- [Instructor] Hi guys.
Welcome to the part seven of
the Swing Trading Strategies video series.
So, in this particular part,
I'll be talking about
outside bar candlestick pattern.
Now, this is a major reversal pattern,
which plays out mostly during end of
a major downtrend or uptrend,
particularly relevant in
the kind of times we are into right now,
and it's actually a good strategy
to have in your arsenal in case you're looking
to go a long or go short on certain stocks
that you have in mind.
So in this particular part,
I'll be again starting out
with instrument selection.
The only thing that you require in this strategy
is just the price chart,
that is candlestick chart.
I'll explain you what
outside bar candlestick pattern is.
This is actually a bar chart pattern,
but I think, on a candlestick chart,
this kind of looks much better,
and you can actually visualize
what is happening in the market well.
I'll be showing you various types of
outside bar candlestick pattern as well,
because this pattern particularly plays out
in many forms or many variants.
I'll be covering those,
then I'll be emphasizing on time frame selection,
entry, exit, stop loss,
and I'll take up various case studies
that is both past and the recent ones
which have played out.
So let's get started.
- [Narrator] In this channel,
we talk about trading, investing,
and market analysis,
to help you become a better investor and trader,
so if you are new here, consider subscribing.
- [Instructor] So the first thing that
I'll start off with is instrument selection.
Now, this strategy is suitable for
both stocks and futures,
in case you are not looking to
short sell in the market,
as many traders are
not comfortable short selling.
You can simply stick to stocks.
The idea behind this strategy is to get
about 20 to 30% return.
Remember, in the part six strategy,
the kicker pattern that we saw,
that usually yields about five to 15%,
so return-wise, this strategy offers
better risk to reward.
Under this strategy,
we are not holding positions for few days.
We'll be at least holding
the positions for few weeks,
let's say anywhere between two to four weeks,
and what we are looking to do is
we are looking to either buy or short
into a sudden reversal
in an ongoing strong trend.
I'll be precisely showing you how to do this.
Again, this strategy is purely to be traded
on price action,
that is simple price chart,
but in case you want to include any indicator,
you can do so,
and you just require either a web-based platform,
or a technical analysis software.
My preference is always
to have a proper software.
The timeframe that we'll be trading
this strategy on is only weekly timeframe.
Now, I know this strategy works on daily as well,
or on hourly chart,
or a 30-minute chart as well,
but what I have found is that on weekly chart,
this strategy actually works the best.
Now, I'll directly take you
to this pattern first.
Before that, I'll just show you
what a basic candlestick chart looks like.
This is a bearish candle.
Here, open and high are the same level.
Price auctions lower.
At some point during the day,
it makes a low here,
and then closes at this level.
On the flip side, look at this bullish candle.
Price opens here,
rallies on the up side.
At some point during the day,
it makes a high here,
and it eventually closes at this level,
with the low being at this point.
So this is how a basic candlestick looks like.
I'll take you through the outside bar pattern.
This is how the pattern looks like.
In this particular pattern,
you have to think psychologically.
Just imagine we have
a bunch of green candles here,
and price has moved up to this point.
All the people who have bought
are feeling pretty good about it,
and the next day, look what happens.
Price opens here,
above the high of the previous candle,
and it auctions lower,
and completely engulfs this previous candle.
So the high point of this candle,
open point, low point, and the close point
is completely engulfed by this second candle.
Now, this signifies a, you know,
significant shift in the overall psychology
of the entire chart.
Now, on the flip side,
if you look at this particular pattern,
which is a bullish pattern,
here, what do you see?
Price trends lower,
then we get this first candle,
which actually signifies the ongoing trend.
Next day, what happens is that
price opens at this level.
It auctions lower, that is moves lower,
below the low point of the previous candle,
and then, suddenly,
you see a spurt of buying emerging,
and then, candle closes above
the high point of this day.
Now, this is what I was referring to earlier,
that the second candle of this pattern
is actually the most important candle,
wherein it completely engulfs
the previous candle,
signifying a change of trend.
Now, I'll take you back to the definition slide,
just because you've seen the pattern.
So, outside bar pattern is actually
a two candlestick reversal pattern.
The first candle usually confirms the trend,
that is this candle and this candle,
and the second candle
actually confirms the reversal.
Now, this is one main condition
I have put out here,
that the close of second candle
should be higher than the high
of previous candle,
in case you are looking to buy.
