell near support because very likely that trade would backfire. Second ways to improve the accuracy of this strategy, is to add a moving average as a trend filter. You will only take long trades if the prices are above that moving average, or if the prices are below the moving average, then you would only take short trades. I tested this with 40 period EMA on Fox and stocks, but 40 period EMA does not work on crypto because cryptos are more volatile, so you would probably have to use a higher period MA if you want to use this trend filter. You can also tweak this period as per your own observations when you are back testing this, um, strategy. Third point is, you should avoid trading this particular setup if any of the left or right candles are too large. Now, if you go back to the chart, we can see that in this setup, we have fairly small candles in setup in our signal candles. Even on this setup, we had relatively smaller candles. But in this setup, we have relatively large larger candles. That's the reason we ignored, we should ignore this trait. Reason being, when the candles these candles are large. That basically means some part of this move is already covered by the candles, by the signal candles itself. I may not really have enough runway left for this trait to complete as per our expectation to give us a risk reward ratio of one is 22. It still went to one is 21 or probably higher. If I just bring it down, you can see it went up to 1.4, which is not bad, but it did not meet the criteria because these candle actually covered some of the move already. That's the reason whenever we see long candles, relatively long candle, we should try to avoid these scenarios. Hope it makes sense. Going back to the presentation, there is one more thing. If you want to trade more conservatively, you can exit from a trade if you see reversal formation in opposite direction. Normally, as per this strategy, we have a predefined stop exit and predefined target profit exit. But let's say you took this trade, which we said that we should avoid, you still want to be aggressive here in taking this trade, and what you can do in this case is when this trade was going on, you can see that this reversal setup is formed. This is a long trade and this is a short setup formed here. As soon as the low of this left and right candle was broken on the downside, let's say this level. You could have exited at this level and you could have still made a little money on this trade and instead of waiting till your stop loss getting hit. That's something which you can always do. Even in this trade, if the reversal formation formed during any time of this thing, you can do that. This tweak can help you protect some of the profits that are already available to you rather than giving everything away because intraday moves can be very volatile. Lastly, if you want to trade this strategy or any strategy that we are going to discuss, you have to back test it. This strategy is a bit difficult to automate because there are some observation based rules like these large candle, relatively large candles and the exact Doge formations. We can still automate it, but it's a strategy which you can probably better back test manually. I would advise you if you want to try this strategy on any particular instrument, then you back test this strategy for at least a year, it's an inter day strategy, at least test it for one year on that particular instrument. For example, you want to trade NIFT, you want to trade SPX 500, you want to trade some crypto or four X or whatever. Bac test it at least for one year manually. I mean, in this case, in trading you can go to, let's say, if I want to back test this for let's say 2023 January. First, I can go through that time frame. It's a 15 minutes, so I don't know whether that much data is available in my plan. Yeah, no. The maximum I can access is July which is also fine. It would still be at least roughly nine to ten months of data. I will start looking for those patterns and I will start trading them, creating traits as we did something like I'm just showing you this is not really a proper setup, but you will create trades like this wherever you will see this setup I think this could be a setup where even though this is not a very good Dji but I'm just giving you example of how you can br test this. So this would have worked. You can record that how many trades were there on what date you took, how many points you made on each trade, and then you will come to a number that whether this strategy is working for you or not working for you. All right. Without B testing, do not trade this strategy. That's all for this one. And let's move on to the next strategy in our next session. 65. Day Trading Strategy: OHLV: Et's take a look at our second introduced strategy that I call OHLV. OHLV stands for open high low with VWAP. Trading timeframe for this strategy is five minute or you can also trade it down 15 minute chart. Now what does open high and open loop means? On the left side, if you see here is a chart which opened at this price at this level, and from there, the stock kept going up. There is no WIC on the downside at all. The price at which the stock opened is also the day's lowest point. From there, only buying was seen. That represents strength. We look for this setup to go long. On the right side, you see just opposite thing where you can see the price open here and from there, the stock kept falling, kept going down. There is no upper side week which basically means that there was no buying strength seen. The open price was never breached on the upside and open price remains the pay high this essentially represents weakness. We look for this setup to go short. Now, your question might be, how do you know which stocks or which crypto or whatever security