Cypher Pattern : Harmonic Pattern

Cypher Pattern : Harmonics

(reading time = 15 minutes)

📶 Cypher Pattern : Harmonics 📶

+ The cypher pattern trading strategy teaches traders how to correctly trade and draw the cypher pattern. The cypher harmonic pattern can be used on its own and provide traders a profitable trading strategy.

+ It is not surprising that geometric patterns are used in trading charts. And the cypher harmonic pattern is a very good representation of that. The pattern is part of the harmonic trading patterns and is the most exciting harmonic pattern because it has the highest winning rate.

+ This is one of the few patterns not identified by Scott Carney. It was discovered by Darren Oglesbee, and though it is technically an advanced pattern formation, it is often linked with and traded together with harmonic patterns. It has particular Fibonacci measurements for every point within its structure.

+ The Cypher harmonic pattern is a reversal pattern

As other XABCD patterns, it has 4 legs

It follows strict fibonacci ratios. 

🔮  What is the Cypher pattern? 🔮

+ The cypher pattern is an advanced harmonic pattern that, when traded correctly, can have a truly outstanding strike-rate as well as a pretty good average reward-to-risk ratio.

+ The cypher is a five-point pattern, composed of points XABCD. It is easy to spot on a chart due to its characteristic wave-like look, displaying either rising peaks or falling valleys.

+ Traders can trade it like other harmonic patterns, by waiting for a reversal at the end and then using pending orders to profit from any potential breakout.

+ This pattern looks like the butterfly in both its construction and where it will occur (close to the end of trends).

+ However, the cypher pattern is rare and not one that shows up frequently. But don’t confuse rarity with being more powerful or profitable. 

+ It is known to have a high positive expectancy, no different than a bat or alternative bat. Just like all other harmonic patterns, the Cypher has specific rules and conditions that must be met for it to be a particular cypher pattern.

📶 How to identify the Cypher pattern?  📶

+ The pattern must verify a few conditions to confirm:

+ B has to retrace to an expansive range between 38.2 and 61.8 percent of XA, at least 38.2 percent, but not exceeding 61.8 percent.

+ C is an extension leg and goes beyond A – but must move to at least 127.2 percent, but it is normal for it to go as far as the 113 to 141.4 percent.

+ It is considered invalid if it moves beyond the 141.4 percent.

CD leg should break the 78.6 percent level of XC.

+ The PRZ (potential reversal zone) of D is a wide range where the price has to get to. Price can move anywhere between 38.2 to 61.8 percent.

+ This pattern works best when the market is calm. In a strong trending market, especially after the news, the cypher pattern becomes less reliable.

+ The bigger the pattern (the longer it takes to form the pattern), the stronger the support/resistance it gives.

⚠️ What does the Cypher pattern tell traders?⚠️

+ The ‘B’ Rule +

Even though not many people apply it, it is an important rule. The rule basically states that B cannot touch the 78.6 percent retracement of X to C, including the candlestick wicks.

+ Bullish and Bearish Cypher Patterns

In any cypher, points X, C and D are the most important points.

+ For a bullish cypher pattern, X should be the pattern low and C the pattern high. A bearish cypher pattern makes its high at X and its low at C.

+ In the bullish cypher pattern, the points A and C has to make successively higher highs and point D has to be above X.

+  In the bearish cypher points A and C have make successively lower lows and point D should be below X.

📶 Market Psychology 📶

+ The cypher is a technical wave pattern in which the market is trending but it makes sharp reversals during the day.

+ The important point of the bullish cypher is that both the lows and the highs are trending upwards. For the bearish pattern, the opposite happens. 

+ If the cypher completes successfully with a reversal taking place at point D, it may eventually become a trend channel where the price moves between the highs and lows.

+ Cyphers can also appear inside price channels that are already formed.

📶 How to trade when you see the Cypher pattern? 📶

+ While trading the cypher pattern, you will apply a set of simple rules. They will try to minimize risk and maximize profits.

+ Even though there is one more important step to learn before defining the cypher pattern trading strategy rules.

+ Step 1: Drawing Cypher patterns +

Click on the harmonic pattern indicator located on the right-hand side toolbar of the TradingView platform.

+ Identify the starting point, X, on the chart, which can be any swing low or high point.

+ Once you’ve located your first swing high/low point, follow the market swing wave movements.

+ Every swing leg has to be validated and abide by the cypher pattern forex Fibonacci ratios.

+ Step 2: Trading process +

Now that you know how to identify and qualify the harmonic cypher pattern, it’s time to trade the pattern.

+Standard methods of trading the cypher pattern include:

+ Entry point +

+ The cypher pattern may be the most exciting harmonic pattern for risk management, because it has the highest winning rate.

+  Backtesting results have continuously proven the cypher pattern a very dependable harmonic pattern.

+ Next, buy with a market order at the first candle preceding the completion of the D point at 0.786 Fibonacci retracement of the XC leg.