What I mean is,
the close of this second candle
should be higher than the high of
this previous candle, right?
And on the flip side,
the close of this candle should be lower
than the low point of the previous candle.
That is how you signify a complete shift
in psychology of the chart.
I hope my point is clear.
So the two main requisites that
I have categorized for this particular pattern,
the number one is that
trend has to be in place,
a prior trend, that is,
with a uptrend or downtrend,
and minimum six to 10%.
In my opinion, the larger, the better,
and reversal candle has to be extremely decisive.
That is, the signal from this candle
should be that a complete psychological shift
has happened, and now,
price is willing to trend
in the opposite direction.
That has to be conveyed
in a very decisive manner.
So again, we'll be trading this pattern
only on a weekly timeframe chart.
Make sure that before you trade this pattern,
there is a sustained trending move before it,
and if there is a visible trending move,
the larger the better,
that actually increases the odd
of this pattern playing out.
This particular pattern,
if you see, if you have some basic knowledge
in candlestick charts,
this particular pattern is actually
a strong variant of bullish engulfing.
So, in bullish engulfing,
the criteria is not so strict or rigid,
but for this outside bar pattern,
this is actually a stronger variation
of bullish engulfing pattern,
which actually works quite well.
I'll now take you through a different kind of
outside bar patterns that you'll spot,
both the bearish part,
and the bullish ones.
I'll start with the bearish outside bar first.
So, have a look at this first pattern.
Now, what has happened?
The previous candle is positive.
We have a opening here.
This completely engulfs the previous candle,
and we clearly get a closing
below the low of this candle, right?
Now, look at this candle.
Now, what has happened is that
this candle is again signifying the prior trend.
Price opens here.
At some point during the day,
it makes a high,
and then it completely closes below
the low of this candle, right?
Now, look at this candle.
This has been a fairly bullish candle,
signifying the previous trend,
and the next day,
we get a open here,
price auctions high, makes a high here,
then it makes a low and closes
nearly at the bottom point of the day.
Again, completely engulfing this candle.
Now, look at this variant.
Price fairly represents the bullish momentum
in the previous trend,
then the price opens here,
forms a high at this point,
forms a low at this point,
then closes here,
completely engulfing the first candle.
Again, you see this particular pattern.
Price opens here,
makes a high at this point,
makes a low here,
and closes at this point,
thereby completely engulfing this first candle.
Now, look at this candle.
Price makes, again, a bullish candle.
Price opens here,
makes a higher high here,
higher than the previous candle,
completely closes at the lowest point of the day,
thereby engulfing this first candle.
Now, all these patterns that I've showed
are actually variants of
outside bar candle pattern.
Now, the key in this strategy,
that is to trade on the down side,
is to identify which pattern
is most bearish, and why.
Now, just for a second,
pause this video and try and figure out
which of these patterns is actually
the most bearish, and why.
If I have to pick out,
I would say that this particular pattern
is extremely bearish, why?
Because this pattern actually,
this first candle signifies
strong buying momentum.
A lot of buying has happened,
that is why price has moved up,
forming a long tail,
and then look at this reversal candle.
It is closing at the lowest point of the day,
after completely engulfing this previous candle.
Similarly if I want to point out,
this candle would again be,
this pattern would again be
a very strong variant, why?
Because we have a really bullish candle
that is representing the previous trend,
then suddenly we get an extremely strong reversal
that is closing towards the low point of the day,
whereas if you look at this candle,
or this candle,
they are actually signifying
the same bearish outlook,
but the intensity with which
this particular pattern,
or this particular pattern,
or even this one,
they are signifying the shift in trend
that is not being conveyed by
either this one or this.
So this is also a kind of practice thing
that will come over a period of time,
that you would be able to finally make out
which patterns are more bearish,
and which ones are more bullish.
I'll just take you to the bullish variants one.
Now, look at this.
Again, the same pattern playing out
in the opposite direction.
So, this is a bearish candle,
signifying the previous trend.
Then again, you get a reversal here,
this candle completely engulfing the first one.
Similar is this one.
Psychologically, this is a very bearish candle,
with selling representing at higher level.
The price for this candle begins
at the lowest point,
that is below this particular candle's low,
and completely engulfs the previous candle,
and you can see
the remaining three patterns as well.