that you are trading have this setup because you may have to go through dozens of stocks till you find this. For this, you can use trading views stock screener, click here. And here you can create different kind of filters for the stocks you are interested in. I have created a filter for open equal to low Relicon filters, I can see I have a condition open equal, low, uh this is Indian stock exchange. You can filter it for other stock exchanges as well. You can change to any market of the world that is supported by trading view. You can also add some other filter criteria like in this case, I'm only interested in stocks which have average sty day volume of 1 million or more. Stocks which are trading at a relative volume more than one. Basically, it means that they are trading at a volume higher than their normal range, and I'm only interested in stocks which are more than 100. But most important condition here is open equal to low. Once I have this, I will see there are two stocks here which open today with this criteria. I click on this I can see today is 24th apparel on recording of this day. Here I can see this is a stock which open and open and low prices same here. Similarly, I can also create a filter for open equal to high, only change will be instead of low, I can do equal to high and I will see all the stocks which have this condition. Going back to the presentation, now you know how to identify socks which are forming this kind of setup. Next thing you have to do is you have to understand the rules for this strategy. This strategy can be traded on both long and short sides so you can buy and you can also sell. Here are the rules for long days open should be days low. First five minute candle should close above VWR. How do we add VWR? Let me go back to chart. Indicator VA volume weighted average price. It shows these bands also we don't need these bands. I'm removing these bands and will also make the Vbline more prominent in black and older. So now we have VAP added to this. Price should go below VA during the day. However, it should remain above the days low. Wait till price comes back above VWAP and closes above it. Let's take a look at this strategy in a white board to get some more clarity. So let's say this is our stock which opened at this price and after this, this also remains the days low and the stock goes up and it comes down. Let me also draw the VWAP line. Let's say the VWAP looks something like this. And then the stock goes below the VWAP and reverses from here goes above it. So now, in this case, we have to wait for this setup where we have open low setup, price went above VWAP then came back down and went below VAR created a swing here, and then went up again. Important thing here is when this swing is created, this low should not breach the low of this first candle. It should be higher than this. Now as soon as this candle closes above VWAP, let's say this high is at 100. We enter above it, let's say 100.1 price, we enter here and our stop loss will be below this low. If this low was let's say 98, we will stop loss could be, let's say 97.9 and our target would be two times of this. We entered it 102 point SL, then we'll have roughly four point target. That's how the setup looks like for OL or open low. Trade with essentially a long trade. We have to look for this way setup, price opens, goes below VWAP, comes above VWAP again and that's when we enter. It's important the price has to once go below VWAP and then come up again and that's when we enter into that trade. Entry is the break of high candle that close above VP as we saw, SL is below the swing low which forms when the price went below AP and target will be the twice of the size, which is the risk reward of one is to two. On the short side, the conditions are just opposite. So the candle opens here. This is days high, and this is also days open. After this, the stock goes down, then goes up. Let me draw VA VARs look something like this in this case. Then the stock goes above VWAP stays there for some time. And then crosses below, VP again. Again, we have this wave kind of setup. Important thing again here is this swing high should not breach the day's high, which is also the open, I should remain below it. And when the low of this candle, which is closed below VWAP, this breaks, let's say this is let's say again 100 or simplicity. When price goes below 100 in the next candle, let's say at 100, sorry, it's 99 point let's say nine or something by this candle. That's when we enter into this rate or top loss will be here above this high and our target would be somewhere here, which will be two times of this SL to entry point. This will be two x, this is whatever this amount is. That's how this open high setup works. Here are the rules. They is open day high, first five minute candle should close below VWAP, price should go above VAP during the day. I should remain below the days high. Wait till price comes below VWAP again and closes below it. Break of low of candle that close below VWAP is our entry. SL should be above the swing high which form when price went above VWAP, target should be twice the size of our stop loss with the risk ivadoFsh to two. As an example, if SL is two points, target should be four points. Now let's jump to the chart to see this in action. Here I have India Woods real estate chart open of this stock, five minute chart, and this is 23rd April. Here you can see the stock opened on this candle and this became the low of the day and price never went below it and stock stayed above the for some time, then it went below it, created a minor swing, and then it went above it again. So if we zoom it, we would have originally planned to enter when this candle, which closed above VAP, its high was broken, but it was not broken till this point of