+ Once the market touches the 0.786 level, wave D is in place, because you can’t control how far the market will go.

+ When the CD leg gets to the 78.6 percent retracement level, the cypher pattern is complete and valid.

+However, the 78.6 percent Fibonacci retracement level of X to C also acts as the standard entry point for a valid cypher pattern trade.

+ Take profit +

There are some ways to take profit with this pattern, but the standard method is to scale out of your position at the first take profit level and end the trade at the second take profit level.

+ Take profit once you get to point A. To get to such levels, draw a Fibonacci retracement of the CD leg.

+ The cypher patterns trading method is a reversal method. Make sure you capture as much as possible from the new trend.

+  If you’re not a fan of reversal strategy, and you prefer a trend following strategy, follow the MACD trend following strategy-simple to learn another strategy. 

+ Ensure you take profits once you reach point A of the pattern, because it has conservative take profit target.

🎯 Why should you take profit so early? 🎯

+ For the most part of the harmonic patterns, it’s best to lock in profits as soon as possible.

+ Since the cypher pattern is one of the most profitable harmonic patterns, you can give it more room for the price action to breath. You have the chance to at least see a retest of the wave A.

📶 Conclusion 📶

We find that the rules of the Cypher pattern trading strategy is pretty much straightforward and even though it has a bigger winning ratio than the other patterns, the Cypher pattern will be detected very rarely on the chart, so we will need to take full advantage when they do show up.

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Know Sure Thing Indicator Trading Strategy

 📊 Know Sure Thing Strategy 📊

   ✅ Free working strategy series ✅

♠️Pros can ignore within 0 seconds♥️

           (Reading time = 15 minutes )

➡️ Know Sure Thing :

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(Note - you can find this indicator in many platforms in-built indicator section.) 

✅What Is the Know Sure Thing (KST)?✅

+ The Know Sure Thing (KST) is a momentum oscillator developed by Martin Pring to make rate-of-change readings easier for traders to interpret.

+ The KST is calculated by taking the simple moving average (SMA) of four different rate-of-change (ROC) periods, adding them together to come up with the KST, and creating a signal line by taking the 9-period SMA of the KST.

🛑 Understanding the Know Sure Thing (KST) 🛑

+ The KST indicator can be used in the same manner as many other momentum oscillators, such as the well-known relative strength index (RSI).

+ Trading signals are generated when the KST crosses over the signal line, but traders may also look for convergence and divergence with the price, overbought or oversold conditions, or crossovers of the center line.

+ Many traders combine the KST indicator with other forms of technical analysis to maximize their odds of success.

+ For example, traders may look at other non-momentum indicators, chart patterns, or candlestick patterns to help in their decision-making.

🟩 Example of KST 🟩

+ (please refer example)

+ Let's take a look at an example chart:

In the example, the KST indicator reached highly overbought conditions in early February and eventually experienced a crossover, which generated a well-timed sell signal.

+ The indicator also crossed over in late February, mid-March, and mid-April with limited success, but the key is looking for both overbought or oversold conditions, as well as a crossover to signal the trade.

+ Traders may have also looked at other forms of technical analysis to maximize their odds of a successful trade.

+ For example, traders looking at the example chart may have considered the significant bearish volume on the day that the signal occurred or the candlestick patterns leading up to the trading signal when making their decision.

+ These insights could also be used to avoid making less profitable trades suggested by the KST indicator.

☣️ How to use the Know Sure Thing indicator? ☣️

 + Know Sure Thing continuously oscillates above or below the Zero Line.

+The reading is positive when the KST is above the Zero Line and it indicates that it is favoring the bulls.

+ The reading is negative when the KST indicator is below the Zero Line and it shows that the momentum is favoring the bears.

+ The positive readings show positive weighted and smooth values of the rate of change and increasing prices of the financial assets.

+ The negative readings illustrate the downtrend with falling prices of the stock. 

+ The basic centerline and signal line crossovers are the strongest signals provided by the Know Sure Thing indicator.

+ Traders can really capitalize on this strength. They should search for signal line crossover after witnessing the basic centerline crossover.

+ They should also detect the general direction of the trend as well. As a general rule, the KST ascends when it is above the signal line and it descends when below the signal line.

+ An ascending and negative Know Sure Thing line indicates the weakening of the downside momentum. A descending and positive Know Sure Thing line shows the waning upside momentum.

+ Moreover, bullish and bearish divergence signals are also possible but they cannot be used every time.

+ The chartists are advised to be selective before using them. They are also encouraged to experiment with different settings because one size may not fulfill the requirements of the traders.

+ They can also experiment with moving average settings and try mixing and matching the rate of change settings to maximize their odds of success. 

   

☢️ The pros and cons of the Know Sure Thing indicator ☢️ 

✅ Pros ✅

+ The KST indicator was invented to make interpretation of the rate of change’s readings easy for the trader.