So again, pause the video here,
and identify which candles would you see,
or which patterns in these particular
six patterns that I've listed out
are the strongest one.
If I have to pick out,
then I would pick out this.
This one is extremely strong.
Again, this candle represents
the previous bearish trend pretty strongly,
and then look at this reversal candle.
Again, price opening here,
making a low at this point,
then completely engulfing
and having a strong bullish candle.
Similarly, this candle is completely,
you know, it's much more stronger
than something like this,
or even something like this.
So out of these six variants that I've shown you,
the ones which I like as the most strongest
are this pattern,
this pattern, and this pattern.
If you look at this particular pattern,
this is actually just closing
at the highest point of the previous candle.
So, you know, this has just about qualified,
but still, it's a strong pattern.
But look at this decisive closing
above the high point of the previous candle.
Similarly with this one.
Even this one is not that weak,
but look at the length of these candles.
This actually signifies that
there's a lot of underlying bullish momentum.
So, I'll just begin with the case studies first.
What I've purposely done is that
I've picked out some case studies
that have happened in 2012, 13, 14, and 15,
and then, the recent move that we've seen
where stocks and indexes have fallen down.
I'll be showing you how this simple strategy
has picked out reversals in many stocks,
and many index that we track on a daily basis.
So I'll just move to case studies now.
So the first case study that we'll pick out
is that of Bank Nifty.
Now, this is of 2016.
Again, a weekly chart.
Now here, what we see that,
we have had a decisive down trending move
that had cleared out in 2015,
and before March 1st,
that is, I think this was on the budget session,
what happened was the previous candle
was a bearish one,
and then price opened at this level,
made a low somewhere,
lower than the previous candle,
and then we had a strong bullish candle
playing out and price closing at
the high point of the day.
Now, the criteria that I had set,
number one, the prior trend in place,
it was clearly there.
First candle was reflecting the ongoing trend.
The second candle was very bullish,
and it completely engulfs the first candle.
Look at one thing in this particular case.
Now, what has happened here is that
this particular candle has actually
engulfed this candle,
then this one, and this one,
so the last three candles have been engulfed
by this particular bullish candle.
So these sort of things also give you
an insight into how strong this reversal pattern
has played out in this particular case.
In this Bank Nifty case then,
you've seen the price has clearly trended higher,
that is on weekly timeframe,
and this particular candle was
clearly reflecting the shift in momentum
from sellers to buyers.
So, this was the first case that I covered
that happened with Bank Nifty instrument
in 2016 March.
The next case study that I'll pick out
is that of FMCG index.
Now, this is of December 2016.
So again, what we have is
a previous downtrend in place.
It was 15% downtrend that happened.
After that, the first candle reflected
the mood of this particular index
that was trending lower.
Look what happens in the second candle.
We opened at this point,
made a lower low with respect to previous candle,
then auctioned higher,
that is closed higher at the,
near the highest point of the day.
Now again, this particular candle
actually engulfs three candles,
that is this one,
this particular one, and this one.
If you see, it also engulfs
this candle and this candle.
So this particular bullish candle
has actually engulfed five previous candles.
Again, decisively showing that
the shift in momentum is here to stay,
and now the trend has shifted
from downtrend to uptrend.
See, it's easy to see that
uptrend has happened here,
because we have the data
printed on the right side,
but when you are here,
you're actually playing with probability
and not certainty.
Now, just imagine this particular chart
is not present.
So, what this candle actually signifies
is number one,
that downtrend may have ended,
and number two,
any trade that you want to take in this index
or this particular stock in FMCG index,
that has to be with respect to
the lowest point that is made in this candle.
I'll come to the entry, exit,
stop loss part a bit later,
but that is how you have to think,
and just remember one thing,
that when you find a bullish candle
that is completely engulfing two, three,
or let's say four, five previous candles,
then that is an extremely bullish sign,
and you should be paying attention
to that particular chart.
The more decisive the second candle,
the higher the probability of
the pattern playing out in your favor,
so which is why,
pay attention to this particular candle,
what is it doing,
how it is closing,
whether it's closing at the highest point
of this particular candle.
What about the low point,
whether it is a decisive low point,
how many previous candles
is this pattern actually engulfing?
All these sort of details
you have to pay attention to.
So the next case study that I'll pull out,
that is of Nifty Next 50,
that is Nifty Junior.
So this is of 2012.