time. So we could have waited the high of this candle is 137.25, we would have looked to enter around 137.3 and our stop loss would have been the low of this swing, which is about 1:36 0.25 below this, and our target would be one is two, two. Here we can see the price went above this and target was met, and in fact, the price went much beyond that. For the open high setup, we can see this is another stock in fee infoss of today's 24th apparel. This had the open high setup. And then you can see price went below VWAP, then it went above VWAP, it closed below it. We would have planned to take a trade when this low was broken. But this was not broken by the next candle. It was broken by the candle after it. This low is 47 40. We would enter at 47 35 or lower and this high was 40, 40, 60. Stop loss we would be something like 40, 40, 65 or higher y. And our target would be one is two. Now, after our entry, you can see that the price again went up, but it did not luckily breach the high of this. That's why we need to keep the stop loss little above the high. In this case, high was 60 and we kept our stop loss at 65. This is how this trade worked out. Then you can see the price kept going down, the weakness was there and the other trade, you can see the stock kept moving up when we had a open look setup. So this is a strategy. Here are a few things which you can use to improve the performance of this strategy. When you are tiding with stocks, you should use the long strategy which is open, equal to low only when the market in general is showing strength. Do not use a long strategy when the markets are down. For example, if you are trading Nifty or SPX 500, if they are down then don't look for stocks with this kind of setup. If the markets are up, then only use this strategy. Similarly, if when markets are down in general, they are in red, then you look for open equal to high strategy that is a short strategy. Trade as per the general direction of the market, avoid trading against the market trend. So if the markets are up and you are looking to shot, then it might backfire. So stay with that trend, and it would improve the chances of your trade working out in your favor. Lastly, you can use this strategy on both five minute and 15 minute chart, but you would likely get better risk reward with 5 minutes because five minute candles are smaller compared to 15 minutes in general. Once again, do not use this strategy without BC testing it. If you want to use this strategy, B test this strategy for your own market. I use this strategy primarily on Indian stocks. It works well, but that does not mean it will work on all the markets. You have to BC test it, get some confidence, and confirmation that this strategy works most of the time, at least 50% of the time. Since the risk reward is one issue two, even if this strategy works one out of two times, you'll still make some money. That's all for this strategy. 66. Swing Trading Strategy: MacTF: Here is another swing strategy that I call McTF. MACTF is a momentum based swing strategy that also uses multi timeframe MA or filtering the trend direction. Essentially, what it means is we determine a trend direction whether the market direction is up or down, and depending on that, we only take long trade if the trend is up and we only take short trades if the trend is down and for entries, we use MGD indicator, which is a momentum oscillator. It helps us identify when is the momentum and what is the right time to enter for exiting, we use EMA of 34 period. Reading time frame for this strategy is 1 hour and indicators use RIs MD and the custom moving average. Let's go to the chart and to the setup. Before that, you will find a script attached in this session. Please download it and open it in any texter of your choice. It will look something like this. Copy the content of this and go to TradingView reading view open fine editor from the bottom menu, click on open new strategy, remove the content that is there, paste the content that we just copied and save it, give a name to it, except the default one. Once it is saved, click on, add to chart. Now the strategy has been added to the chart and we can see that we have the trend filter EMS added. When the price is above this, we are only going to take long trades, when the price is below this, we are only going to take short rates. Now the second thing we have to do is go to the indicator, search for MGD moving average convergence divergence, add the indicator to the chart, and now we are ready with the setup. Let's go back to the presentation to see the rules. So here are the rules for going along. First, there are two valid entry rules. We can use any of them. First one is MGD crosses above zero line and trend filter is in bimode. Bimode is exactly the same as we saw in the previous swing strategy, MTF MA. When the fast moving average is above the slow moving average, we are in bimode and when the fast moving average is below the slow moving average, we are in cell mode. Trend filter should be in bimode and MGD crosses above zero line, Let's go to the chart and see this. Here you can see MGD line, the blue line, orange one is the signal line, blue one is the Mcdine. McDine has crossed above zero. This is zero line, as you can see here, and this is where we go long and also we can see the fast moving average, the red one is above the slow blue one. This is our entry and second valid entries when price closes above 34 EMA and MGD is above the signal, so here below the indicator, the blue line is the MGD line, orange one is the signal line. We have to find a scenario where the price closed above. This is the crossover scenario. Here we can see here the price closed above 34 AA and MGD is above signal line and also we are in by moodeFast EMA is above the slow moving average. Here