+ It has several other advantages that make it one of the most efficient indicators among the technical analysis tools. 

+ Its response rate is comparatively higher than any other momentum oscillator.

+ It is a versatile indicator that can be used on all timeframes ranging from short term to long term.

+ It serves multiple purposes such as to seek divergences, signal line crossovers, and centerline crossovers.

+ Its basic centerline and signal line crossovers are considered the strongest signals to measure the strength of a trend

⛔ Cons ⛔

+ There is no doubt that the Know Sure Thing oscillator is one of the best trading tools, yet it has certain disadvantages as well. 

+ It may give false signals like any other indicator.

+ It requires the assistance of other indicators to confirm the validation of a trend

📶 Conclusion 📶

+ The Know Sure Thing oscillator is considered among the most reliable and user-friendly momentum oscillators.

+ It captures four different price cycles as it is based on the rate of change of four different time periods.

+ The indicator makes every time period smooth through a moving average.

+ It is a powerful indicator that has the potential to help you maximize your trading profit. Technical analysts suggest maximizing with different settings to enhance the chances of maximizing gain.

+ However, the default setting of the KST is recommended for novice traders who are at the very beginning of their trading career.

+ If the price of an asset is decreasing but the Know Sure Thing oscillator is ascending, it is a strong signal of a bullish divergence.

+ If the price of an asset is increasing but the Know Sure Thing indicator is descending, it is a strong signal of bearish divergence.

+ However, the experts emphasize not to rely on a single indicator. The Know Sure Thing should be used in conjunction with other technical analysis tools to get accurate signals. 

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Crab and Deep Crab Pattern: HARMONIC PATTERN

 CRAB and DEEP CRAB : Harmonic Pattern

(reading time = 8 minutes)

📶 Crab & Deep Crab Harmonic Pattern: 📶

+ The Crab & Deep Crab harmonic patterns are reversal patterns

+ There are 4 legged patterns

+ The crab pattern follows strict fibonacci ratios

+ The deep crab pattern also follows fib ratios (but with a slight variation)

+ It is a harmonic pattern that helps traders predict when the price of a stock is about to change direction.

+ The pattern can be used to predict either a bullish or bearish reversal depending on the orientation.

🔮  The Crab Harmonic Pattern 🔮

+ The pattern follows some specific features

The pattern was discovered in 2001. 

+ Just as it is with other harmonic patterns, this pattern is a reversal pattern. Therefore, we have the bearish crab pattern that indicates a bearish reversal in price and a bullish crab pattern that indicates a bullish reversal in price. 

+ Just as it is with other patterns, there’s a naming convention for every leg in the formation.

+ Beginning with the swing low or high, every leg is marked by a letter. There are five swing points named as X, A, B, C and D.

+ In some patterns, you will only find four (X, A, B and C).

+ The crab pattern is different because of its sharp movement in the CD leg. 

+ This is usually a 1.618 percent Fibonacci retracement of the XA leg, the previous part of the crab pattern.

📶 Rules  📶

+ Some rules that have to be followed to confirm a crab pattern, such as:

+ Following the XA leg in price, the point B is a retracement of between 38.2 to 61.8 percent. 

+ This retracement should ideally be lower than 61.8 percent. 

+ The AB leg, is a counter trend move to the initial leg

+ After point B, the next leg, BC, can run up to 38.2 to 88.6 percent Fibonacci ratios of the AB leg (C should never go beyond point A)

+ Following the BC leg, price reverses once again, with the CD leg being the longest and reversing between 161.8 percent of the XA leg and an extreme 224.0 to 361.8 percent extension of the BC leg

+ Then you should wait for confirmation

After the crab pattern confirms these factors, a position can be taken after the CD leg is made.

+ Even though you will not notice the CD leg is always reversing close to 161.8 percent, if price action starts to stall and such a reversal begins to happen, it can be a high probability trade setup.

+ It is always better to wait until point D is made and then take an appropriate short or long position.

+ Stop-losses are placed at the low or the high of D, and targets are typically points A or B in the pattern.

⚠️ Bearish Crab Patterns ⚠️

+ The Deep Crab harmonic pattern

The deep crab is a variation of the normal crab pattern. 

+ It is still a 5-point extension, and it still has the endpoint, D, at the 161.8 percent extension of XA, but the little difference is in the AB=CD importance.

+ The most distinguishing component of this pattern is the importance of the particular 88.6 percent retracement point of B.

+ Together with the crab pattern; the deep crab pattern presents an especially extended and long move towards D.

📶 Bullish & Bearish Deep Crab patterns 📶

+ Major differences between the Crab and Deep Crab patterns

+ Projection of the BC leg is not as extreme as the crab

B has to be at least an 88.6 percent retracement. Common to move more than 88.6 percent retracement level not above/below X

+ AB=CD pattern variations are more vital in the deep crab pattern

+ The BC leg is a minimum of 224 percent but can extend to 361.8 percent

📶 How to identify the Crab & Deep Crab patterns? 📶

+ It can be hard to be familiar with the Fibonacci retracement and extension values in a crab pattern. 