Now, we had a prior downtrend in place,
again, 10, 15%.
The first candle that you see
represents the existing downtrend,
and look at the second candle, what happens.
It makes a clear low with respect to this candle,
then the price opens here,
it makes a high here,
and this closes above the high
of this previous candle.
Now, this particular pattern
is not as bullish as what we saw in Bank Nifty,
or for that matter, FMCG as well,
but it overall signifies the shift in momentum
that has happened from sellers to buyers,
and which is why, you know,
this pattern should've been
traded on this chart also.
But when you want to compare it with
Bank Nifty or FMCG chart,
then clearly, Nifty Junior chart,
the pattern that has played out in 2012,
is weak when you compare it with something,
what played out in 2016 in Bank Nifty,
or 2016 December in FMCG.
The next example that I've picked out
is again of FMCG,
but it's just of last few weeks,
that is in September.
Now, look what had happened.
We have seen a lot of
sectors and stocks breaking down.
In this particular case,
it's the FMCG index.
The breakdown happened in
first week of September.
Now again, a clear trending phase was visible,
15% trend was visible, 10 to 15%.
The first candle is again reflecting the mood
existing on the chart,
that is price is trending higher.
But look at the second candle,
how bearish it is.
The opening is exactly at
the high point of the candle,
and then, price auctions lower,
and finally closes somewhere here.
Now again, in this particular chart,
you'll see that this particular bearish candle
actually engulfs one, two,
and almost this candle,
that is three candles.
So, when you want to measure the bearishness
of this pattern,
then FMCG being a defensive sector,
and such a wide range candle printing on it,
definitely sends out a negative message,
and since then, you've seen
price has clearly auctioned lower.
So, two things you have to check.
One, prior trend in place,
and number two, how strong
the second reversal candle is.
In this particular case,
this candle is exceptionally strong,
which thereby qualifies as a short trade.
Now, the next example that I'll pick out
is of media sector.
Now, we see a prior trend in this chart, right?
Now, selling is also evident
as this candle has you know,
engulfed this previous candle.
In hindsight, you see that this pattern
has also worked extremely well,
but still, I categorized this particular pattern
as a weak pattern.
Now, just pause the video
and think for sometime,
that why I categorized this as a weak pattern.
The criterias have fulfilled,
selling was evident,
it has worked as well,
but why is this weak?
Now, based on whatever we have discussed
in the previous slides,
you should be able to answer this question now,
that why this particular pattern
is weak than something like this,
a short sell example that we have seen before.
So just pause it here,
and think why this is weak.
Now, the reason I categorized
this pattern as weak,
I'll just zoom this for you,
this particular pattern that has formed here,
I'll just zoom in.
Now, look how the closing is happening.
The current candle close is actually
not below the close of the previous candle,
that is the low point.
Again, I'll repeat.
The closing point of this candle
is not below the low point of this candle,
so while criterias are being fulfilled,
one major criteria that is missing out
is that the closing has to happen
below the low point of the previous candle.
So this pattern on the media sector
does not necessarily work out
as an outside bar candlestick pattern.
This is a simple bullish engulfing
that has happened.
Rules-wise, yes,
all the rules that I've listed,
you can still categorize it as
an outside bar pattern,
because the high has surpassed
the previous high of the candle,
and the low has surpassed
the previous low of this candle,
but in terms of strength,
or in terms of bearishness,
this pattern is not as bearish,
or nearly as bearish as what we saw
in FMCG sector, because here,
the close was clearly lower than
the low of the previous candle,
whereas in the media sector case,
the close is just about lower
than the open of the previous candle,
not at the low point.
So had the close happened somewhere here,
that is clearly lower than
the low of this candle,
then this would've been categorized as
an extremely strong bearish reversal case.
I hope my point is clear here.
Do remember this,
that the current candle closing
has to be below the low of the previous candle,
as it will signify more strength.
This is a point to remember.
Now, I'll move to, again, Nifty Next 50.
So this is case of 2017.
Now, why I've pulled out this case is that
I wanted to show you that
this pattern fails as well,
no matter how strong this pattern looks.
If you look at these two patterns,
now, this candle was signifying the past trend.
Look how bearish this candle is,
but despite of that,
this pattern failed.
Again, a similar pattern played out.
This candle was signifying the past trend.
Again, a very strong bearish pattern,
but again, the stop loss was hit,
and the trade failed.
