Creator: ** **Source: ** **Type: #litnote Topics: [[ Trading ]]

• Price Action
• Golden Rules of Price action

Price Action Type 01 Strategy

For Uptrend Conditions:

• The stock has to make higher lows and higher highs
• Wait for price to retrace to 3rd support level
• It has to give reversal patter in the support line

Bullish Engulfing pattern: The green candle should completly engulf the red candle. Even the wig of red candle shouldn’t go past the green candle. Mother baby candle: Green candle should be completely inside the red candle. Enter the trade the next day only when the price breaks the hight of the previous high Bullish 3 pattern: A red candle followed by a doji.

For Downtrend Exactly the same but opposite

Mistakes Trader Make in Price Action Type 01

1. Entering the trade: Conditions:
   • The stock must have tested at least 3 times
   • The stock must be in uptrend or downtrend
   • no more than 18-20% difference between two swings
2. The reverse must be in support/resistance zone/ Other than that reversal pattern anywhere, it doesn’t have any value
3. The reverse pattern shouldn’t be below support/ resistance line. It may show continuation of the same trend
4. If there are less touches in support line, don’t enter. More touches means better confirmation
5. The swings shouldn’t be extremely vertical. There should be common swings

Price Action Type 02 Strategy

Look for downtrend or uptrend. Stock prices don’t need to retrace for the third time. Sketch a trend line and Wait for the volume confirmation before entering the trade. ++ Advantages

• It is consistent strategy
• It is frequent

Price Action Type 03 Strategy

When a market is in uptrend, we look for selling opportunities and when the market is in downtrend, we look for buying opportunities.

Draw a trend line and look if there is lower high and lower low, look for volume confirmation then.

Patterns

Channel Pattern

• Draw a trend line and create a channel pattern
• Don’t take entry after 7th point
• Enter trade only in between 5,6,7 points
• We can’t trade with channel pattern on lower time frame

Head and shoulder patterns

• They all should have similar tops
• The left shoulder should have greater depth than the right shoulder depth
• Draw a trend line and wait for confirmation

Flag Pattern

• stock has to be in downtrend or uptrend
• Pole
• Narrow Range
• Breakout with volume confirmation

Tip: The poll should follow the same trend. It shouldn’t be very short either. The narrow range shouldn’t be moving downwards or upwards during the consolidation period because it is not a good sign and market might quickly revamp.

Cup and Handle Pattern

• A cup like shape with a handle.
• It is rarely found
• It should have round botoom with similar top
• It should also have narrow range and wait for volume confirmation and

How to Select Stocks for Trading

• Wait until the market settles. People trade on emotions during the first hours of stock market

Stop Loss

It is the risk bearing capacity. There;s always risk in trading. Every time you trade, if you make stop loss you can sleep with a peace of mind

Fundamental Analysis

Always have free cash to take advantages of trading opportunities. Also use index to see breakout

• **PEG ratio: **should be more than 0.2 to 0.9. IF the ratio is 1.0, we can say it has reached its growth potential
• Cash flow: should have positive cashflow for recent two years
• Market Cap:

Trend Line

• Draw a trend line
• Draw a micro trend
• Only enter the trade after second confirmation

Trend line Breakout

Happens when momentum is lost in a trend