+ Also, it can become tiring when using the Fibonacci tool to measure each leg while drawing the crab pattern.

+ Aside from the main rules of the crab pattern, traders can look for the following signs in the market, by analyzing the lows and highs and simply observing the price movement.

+ BC leg mostly exists within the XA leg

C is a higher low as opposed to A in a bearish crab pattern or C is the lower high as opposed to A in a bullish crab pattern

B makes a lower high when compared to X in a bearish crab pattern, or B makes a higher low when compared to X in a bullish crab pattern

+ D is the extreme, indicating a lower low or a higher high, going beyond X

🎯 What does the Crab (and Deep Crab) harmonic pattern tell traders? 🎯

+ Just like the butterfly, it can help traders identify when a current price move is likely getting to its end. This means traders can enter the market just as the price changes direction in the opposite way.

+ The crab and deep crab represent important overbought and oversold conditions, and reaction after completion is mostly sharp and fast.

+ It is the opinion of many analysts and traders that the crab pattern and deep crab represent some of the quickest and most profitable patterns out of all harmonic patterns.

📶 How to trade when you see the pattern📶

🎯 Trading a bearish Crab pattern 🎯

+ To trade a bearish crab pattern, put a short (sell) order at point D (the 161.8 percent Fibonacci extension of the XA leg).

+ Entry: Identify where the pattern will end at point D, and place your order

+ Stop-Loss: Put your stop-loss just below point D

+ Take Profit: The location of your profit target is highly subjective and depends on your objectives and market conditions. 

+ If you desire aggressive profit, place it at point A of the pattern. For a more conservative profit, place it at point B.

✅ Trading a bullish Crab pattern ✅

+ First of all, choose the crab pattern charting tool and follow all the above rules to identify the pattern. 

+ Remember that the Fibonacci ratios are very important to trade the crab pattern. 

+ If you notice the pattern on a price chart and if you find the ratios not matching with the pattern rules, it means that the pattern is not valid. So do not trade that pattern.

+ When the price action confirms the pattern, immediately enter for a buy.

+ If you are a conservative trader, ensure you wait for a couple of bullish confirmation candles before entering the trade.

+ There are four targets (X, B, C, A) to place the take-profit order in the crab pattern. 

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trendline Trading Strategy

   

➡️ TRENDLINE STRATEGY 

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What Is a Trendline?

+Trendlines are easily recognizable lines that traders draw on charts to connect a series of prices together or show some data's best fit.

+ The resulting line is then used to give the trader a good idea of the direction in which an investment's value might move.

🛑 HOW TO USE 🛑

+ A trendline is a line drawn over pivot highs or under pivot lows to show the prevailing direction of price.

+ Trendlines are a visual representation of support and resistance in any time frame.

+ They show direction and speed of price, and also describe patterns during periods of price contraction.

+ To create a trendline, an analyst must have at least two points on a price chart.

+Some analysts like to use different time frames such as one minute or five minutes.

+Others look at daily charts or weekly charts. Some analysts put aside time altogether, choosing to view trends based on tick intervals rather than intervals of time.

+ This makes trendlines so universal in usage and appeal is they can be used to help identify trends regardless of the time period, time frame or interval used

🟩 What Do Trendlines Tell You? 🟩

+ The trendline is among the most important tools used by technical analysts. Instead of looking at past business performance or other fundamentals, technical analysts look for trends in price action.

+ A trendline helps technical analysts determine the current direction in market prices.

+ Technical analysts believe the trend is your friend, and identifying this trend is the first step in the process of making a good trade.

☣️ Details with Example ☣️

(please refer example) 

+ In this case, trader may choose enter a long position near the trendline and then extend it into the future.

+ If the price action breaches the trendline on the downside, the trader can use that as a signal to close the position. This allows the trader to exit when the trend they are following starts to weaken.

+ Trendlines are, of course, a product of the time period. In the example above, a trader doesn't need to redraw the trendline very often.

+ On a time scale of minutes, however, trendlines and trades may need to be readjusted frequently.

   

☢️ The Difference Between Trendlines and Channels☢️ 

+ More than one trendline can be applied to a chart.

+ Traders often use a trendline connecting highs for a period as well as another to connect lows in order to create channels.

+ A channel adds a visual representation of both support and resistance for the time period being analyzed. Similar to a single trendline, traders are looking for a spike or a breakout to take the price action out of the channel.

+ They may use that breach as an exit point or an entry point depending on how they are setting up their trade.

📶 Limitations of a Trendline 📶

+ Trendlines have limitations shared by all charting tools in that they have to be readjusted as more price data comes in.

+A trendline will sometimes last for a long time, but eventually the price action will deviate enough that it needs to be updated.