So, I want to highlight one thing.
Nothing works always,
and it always has to be in context with
what is going on in overall market.
But look at what happened in Nifty Next 50
few months down the line.
In August and in October last year,
while both these patterns fail,
now look at what happened
pretty recently in April,
and more importantly, in September.
Now, a prior trend was there in place,
but not that strong.
But still, it worked,
and price moved lower.
But in this particular case,
you do have 10% move,
then you see opening of
this candle at this point,
pretty close to the high point of the candle,
and then a clear close below the low point
of the previous candle,
and since then, we have seen price move lower.
Now, what would have made
this candle more bearish,
or this pattern more bearish,
if the closing point that you see here
would've happened somewhere closer
to the low point of the candle,
that would've signified
a more bearish momentum
in this particular pattern,
but that did not happen
and price did auction higher,
but over the subsequent weeks,
you've seen price coming down.
So, I hope you're clear on two things.
One, the required conditions that are needed
for this pattern to play out,
and number two, to measure the strength of
bearishness in this particular strategy.
Now, if you look at this pattern
and this pattern,
out of these two,
I think this is more bearish,
because the closing point is clearly lower
than the low of the previous candle,
and look at how bearish this candle is.
If you look at this candle,
it is still bearish.
It sort of checks all the rules
that we have covered,
but look at the low point here,
and look at closing here.
You do get a feeling that
some sort of buying has happened,
the price has not been able to close
near the low point of the week.
So, this is what I want to cover on
the strength of this pattern,
how you assess whether this pattern
is on strength parameters,
whether it works out well or not.
Now, I wanna come to a individual case study,
that is of Kotak Bank.
Again, this is a pretty recent example.
So we have had a 10, 15% prior trend in place.
The first candle is actually signifying
the trend pretty clearly.
The next candle, look at the next candle,
how it plays out.
It opens at this point,
a high is made,
that is higher than the previous candle,
and clearly, there is a close happening
below the previous low of the first candle,
and near the low point of the current week.
Now, look how bearish this looks
in comparison to something like this
that we saw in the previous slide,
and you'll see that since then,
price has fallen.
So in terms of checking
the overall strength of the pattern,
this is how you have to go about.
So the next example that we'll take up,
again, it's a stock,
a banking stock, Axis Bank.
Now, again, we have a prior trend in place.
We get a bearish candle here.
It's pretty bearish,
that is representing
the previous trend pretty clearly,
then we get a fairly bullish candle.
Look at the strength of this candle,
but look at what happens here.
Instead of price rallying in one direction,
first, you get some sort of selling,
price again retraces back to
the low point of these candles,
and then, it moves up.
So it was not a direction movement,
which actually brings to,
notice a very important point,
that just because a bullish candle
or a bullish pattern has formed,
it does not mean that you'll get
a runaway move right away.
It is possible that sometimes it retraces back,
and then the pattern plays out.
But the lowest point of the second candle,
this actually becomes your reference point,
and the price should not dip
below the lowest point of your reversal candle.
Now, if you see on this chart,
this pattern actually also played out
in November 2015,
but look at the context of
the pattern that played out.
Had I seen this pattern back in November 15,
I would have traded it,
because it's a pretty strong pattern,
although when you look at a candle here,
which is actually,
this candle is actually more bearish
than this bullish candle,
so these are some pointers that
you have to take a look at,
although I must admit that
these pointers are more visible in hindsight,
and in real time,
because you're so eager to take a trade,
sometimes you do make a mistake.
But this is something
you'll need to keep in mind.
If you look at this bullish candle
that has formed,
this is actually more bullish
than this previous two bearish candles, right?
So these are just some minor points
that you have to note,
take a note of,
and while analyzing a trade on your own,
you need to keep these few things in mind.
So while pattern failed here,
a couple of months down the line,
this actually gave you a major reversal,
and then price moved up.
One thing I want to point out straight away
is that the beauty of this pattern is that
you'll see this pattern forming
only at the end of major trending moves,
which is why it is a rear pattern.
It does not form that often,
but you will find this pattern forming
after a major trending move,
either uptrend or downtrend.
Now, I'll come up with one more case study
with volumes in it.
Now, this is a stock.
I think I've not mentioned the stock name here.
I'd forgotten that.
So look what has happened.
Again, we have a prior downtrend in place, 10, 15%.
