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    2 Advanced Candlestick Techniques and Analysis

    Uploaded by

    Amit Maity
    The document discusses strategies for analyzing price action and volume to identify trading opportunities. It covers: 1. Using confirmation from price action, tails that stick out from surrounding bars, and confluence factors like moving averages to identify topping/bottoming patterns and flag formations. 2. Analyzing volume to confirm directional moves, reversals, and continuations, looking at both increasing and decreasing volume in relation to price action. 3. Outlining strategies for different trading sessions, like using opening range breakouts in the morning and prior day highs/lows in afternoon, and focusing on specific patterns like reversals.

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    Download as PDF, TXT or read online from Scribd

    2 Advanced Candlestick Techniques and Analysis

    Uploaded by

    Amit Maity
    495 views30 pages
    The document discusses strategies for analyzing price action and volume to identify trading opportunities. It covers: 1. Using confirmation from price action, tails that stick out from surrounding bars, and confluence factors like moving averages to identify topping/bottoming patterns and flag formations. 2. Analyzing volume to confirm directional moves, reversals, and continuations, looking at both increasing and decreasing volume in relation to price action. 3. Outlining strategies for different trading sessions, like using opening range breakouts in the morning and prior day highs/lows in afternoon, and focusing on specific patterns like reversals.

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    The document discusses strategies for analyzing price action and volume to identify trading opportunities. It covers: 1. Using confirmation from price action, tails that stick out from surrounding bars, and confluence factors like moving averages to identify topping/bottoming patterns and flag formations. 2. Analyzing volume to confirm directional moves, reversals, and continuations, looking at both increasing and decreasing volume in relation to price action. 3. Outlining strategies for different trading sessions, like using opening range breakouts in the morning and prior day highs/lows in afternoon, and focusing on specific patterns like reversals.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    495 views30 pages

    2 Advanced Candlestick Techniques and Analysis

    Uploaded by

    Amit Maity
    The document discusses strategies for analyzing price action and volume to identify trading opportunities. It covers: 1. Using confirmation from price action, tails that stick out from surrounding bars, and confluence factors like moving averages to identify topping/bottoming patterns and flag formations. 2. Analyzing volume to confirm directional moves, reversals, and continuations, looking at both increasing and decreasing volume in relation to price action. 3. Outlining strategies for different trading sessions, like using opening range breakouts in the morning and prior day highs/lows in afternoon, and focusing on specific patterns like reversals.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 30
    At a glance
    Powered by AI
    The document discusses various candlestick patterns, factors for analyzing volume, and strategies for different trading sessions.

    Some candlestick patterns discussed include bullish/bearish engulfing, piercing, doji lines, and reversal patterns like bull/bear traps.

    Factors discussed for analyzing volume include heavier/lighter activity in relation to price moves, linear/non-linear relationships to price action, and volume preceding or supporting price changes.

    3.

    Sideways
    Topping Action
    1. Sideways
    Bottoming Action
    Intraday
    Daily
    Weekly
    Monthly
    1. Sideways
    Bottoming Action
    Transition Among Phases
    1
    3 2
    1
    2 3
    B
    A
    C
    Flags 1
    2
    3
    B
    A
    C
    Flags
    1
    2
    3
    1
    2 3
    Breakdown
    Patterns
    Breakout
    Patterns
    Rely on confirmation of price action for most potent setups
    Look for Topping / Bottoming tails that protrude from the surrounding bars (really stick
    out
    The Candlestick /Bar-by-Bar setups are executed using confluence:
    Moving Averages
    Support and/or resistance levels
    Swing pivot levels and/or floor pivots
    Fibonacci levels (retracements of the prior move)
    Prior setups and/or failed setups
    Gaps
    Opening Range Highs and Lows
    Volume is the second most important characteristic of price action for most potent setups
    We want to focus on volume in the context of heavier activity and lighter activity.
    Heavier activity indicates volume increasing in relationship to the price action move
    Lighter activity indicates diminishing or declining volume in relationship to the price action
    move
    The primary focus of volume is to confirm the direction moves of price action, reversal
    chart patterns and continuation patterns
    Congruency of volume and price action supports or refutes the move in buyers or sellers
    Look for linear and non-linear relationships in volume to provide an additional indication of
    the setup.
    For example, a breakout of sideways consolidation, range-bound or congestion price action should be in parallel with
    the directional move
    Two schools of thought:
    Volume precedes price action meaning that when volume dries up, price action rolls
    over
    Volume supports price action meaning that volume shows up after significant
    reversals in price action or momentum changes
    We dont carewhich one is right or wrong!
    We simply use volume as a compliment and weight-of-evidence
    Increasing Volume and
    Analysis
    1
    3 2
    1
    2 3
    B
    A
    C
    1
    2
    3
    B
    A
    C
    1
    2
    3
    1
    2 3
    Decreasing Volume and
    Analysis
    1
    Morning Session
    Aggressive
    2
    Mid-Day Session
    Moderate
    3
    Afternoon Session
    Diligent
    Daily Swing Strategies
    (i.e., Bull/Bear Traps)
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Opening Range Breakouts Opening Range Breakouts Opening Range Breakouts
    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    0
    Pre Market Session
    Extremely
    Aggressive
    1
    Morning Session
    Aggressive
    2
    Mid-Day Session
    Moderate
    3
    Afternoon Session
    Diligent
    Friday-Monday
    Breakout/Breakdown
    Prior Day Highs & Lows
    Daily Swing
    Strategies
    (i.e., Bull/Bear
    Traps)
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Opening Range
    Breakouts
    Opening Range
    Breakouts
    Opening Range
    Breakouts
    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    0
    Pre Market Session
    Extremely
    Aggressive
    1
    Morning Session
    Aggressive
    2
    Mid-Day Session
    Moderate
    3
    Afternoon Session
    Diligent
    Friday-Monday
    Breakout/Breakdown
    Prior Day Highs & Lows
    Daily Swing
    Strategies
    (i.e., Bull/Bear
    Traps)
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Higher Highs
    Lower Lows
    Opening Range
    Breakouts
    Opening Range
    Breakouts
    Opening Range
    Breakouts
    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    2-Bar Reversals
    3-Bar Reversals