+ Moreover, traders often choose different data points to connect.

+ For example, some traders will use the lowest lows, while others may only use the lowest closing prices for a period.

+ Last, trendlines applied on smaller timeframes can be volume sensitive.

+ A trendline formed on low volume may easily be broken as volume picks up throughout a session.

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Butterfly Pattern - Harmonic Pattern

Butterfly Pattern : Harmonic Pattern 

(reading time = 5 minutes)

📊 Butterfly Pattern :

+ The Butterfly pattern is a reversal pattern composed of four legs, similar to the Gartley and Bat pattern, marked X-A, A-B, B-C and C-D.

+ It helps you identify when a current price move is likely approaching its end. This means you can enter the market as the price reverses direction.📊

🔮 How to identify the Butterfly pattern 🔮

(refer Image - Bearish Butterfly Pattern Example)

+ The Butterfly pattern looks very similar to the Gartley or Bat patterns, with four distinct legs labelled X-A, A-B, B-C and C-D. The above example is a bearish version of the pattern, where you would be look to sell after the pattern has completed.

X-A

In its bearish version, the first leg forms when the price falls sharply from point X to point A.

A-B

The A-B leg then sees the price change direction and retrace 78.6% of the distance covered by the X-A leg.

(The Butterfly is similar to the Gartley and Bat patterns but the final C-D leg makes a 127% extension of the initial X-A leg, rather than a retracement of it.)

B-C

In the B-C leg, the price changes direction again and moves back down, retracing 38.2% to 88.6% of the distance covered by the A-B leg.

C-D

The C-D leg is the final and most important part of the pattern. As with the Gartley and Bat pattern you should also have an AB=CD structure to complete the pattern, however the C-D leg very often extends forming a 127% or 161.8% extension of the A-B leg. As a trader you would be looking to enter at point D of the pattern.

🚫 Different from Gartley/Bat Pattern 🚫

+ A major difference with the Butterfly pattern over the Gartley or Bat pattern is you look to place your trade entry order at the point where the C-D leg has achieved a 127% Fibonacci extension of the X-A leg.

+ It is the pattern's longest leg. Ideally, point D should also represent a 161.8%-261.8% extension of the B-C leg.

⚠️ Checklist for the Butterfly pattern ⚠️

+ Before you trade the Butterfly pattern, confirm from the following checklist that the pattern is authentic. It should include the following key elements:

+ The AB=CD pattern or an extension of this pattern

A 127% Fibonacci extension of the X-A leg

A 161.8% -261.8% Fibonacci extension of the B-C leg.

📶 Summary 📶

You have learnt :

+ The Butterfly is a reversal pattern that allows you to enter the market at extreme highs or lows.

+ It is similar to the Gartley and Bat patterns but the final C-D leg makes a 127% extension of the initial X-A leg, rather than a retracement of it.

+ To trade the Butterfly, enter the market with a long or short trade at point D of the pattern – the price should reverse direction here.

+ Place your stop loss just below (bullish trade) or above (bearish trade) the 161.8% Fibonacci extension of the X-A leg.

+ For an aggressive profit target, place your take profit order at point A.

+ For a more conservative profit target, place your take profit order at point B.

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The Bat Pattern - Harmonic Pattern

Bat Pattern : Harmonic Pattern 

(reading time = 6 minutes)

📊 Harmonic Bat pattern: It could be said that within the harmonic patterns it is one of the favorites among investors due to its effectiveness or reliability of its buy and sell signals.📊

🔮 How to identify the Bat Pattern 🔮

+ The Bat pattern consists of several points (X, A, B, C and D) and price movements (AB, XA, BC, CD) and, of course, it has a BULLISH version and a BEARISH version.

+ It is similar to the Gartley pattern but with different Fibonacci levels, for example, the Fibonacci retracement of 88.6% of the X-A movement.

🚫 Characteristics are as follows: 🚫

(you can refer the examples for clear understanding)

+ The A-B movement would be a Fibonacci retracement of 38.2%to 50% of the X-A movement, the B-C component would be a Fibonacci retracement or 38.2% or 88.6% of the A-B component.

+ The C-D component could be a Fibonacci extension of 161.8% to 261.8% of the B-C movement.

+Point D (turning point) would be a Fibonacci retracement of 88.6% of the X-A segment.

⚠️ Details of the Bat Pattern ⚠️

(you can refer the examples for clear understanding) 

+ It consists of five points: X, A, B, C, and D. 

The five points give rise to four components or segments: X-A, A-B, B-C and C-D.

+ The A-B component can make a retracement of 38.2% – 50.0% of the X-A component.

+ The B-C component can make a retracement of 38.2% -88.6% of the A-B component.

+ The C-D component can perform a retracement of up to 88.6% of the X-A component.

+ The C-D component can be an extension of 161.8% -261.8% of the A-B component.