This first candle is clearly signifying
the bearish momentum,
then you get this super bullish candle.
It's clearly more bullish
than what you've seen here,
and then, price consolidates a bit,
and then moves higher.
Now, why I've pulled out this case study
is because of the volume.
Look at the volume here.
As this bullish candle has formed,
the volumes have actually spiked.
Now, this is not a criteria
that has to fulfill,
it's not mandatory,
but if you find such cases happening,
where price is trending lower,
and then you suddenly see
this reversal pattern kicking in,
with good amount of volume,
then do take note of it.
Volume is very similar
to adding fuel to fire.
So, if fire is represented by
this particular candle,
then volume becomes your fuel,
so which is why I always like to
pay attention to those particular
stocks or charts which are breaking out of
forming very good bullish reversal
or bearish reversal patterns,
which are happening on huge volumes.
You should definitely take note of those charts.
Now, next case study is of a stock, Havells.
Just now, I showed you how volume
does play an important role.
Why I pulled out this particular chart
is because while the bullish pattern
was playing out in this particular stock,
you can see that the high of this candle
is higher than the previous candle.
The close is also fairly bearish,
although I would've preferred a close
somewhere near the low point of
this current candle,
that is clearly lower than the previous one,
but you can see that
as this bearish candle was forming,
there was no distinctive pick-up in the volume,
so which is why I've not
added volume as a filter,
because sometimes it happens on great volume,
sometimes it does not,
so that is why I cannot put out
volume as a filter,
but definitely, if you see
something like the next chart,
that again, I'm going to show up,
that is of Godrej Consumer.
It's a pretty defensive stock,
but look at how it reversed in September 2018.
Again, a trend of 10, 15% was in play.
We got a high that is higher
than the previous candle,
a clear, a close below
the low of the previous candle,
but look at the volume spike that has happened.
The volume on this particular day
was highest that we saw
in the last one year or so.
So when you see this volume expansion happening,
when this pattern is playing out,
that actually becomes
an extremely bullish signal,
and you should be taking or trading those trades,
because the odds of these trades working out
is always good.
So I'll just move to the entry,
exit, and stop loss section.
I've covered about 10 to 12 case studies.
I'll just replicate this chart
to explain to you about entry,
exit, and stop loss.
So clearly, at the end of the week,
when this candle forms
and the closing happens,
this becomes your entry point.
The high point of this candle,
your entry candle,
becomes your stop loss when you're short selling.
In case you're buying,
I'll just pull out a buying example.
So this is a buy example.
In case you're buying,
this low point of the entry candle
becomes your stop loss.
So the second candle,
that is the entry candle of the trade,
becomes your entry,
and the high or the low point,
depending on whether you are short selling
or buy, becomes your stop loss.
Exit is subjective,
but I've found that this strategy
easily yields, whenever it works,
about 20 to 30%,
so you do get a risk-reward of
easily about three is to one,
four is to one, or five is to one.
Such kind of trades are easily,
you know, you can execute such trades
with this particular strategy.
Now, I'll come to the stock selection part.
Now, in stock selection,
you don't have to stick only to high beta.
In this particular strategy,
you can select low beta stocks as well,
because it's all about change in sentiment.
That happens or that plays out
in low beta stocks as well.
This pattern is again, rare.
It does not form that often,
but the odds are always high.
This is actually one of
the highest probability reversal patterns
that you'll find,
both on the bearish and the bullish side,
so whenever this plays out,
especially with expansion of volume,
do take note.
Stock universe can be anything.
It can be stocks comprising in F&O segment,
or in case you don't like short selling,
you can just stick to equities only.
One volume criteria that you can add just
to avoid illiquid stocks is that
over a period of 252 days,
the average volume should be
greater than five lakhs, right,
or half a million.
Again, no fundamental criterias are required,
but in case you want,
you can experiment with
the good fundamental stocks,
but I don't think that increases
the effectiveness of this pattern.
It might increase on the bullish side,
but I haven't tested that,
so I'll refrain from commenting on it.
One criteria that I always share
in all of my strategies is that
always check for the stocks in the same sector.
So, let's say Godrej Consumer,
in the FMCG sector,
is forming this bearish pattern,
and the chart is indicating that
price will move lower,
check out other stocks.
They may not be forming the same pattern,
but they might be indicating
same amount of bearishness in other forms,
so do take a note of that as well.