we got the entry. For exit, we use any of these two conditions, whichever is occurs first, price closes below 34 EMA. If you go to the same trade, here we took the entry and here price closed below 34 EMS on the next candle, we will exit. Or we will also exit if MGD crosses below zero. In this case, here the MGD line crossed below zero, but we have already exited in this previous candle. But if there was no exit here, then we would have exited after this. This script already marks all the scenarios that we discussed for long and short. Now here in all this period, you can see that um, fast moving average is above, we will only be taking long traces. There will not be any short rates, and for short rates, we will have to go here you can see here the red line came below the blue line and here you can see some short rates. You go to the presentation and see the rules for short, which are just opposite of long we take entry, short entry when any of these one or two condition is true, MGD crosses below zero line and trend filter is in cell mode or flies close below 34 AMA, Magdline is less than signal below signal, and trend filter is in cell mode. Let's take the same treat. Here, this signal was generated because the MGD line crossed below zero. Let's look at the other second scenario if we can find. Here we can see the price close below 30 4:00 A.M. The orange line on this candle and short signal was generated, and the fast MA is below. The slow MA also MGD line is lower than the signal line. All three conditions were met and hence this signal was generated. For exit, any of these two conditions, price closes above 30 4:00 A.M. Here you can see the price, the green candle closed above and the next candle generated close entry for shop or MGD crosses above zero. So as an example, here the MACD is crossing above zero. If there was open trade, it would have generated um, closing signal for that short. But since the trade was already closed here, um, we did not have to worry about this particular. This is a strategy. Now, let's take a look at the back testing part. We will click on Strategy tester. This is NVIaF this strategy, you can see, we have a profit factor of higher than two. Percentage profitable trates, 33.2%. In the long run, this is a profitable strategy with a decent profit factor. You can try it on other stocks also and see how it works. Let's say, Tesla. On Tesla, it gives a profit factor of 1.8 and percentage profitability, 35%. I use this strategy on FT Index. 50 50, where it gives a profit vector of around 1.9. Um, before you use this strategy, make sure you back test it using this script, and, uh, this strategy has a much higher profit factor compared to the other trend following strategy that we saw MTF MI. But before you use it, make sure you back test it on the instrument that you want to trade, and if the results or the profit factor or percentage profitability is not very high, look for something else. Do not assume that since this strategy works on some stocks or some instruments, it'll work on others as well. Make sure you test, B test it, and you can even annually back test this on certain instruments to just take a look at charts, scroll through it and see how this talk is behaving with respect to this particular strategy. If you feel that this strategy looks promising and even the pine script generated testing results are promising, then definitely go for it. 67. Swing Trading Strategy: MTFMA: Here is the first swing strategy that I call MTF MA. MTF MA is a trend following strategy that uses moving averages to determine the prevailing trend entries and exits. MTF MA stands for multi time frame moving averages. Training time frame for this strategy is 1 hour and the EMS I have used for this are eight and 13, since it's a multi time frame strategy and multi time frame moving average, sorry. I use 1 hour, one day and one week's moving averages of eight period and 13 period respectively, and then take an average out of it to calculate the final multi time frame moving average. For this, I have developed a custom script that I'm going to share with you. You can find it in the same session. You can download it. And once you have download, you can open that into any text writer. I will look something like this. Copy this code. Go to Trading View and at the bottom, you will see fine editor. Once the ter is open, click on open and then at the bottom menu templates, you can find new strategy. Click on that. When you have new strategy, delete everything that is already there and paste the code that I have provided and save it. I'll ask you to give a name, just save the default. Once this strategy is saved, you have to click on head to chart. Now the strategy is added to the chart. This strategy, as I said, uses two moving averages. The red one is a eight period moving average, which is a multi time frame moving average. Blue one is a 13 period moving average. That is, again, the multi time frame moving average, and the orange one, it's a plain 34 period EMA of 1 hour. Let's go back to the presentation now. Now we have all these things and these are the components of this strategy, eight period moving average, that we call fast moving average, 13 period moving average, we call slow moving average. When fast moving average is higher than slow moving average, essentially when eight period MA is above 13 period MA, we say it's a B mode and when fast MA is below slow MA or eight period moving average is lower than 13 period moving average, we say it's in cell mode. So now with this understanding, we can get into the rules for long and short. So here are the rules for long setup. Any of these two conditions should be true. So first condition is for entry, fast MA crosses above slow MA. So when this red line crosses above the blue