D is the entry point for buying and selling trades.

+ The STOP LOSS could be placed below X point (bullish Bat pattern) or above X point (bearish Bat pattern).

📶 Note 📶

+ The essence of the Bat pattern is that it is a chart formation that would help us to enter and incorporate into a trend when it is resuming after a correction.

+ Also, this pattern can give us a good entry when the market definitively changes its trend.

+ Therefore, it is a relatively common harmonic pattern that occurs when the trend changes its direction and then returns to its previous direction.

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The WT STRATEGY

📊 THE WT STRATEGY 📊

   ✅ Free working strategy series ✅

♠️Pros can ignore within 0 seconds♥️

           (Reading time = 15 minutes )

➡️ THE WT STRATEGY 

+ TRADER’S HEAVEN LEARNING 

so here's the thing guys 

 for this strategy you need 3 indicators .

1) Relative strength index

2) Volume  

3) Wavetrend oscillator[WT] (only Tradingview-website/app) 

🛑 HOW TO USE 🛑

FOR GOING : LONG

ENTRY:-

 

a) Whenever you get good GREEN volume reading

b) Along with rsi momentum confirmation

c) Green line crossing red dots UPSIDE 

d) Only enter the trade if green line is crossing red dots near/little above extreme lower horiontal GREEN line

EXIT:- 

When green line touches extreme RED border line upside .(WHICH INDICATES TREND REVERSAL)

FOR GOING : SHORT

ENTRY:-

 

a) Whenever you get good RED volumes reading

b) Along with rsi momentum confirmation

c) Green line crossing red dots DOWNSIDE 

d) Only enter the trade if green line is crossing red dots near/little below extreme higher horizontal RED line

EXIT:- 

When green line touches extreme GREEN border line DOWNSIDE .(WHICH INDICATES TREND REVERSAL)

🟩 NOTE 🟩

 I have personally back - tested this strategy hundreds of times and is excellent every time.

☣️ IMPORTANT ☣️

+ How to get this wavetrend indicator?

            

You can get this wavetrend oscillator[WT] indicator on TRADINGVIEW charts (website/app)(not in zerodha or upstox or angel or elsewhere)

   

☢️ Which Time Frame to USE? ☢️ 

I would Suggest 15 minutes and Above..

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The Dow Theory

 📊 THE DOW THEORY 📊

   ✅ Free working strategy series ✅

♠️Pros can ignore within 0 seconds♥️

           (Reading time = 15 minutes )

➡️ THE DOW THEORY

+ The Dow Theory, also known as the Dow Jones Theory, forms an important part of technical analysis. Its principles help traders understand the market better and identify price and volume movements more accurately. This theory was propounded by Charles Dow years ago, even before candlestick charts were invented. Basically, the Dow Jones Theory suggests that the market moves in trends. And understanding this theory can help traders identify market trends, so they can make smarter trading decisions.

+ The six basic tenets of the Dow Theory

For all its usefulness, the Dow Jones Theory is essentially a simple concept that includes six basic tenets. Let’s get right into them.

🛑 SIX TENETS 🛑

+ Tenet 1: The market discounts everything

This is just what the Efficient Market Hypothesis suggests, remember? According to this tenet, the prices of stocks and indices reflect all available and known information. This means that price trends will move according to the new information that becomes available. Traders can study these price movements to understand how the market is likely to move in the near future.

+ Tenet 2: The market has three trends

This is perhaps one of the most popular tenets of the Dow Jones Theory. It explains that the market moves in three main trends, as listed here.

*Primary trends:

+ These trends are the main movements in the market, and they can last for one or more years. They determine if a market is bullish (moving upward) or bearish (moving downward). For individual traders who make up most of the retail trading segment, it’s generally considered a smarter idea to move with the primary trend instead of against it.

*Secondary trends:

+ Secondary trends are those price patterns that act as corrective points within major primary trends. They’re generally spread over a period ranging from three weeks to a few months. And they move in the opposite direction of the primary trend. For instance, in a primarily bullish market, you may see a bearish secondary trend for a few weeks before the market picks up again.

*Minor trends

+ Minor trends, as the name signifies, occur over a very short range of time. Often, they only last for a few hours or a few days. These trends are essentially just market noise, and they’re the least reliable patterns if you’re looking for market trends to follow. Minor trends can be in the opposite direction of the primary trend or the secondary trend.

+ Tenet 3: Market trends have three phases

Whether the market is moving upward or downward, every trend is marked by three phases. These phases are listed here.

*Accumulation phase

*Public participation phase

*Distribution phase

Let’s look at what happens during these three phases.

*The accumulation phase

+ This phase generally occurs right after a steep downtrend, during which many investors and traders lose hope of the prices rising upward. So, although the prices may have touched the lowest possible point for that cycle, buyers remain hesitant to purchase the stock. Because of this, the price of the stock continues to stagnate at low levels. 