Now, I'll move to position size.
Again, this is a very common slide
that I put out in every swing trading strategy.
So, it's a repetition of that.
So, you are not willing to risk
more than 1% of your capital.
So, assuming your capital is Ten lakh,
your risk would be 10,000.
If 280 is your entry, stop is 260,
your position size would be your risk,
that is 10,000 divided by your entry minus stop,
that is 20, so 500 units.
So the formula for position size is
risk divided by the difference of
entry and stop loss.
In this particular outside bar pattern,
your second candle is the most important one,
so if you're buying,
the low point of that candle
becomes your stop loss,
whereas if you're short selling,
the high point of that candle
becomes your stop loss.
One thing I wanna add is
wait for the end of the week to play out.
Don't take a trade assuming that
this pattern is forming at mid week.
Please don't preempt, because sometimes,
the mistakes are really costly.
Just be patient, and wait out.
As it is, you intend to capture
the next 20, 30% of the move,
so getting in early 1% or 2% early,
it hardly would make a difference.
So I'll just repeat the key points.
Time frame has to be weekly.
There has to be a major trending move.
Volume addition is a criteria
you can definitely explore,
although that's not a prerequisite.
Now, decisiveness of the second candle
usually determines the success of this strategy,
that is why focus on the second candle.
Learn to think in psychological terms,
like I showed you.
Be in the position of the trader.
Let's say, in case you're trying to
short the market,
you've had a nice trend in place,
imagine you have a position,
and then you see a sudden shift happening.
Just try and think from
a psychological point of view.
Your trading would naturally improve over time.
What I've found is that
due to the nature of stock market,
which usually trends up after a down cycle,
and in general, also,
the bias of stock market is to trend higher,
this pattern actually does work
better on the buy side.
So I usually don't pick out
this pattern for short sell that often.
I usually stick to the buy side only,
but it depends on
the underlying market conditions.
Like the conditions that we have now,
I would definitely look for
reversal trades as well.
Again, don't forget to check the stocks
from the same sector,
that is the sister stock concept
that I've discussed many times.
So I was due to release options video this week,
but because of the kind of market
that we are into,
I thought that I would cover
reversal pattern again.
I covered the reversal pattern two weeks back,
that is the kicker pattern of candlesticks,
and I thought that, again,
a reversal pattern at this particular time
would be more handy,
which is why I made out
a swing trading video this week,
and not an options trading one.
So, you can contact me on my email address,
Twitter, or on YouTube as well,
and I'll get back to you
with whatever query you have.
So thanks a lot for watching this video.
In case you have any doubt,
just leave a comment below,
and I'll answer it as soon as possible.
Be safe, guys.
- [Narrator] Click on the subscribe button
and bell icon,
to get instantly notified when
a new video is uploaded.
Thank you for subscribing.
For more infomation >> Секреты успеха | Первый шаг к успеху в МЛМ - Duration: 4:09. 
For more infomation >> FIFA ONLINE 4 MANAGER - review นักเตะ - Lionel Messi 17 +1 [ขอแรงแรง][NRS Gamer] - Duration: 13:15. 
For more infomation >> 4.7: Mastodon Bot - Replying to a Mention - Duration: 8:30. 
For more infomation >> Einmal in einem "Tatort" mitspielen I Landesschau Baden-Württemberg - Duration: 4:59. 
For more infomation >> Hills of steel Update - Videos for kids - Tank - Games bii - Duration: 16:21. 
For more infomation >> Radar-Walter ist verschwunden I Landesschau Baden-Württemberg - Duration: 3:05. 
For more infomation >> Maconha, Planet Hemp e os bastidores Legalize Já - Amizade Nunca Morre - Duration: 3:22. 
For more infomation >> Ожерелье из Бусин и Бисера Мастер Класс! Колье из бисера и бусин / Necklace of Busins and Beads! - Duration: 10:20. 
For more infomation >> ماذا يحدث للسماء يوم القيامة؟ نسأل الله السلامة - Duration: 1:26. 
For more infomation >> Die Wohnpyramide von Bönnigheim I Landesschau Baden-Württemberg - Duration: 2:38. 
For more infomation >> 【ぽに子】スパゲティ叩こうぜ！「SPAGHET」プレイ - Duration: 36:35. 
Không có nhận xét nào:
Đăng nhận xét