line, that's a bi signal. So in I guess here it happened here. The red line crossed above the blue line, the fast MA crossed above the slow MA, that is a bisignalT should happen on candle closing basis. What this means is, you have to wait till the current candle has closed and the new candle has started to verify that in the previous candle close, there is a crossover. You don't need to manually do it because this code will do it for you. I will show you the signal that when you have to go along and when you have to exit long close entry long, another new long. But for understanding purpose, you need to know that when we say closing basis, you have to wait for the candle to close to confirm that the signal has been generated and only on the next candle, you have to ting the tread. So that is the first condition. Second condition is not second condition, any of these conditions is a valid long entry. Second entry is B mode. Basically, when we say buy mode, fast MA is above slow MA and price closes above 34 EMA. When these two conditions happen, we can take a trade let's take an example of this. Here you can see the fast MA, red line is above the blue, that is a slow MA and the price closed above 34 A, which is the orange line. Then we take an entry here. So that's the example of second entry. When any of these condition is true, we take an entry and exit is when fast MA crosses below slow MA, the opposite of what we saw in the entry, when the fast MA or the red line goes below, blue line, we have to wait for the candle to close when that is happening to ensure that it is really happening because sometimes what happens, temporary price might go below and then it'll go back up again. We have to wait for the candle closing and then only we have to exit. Second exit is price closes below 34 EMA. As soon as the price closes below 34 EMA, we exit from the trail. Let's say in this trade we entered here, and here you can see the price closed at EMA and we exited on the next candle. We waited for this candle to close and once this candle closed, we exit this candle. These are the long rules. Short rules are just opposite of it. When fast MI closses below slow moving average, then we enter or we can also enter when we are in cell mode. Cell mode is fast moving averages slow moving average, and price close below 34 EMA, opposite of long and for the exit rules are again, just opposite of long. When fast MI crosses above slow MI or when the price closes above 34 EM, we can exit. So that's a strategy for you. Now, when you click on strategy tester, you can see that this is a profitable strategy because I have written it as a strategy, it does the back test and it has done B test where it has taken 905 traits. Out of its 36.8% were profitable. The profit factor of this strategy is 1.8 higher than that. And basically, this means that when profit factor is one, that basically means that we are neither making money nor losing money. So to make money, the profit factor has to be greater than one, and the higher the profit factor, the better it is. So in this case, we have profit factor of um, 1.8, which means we make 1.8, points for every one point we lose. That's what it means. And you can also go to list of traits and see all the traits here, what happened. The red ones are the losing ones, the black ones. I'll show you the entry exit and how much time it took and all those things. You can also see the performance summary here. You want to know more details like average losing trade, how much is it, average winning trade, how much is it? And how many bars are there on average in a winning trade and how many bars are there in a losing trade, stuff like that. Overall, this is a profitable strategy, but this strategy, I use on NIFT index, and it works here, but that does not mean it'll work everywhere. That's where I said the Bg testing has to be done for the specific instrument. If you plan to use this strategy, you have to apply it to, let's say you want to use it on S&P 500. Go to the chart. Open the strategy tested. I need to reload. You can see the strategy is still profitable, but the profit factor has gone down from 1.8 to 1.3. I would not recommend using a strategy with a profit factor below 1.5, maybe SNP 500 is not a very good candidate for this. You can try it out on other things. Maybe on some stocks. And see how this strategy works. On this NVDA stock, we can see that this strategy has a decent profit factor of 1.7. The percentage profitability is around 30%, which is not as high as we saw in NFT, but still the strategy will make money in the long run. Depending on what exactly you want to trade, you have to apply this thing on that particular instrument, make sure that the strategy is profitable and a percentage number which you are comfortable with 30% basically means three trades out of ten are winning trades. Seven trades are losing ones. But since the profit factor is high, that basically means the risk reward is good for this strategy when the long long or short rates work. They give you good money and the money it makes when the winning trades is much higher compared to the money it loses on the losing trade. So depending on that, which index or stock or crypto or currency pays you want to use, you have to test it on that and then only use this strategy when you are in a comfortable. I would again say that you should not use it if the profit factor is less than 1.5, in fact, and you should in fact look for, um, some uh instruments which give you if something gives you even more than two, uh profit factor of two or higher, that's even better. And this is a trend following system. I would also like to add that currency pairs or FX. Basically, they are slow moving instruments. So trend following will not really work on Fox pairs. This strategy is probably not a very good fit for that. This strategy would work better on indexes, stocks, stock indexes, and, um even cryptos. 