At this point, astute institutional investors enter the market. They recognize that the market has touched a low, and in a bid to accumulate the stock at such low prices, they begin to purchase large volumes of the stock regularly, over a prolonged period of time. This is what results in the formation of support levels, since the huge volumes of stock purchase by these smart investors kickstarts the sluggish demand and gives the stock price a much-needed upward push.

*The public participation phase

+ Also known as the response phase, the public distribution phase is when short-term traders, who follow technical trends, notice the activity that’s taking place and enter the markets. They begin buying the stock as well, causing a quick rise in the price of the asset. In this manner, a bullish trend is established, which is why this phase is also known as the mark-up phase. This rising trend is generally swift and steep, so a large segment of the public is initially left out of the trading rally.

Soon, the news about the markets becomes generally positive, causing more buyers to enter the trading arena. Analysts and researchers see high price trends, and this eventually increases the public participation in the markets. 

*The distribution phase

+ At the peak of the mark-up phase, the price of the stock reaches new high levels. As news of these trends become more publicly available, everybody begins to invest in the stock. Here’s where the smart investors again enter the picture. Contrary to what occurred in the accumulation phase, here, institutional investors start to sell off their holdings systematically. They do so when others in the market are focused on buying. 

The supply of the stock thus constantly increases. And whenever the stock price attempts to go past a certain point, the increased sell-off from institutional investors prevents it from rising past that mark, leading to the formation of resistance levels. Eventually, the huge sell-off stagnates the price at certain levels and keeps it from rising further. And then, a downtrend begins, leading to a bear market. 

+ Tenet 4: The indices must confirm each other

To identify that a trend has been established, it’s essential that all the market indices must confirm each other. So, the movement of one index must match the movement of all other indices in the market. Only then can we label the market as being bullish or bearish, as the case may be.

For instance, say the CNX NIFTY is primarily moving in the upward direction, but NIFTY 500, CNX NIFTY Midcap, and many other indices in the market are primarily moving downward. In this case, it wouldn’t be right to classify the market as bearish (moving downward), since CNX NIFTY is moving up instead. Only when all the indices move in the same direction can you identify the trend concretely, according to the Dow Theory.

+ Tenet 5: The trading volume must conform with the price trends

According to this tenet, any primary trend in the market, whether upward or downward, must be supported by a corresponding increase in the trading volume. To make it clearer, let’s take the example of a market phase where the prices are on the rise. In order to classify this as a primarily bullish market, the trading volumes should increase when the prices go up (since this is the primary trend) and fall when the prices go down (since this is the secondary trend). In other words, more trades should be following the primary upward trend rather than the secondary downward trend.

Conversely, let’s take a market where the prices are falling. Here, to classify this as a primarily bearish market, the trading volumes should increase when the prices go down (since this is the primary trend) and fall when the prices go up (since this is the secondary trend). In other words, more trades should be following the primary downward trend rather than the secondary upward trend.

+ Tenet 6: Trends persist until there is a clear reversal 

Charles Dow recognized that it’s easy to confuse secondary trends with trend reversals. This is because both these price movements move in a direction that’s opposite to the primary trend. For instance, say the market is now primarily bearish (or falling downward). A temporary upswing may seem like a trend reversal. But then again, it could also just be a secondary trend. So, as the Dow Theory says, you’ll have to continue to consider the market as bearish even with a temporary upswing until it’s clear that the upward movement is established. In that case, it would be a trend reversal, making the market bullish.

🟩 How is the Dow Theory useful for traders? 🟩

+ The Dow Theory primarily helps traders identify market trends with greater accuracy, so they can take advantage of potential price action points. It also helps traders act with caution and not move against the market trends. And above all, the Dow Theory stresses on the importance of the closing price as a good indicator of the general sentiment of the market. 

+ This is because throughout any trading day, trades can happen all over the place. But as the closing bell draws nearer, most market participants will want to conform with the trend. Accordingly, the closing price of a stock is determined, depending on how the traders react as the trading day draws to a close. This can give you a great deal of insight into where the market is heading collectively. 

☣️ IMPORTANT / QUICK RECAP ☣️

+ There are six basic tenets to the Dow Theory.

+The first tenet states that the market discounts everything.

+The second tenet states that the market has three trends: primary, secondary and minor.

+The third tenet states that market trends have three phases: accumulation, public participation and distribution.

+According to the fourth tenet, the indices must confirm each other for a trend to be established.

+The fifth tenet says that the trading volume must conform with the price trends.

+Lastly, trends persist until there is a clear reversal.

+The Dow Theory primarily helps traders identify market trends with greater accuracy, so they can take advantage of potential price action points. 

+It also helps traders act with caution and not move against the market trends. And above all, the Dow Theory stresses on the importance of the closing price as a good indicator of the general sentiment of the market.