    Use pre-market price action,


    support & resistance, gaps,
    chart patterns and formations
    to validate the market cycle
    framework and phases
    Bullish
    Engulfing
    Bearish
    Engulfing
    Bullish
    Piercing
    Bearish
    Piercing
    3 Bar
    Reversal
    3 Bar
    Reversal
    Bullish
    Engulfing
    Bearish
    Engulfing
    Bullish
    Piercing
    Bearish
    Piercing
    3 Bar
    Reversal
    3 Bar
    Reversal
    Volume
    Volume Volume
    Volume
    Volume
    Volume
    4)
    3 Bar
    Opening Ranges
    (aggressive)
    2)
    3)
    1)
    Time-based
    Opening Ranges
    1/2 Bar
    Opening Ranges
    (most aggressive)
    Ideal trading
    situation
    ENTRY
    LONG Entry
    Up trend
    Higher Highs & Higher Lows
    Price
    Action
    OR High
    OR Low
    Intraday
    3 Bar High 3 Bar High
    2B/3B
    Reversal
    2B/3B Reversal &
    crosses back into OR
    2B/3B
    Reversal
    1. Price action is trading inside the 3 Bar
    Range
    2. Look for 2/3 bar reversal inside
    tight range
    3. Look for lower highs in down trends
    inside tight range
    4. Look for higher lows in up trends
    inside tight range
    5. Consider entry after 1
    st
    wide-range
    bar break outside of the 3-bar range
    Identify Market Cycle
    Ignore gaps at open in price action
    Consider aggressive short entries
    when price action breaks below 3 Bar
    low & below 20 MA
    Consider conservative short entries
    when price action breaks below 3 Bar
    low & not below 20 MA
    Consider aggressive long entry
    when price action breaks above 3 Bar
    high & above 20 MA
    Consider conservative long entries
    when price action breaks above 3 Bar
    high & not above 20 MA
    Ideal trading
    situation
    ENTRY
    LONG Entry
    Up trend
    Higher Highs & Higher Lows
    Price
    Action
    2B/3B Reversal
    Bullish
    Engulfing
    Bearish
    Engulfing
    Bullish
    Piercing Bearish
    Piercing
    1
    st
    Bar
    1
    st
    Bar
    1
    st
    Bar
    1
    st
    Bar
    Ideal trading
    situation
    ENTRY
    LONG Entry
    Up trend
    Higher Highs & Higher Lows
    Price
    Action
    Higher
    Opening Ranges
    Stop loss
    Entry
    Identify Market Cycle on 1 time frame higher
    Price action establishes the 1
    st
    bar
    Consider entry after price action breaks outside of the 1
    st
    bar range
    Ignore gaps at open in price action
    Consider aggressive short entries
    when price action breaks below 1
    st
    Bar low & below 20 MA
    Consider conservative short entries (counter trend trade)
    when price action breaks below 1
    st
    Bar low & not below 20 MA
    Consider aggressive long entry
    when price action breaks above 1
    st
    Bar high & above 20 MA
    Consider conservative long entries (counter trend trade)
    when price action breaks above 1
    st
    Bar high & not above 20 MA
    Reference for Candlestick Basics and Analysis
    Minor support area
    Major support areas
    Topping Tail Bottoming Tail
    Narrow Range Bar Wide Range Bar
    Bullish
    Engulfing
    Bearish
    Engulfing
    Bullish
    Piercing Bearish
    Piercing
    50%
    50%
    Bullish
    Reversal
    Bearish
    Reversal
    Variations apply to last two candlesticks
    for each pattern
    Variation bars
    Variation bars
    3. Sideways Topping Action
    1. Sideways Bottoming Action 1. Sideways Bottoming Action
    Bullish Engulfing
    Bullish Piercing
    Bear Trap
    3-Bar Bullish Reversal
    Opening Range Higher Low
    Bearish Engulfing
    Bearish Piercing
    Bull Trap
    3-Bar Bearish Reversal
    Opening Range Lower High

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