68. Intraday Tips: A couple of things I wanted to share with you about intraday trading, which are not specific to the strategies that we have discussed, and they are relevant to any strategy that you are using as long as you are doing it intraday. So the first thing is, you should look for booking partially or half of the amount as soon as your trade reaches one is to one profit, and then you should move your SL from original position to your entry price for the remaining amount. What does this mean? If we take the same trait that we were discussing for ITR strategy here. Let's take this setup and our entry somewhere here, stop loss below. An hour target was two times of stop loss. Now, in this trade, everything went fine as expected, but intraday trading could be very volatile and it doesn't take markets to turn against you very quickly. So for example, let's say if your target was here, and you can see how quickly in two candles it went against you, despite it was probably about to meet your target. So what you can do when you are trading on intraday, so now your stop loss here is 0.00 0078. But this instrument that we're using. It shows you the open profit. The open pill, right? So as soon as your open pal or your current profit goes, which is equal to stop loss, it doesn't have to be exact one is 21. So when you feel that, okay, almost like, whatever stop you had, that much amount has been made. Let's say at this place, you sell half the quantity. Let's say your quantity, original quantity was 100. So you sell 50 here, and for the remaining 50, you move the stop from this position to your entry price, your entry price was this price, right? So that way, you will be able to protect your profits, even though this trade worked and you would have made much more, but you have to think conservatively, you might have heard about slow and steady winsoras. So your profits might be less, but you will make profit more with more probability if you will follow this system. As it will protect the profits which you have already made, if there was a candle, this candle was bigger, let's say, you would have lost everything, even though you were in green for some time. So this method helps you book some profits and further helps you protect against any wild move. So even if some big move comes, you don't have to wait till your original stop loss, and you exit at your entry price for the remaining amount. So that's the first thing. Second thing, you should use ATR bands or some kind of ETR indicator, which tells you what is the daily average range for a given security. So this is needed because if you are entering in a trade, when the daily range is already exhausted, for example, a stock, let's say, move $4 in a day, right? And the stock has already gone up $4, and that's when you get your signal. But the range is $4. It's very unlikely, even though the setup is there, your signal is there that the stock will go another $4. Or another whatever your target is, right? So you have to use some kind of indicator that will help you understand what is the current daily range on both upside and the downside and only trade if your trade fits within that range. As an example, let me go back to the chart. Go to indicators, search for ATROn you search for this, you will find this indicator, daily average two range overlay by stake at risk. Click on this. And here you can see it will create two bands, upper band in red and the lower band in green. It will tell you the current range, current daily average range for this particular instrument in this case, Euro USD. So in most probability, it will not go beyond on the upside, this line and on the downside, it will not go below this. It does not mean it will never happen. I will happen at times, but more often than not, in this case, this happened? But more often than not because trading is all about probability, so we have to increase the probability in our favor to whatever extent possible. So now if I am taking this trait same tread, in this case, I think it was fine because if my entry was here, and my Target was here. This is well within the range. But if my target was here above this, then I shouldn't have taken this. As an example, let me show you another chart. So this is the second strategy that we saw VWAP and open low. Here, this stock has open low setup, the stock went above came down below and did not go up here again. This is where it went. Our entry as perour setup would have been on break of this high stop loss here. Now target would have been two times of this. But now, if you see the target is much beyond the daily range of this stock, and it did not really go beyond this range, right? So this range actually helped us taking a trade which would have gone against us, right? So this range will really help you use this indicator if you are doing intraday trading, and, uh, take a trade only when your targets, be it on the long side or on the short side are well within this range if the targets are beyond it, do not go for those trades. Also, I have seen a lot of people what they do is they try to reduce the target by reducing their stop. So they will go very aggressive and they will move their stop to whatever possible they thing like, after just below the entry candle. So now, if I can have this cla wad of two to two around here. And sometimes if you are lucky, it could actually come here, but don't do this because by reducing your stop, you are risking your trade because chances are with such a aggressive stop loss, it would likely go against you very quickly. So these two small things will help you improve your intraday winning probability. So use things, that's all for this video.