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Harmonic Pattern - The Gartley

➡️ Harmonic pattern - The Gartley ⬅️

(reading time = 7 minutes)

📊 Harmonic price patterns are those that take geometric price patterns to the next level by utilizing Fibonacci numbers to define precise turning points. Unlike other more common trading methods, harmonic trading attempts to predict future movements.

By finding patterns of varying lengths and magnitudes, the trader can then apply Fibonacci ratios to the patterns and try to predict future movements. 📊

🔮 The Gartley - Bullish and Bearish 🔮

+ The Gartley was originally published by H.M. Gartley in his book Profits in the Stock Market2 and the Fibonacci levels were later added by Scott Carney in his book The Harmonic Trader.

+ The bullish pattern is often seen early in a trend, and it is a sign the corrective waves are ending and an upward move will ensue following point D.

+ All patterns may be within the context of a broader trend or range and traders must be aware of that.It's a lot of information to absorb, but this is how to read the chart.

+ We will use the bullish example. The price moves up to A, it then corrects and B is a 0.618 retracement of wave A. The price moves up via BC and is a 0.382 to 0.886 retracement of AB.

+ The next move is down via CD, and it is an extension of 1.13 to 1.618 of AB. Point D is a 0.786 retracement of XA. Many traders look for CD to extend 1.27 to 1.618 of AB.The area at D is known as the potential reversal zone.

+ This is where long positions could be entered, although waiting for some confirmation of the price starting to rise is encouraged.

+ A stop-loss is placed not far below entry, although addition stop loss tactics are discussed in a later section.

+ For the bearish pattern, look to short trade near D, with a stop loss not far above.

🚫 Issues with Harmonics 🚫

+ Harmonic price patterns are precise, requiring the pattern to show movements of a particular magnitude in order for the unfolding of the pattern to provide an accurate reversal point.

+ A trader may often see a pattern that looks like a harmonic pattern, but the Fibonacci levels will not align in the pattern, thus rendering the pattern unreliable in terms of the harmonic approach. This can be an advantage, as it requires the trader to be patient and wait for ideal set-ups.

+ Harmonic patterns can gauge how long current moves will last, but they can also be used to isolate reversal points. The danger occurs when a trader takes a position in the reversal area and the pattern fails.

+ When this happens, the trader can be caught in a trade where the trend rapidly extends against them. Therefore, as with all trading strategies, risk must be controlled.

+ It is important to note that patterns may exist within other patterns, and it is also possible that non-harmonic patterns may (and likely will) exist within the context of harmonic patterns.

+ These can be used to aid in the effectiveness of the harmonic pattern and enhance entry and exit performance. Several price waves may also exist within a single harmonic wave (for instance, a CD wave or AB wave). 

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Price and Volume Relation

 ➡️ Price and Volume Relation ⬅️

 

 

 (reading time 4 minutes)

Volume is the number of shares of stock, bonds, options, or futures con tracts traded over a designated period (e.g., daily, weekly, monthly).

+ Advancing volume is the total volume for all stocks increasing in price; declining volume is the total for all stocks decreasing in price.  

+ Volume reflects the intensity (strength) of a stock, commodity or index. Volume also provides an indication of the quality of a price trend and the liquidity of a security or commodity.

📶 What volume reveals about the market's strength? 📶

1) High volume means greater reliance can be placed on the movement in price than if there was low volume, because heavy volume is the relative consensus of a large number of participants.

2) High volume indicates an active market; in an active market, the spread between bid and asked prices is usually narrower.

3) High volume is often characteristic of the initial stage in a new trend, such as a breakout in a trading range. Before a market bottom, investor nervousness leads to panic selling, a characteristic of which is high volume.

4) High volume is also attributable to a market top when strong buyer interest exists.

5) Low volume often exists during an unsettled period, such as at a market bottom. 

6) Low volume reflects a lack of confidence that is usually indicative of a consolidation period when prices are within a sideways trading range.

7) A sizable increase in volume may point to a breakout (start) or climax (culmination) of a move, which may be temporary or final. In a rare case, it may represent a shakeout.

8) Volume typically follows a trend, expanding on rallies and decreasing on reactions. Volume is useful in ascertaining how strong a change in expectations really is.

🎯The following guidelines apply to the study of volume: 🎯

+ The market is bullish if a new high occurs with heavy volume. A new high on light volume is deemed temporary.

+ A new low price with high volume is a bearish indicator. A new low on light volume is less significant.

+ A rally to a new price high on expanding volume but with less activity than the previous rally is questionable. It may point to a coming reversal in trend.

+ A rally on contracting volume is questionable. It warns of a possible price reversal.

+ If prices advance after a long decline and then go to a level at or above the previous trough, the indicator is bullish when volume on the secondary trough is less than the first.

+ If the market has been increasing for a while, an anemic price increase coupled with high volume is a bearish sign. After a decline, substantial volume with minor price changes points to accumulation, typically a bullish indicator.

✅✅ Specially for Beginners!!! ✅✅

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