The morning star and the evening star are the last two candlestick patterns we will be studying.
Before we understand the morning star pattern, we need to understand two common price behaviours –gap up opening and gap down opening. Gaps (a general term used to indicate both gaps up and gap down) are a common price behaviour. A daily chart gap happens when the stock closes at one price but opens on the following day at a different price.
10.1 – The Gaps
Gap up the opening – A gap up opening indicates buyer’s enthusiasm. Buyers are willing to buy stocks at a price higher than the previous day’s close. Hence, the stock (or the index) opens directly above the previous day’s close because of the enthusiastic buyer’s outlook. For example, consider the closing price of ABC Ltd was Rs.100 on Monday. After the market closes on Monday assume ABC Ltd announces their quarterly results. The numbers are so good that the buyers are willing to buy the stock at any price on Tuesday morning. This enthusiasm would lead to stock price jumping to Rs.104 directly. This means there was no trading activity between Rs.100 and Rs.104, yet the stock jumped to Rs.104. This is called a gap up opening. Gap up opening portrays bullish sentiment.
In the following image, the green arrows point to a gap up openings.
Gap down opening – Similar to gap up opening, a gap down opening shows the bears’ enthusiasm. The bears are so eager to sell that they are willing to sell at a price lower than the previous day’s close. In the example stated above, if the quarterly results were bad, the sellers would want to get rid of the stock and hence the market on Tuesday could open directly at Rs.95 instead of Rs.100. In this case, though there was no trading activity between Rs.100 and Rs.95, the stock plummeted to Rs.95. Gap down opening portrays bearish sentiment. In the following image, the green arrows point to a gap down opening.
10.2 – The Morning Star
The morning star is a bullish candlestick pattern which evolves over a three day period. It is a downtrend reversal pattern. The pattern is formed by combining 3 consecutive candlesticks. The morning star appears at the bottom end of a downtrend. In the chart below the morning, the star is encircled.
The morning star pattern involves 3 candlesticks sequenced in a particular order. The pattern is encircled in the chart above. The thought process behind the morning star is as follow:
- The market is in a downtrend placing the bears in absolute control. The market makes successive new lows during this period.
- On day 1 of the pattern (P1), as expected, the market makes a new low and forms a long red candle. The large red candle shows selling acceleration.
- On day 2 of the pattern (P2), the bears show dominance with a gap down opening. This reaffirms the position of the bears.
- After the gap down opening, nothing much happens during the day (P2) resulting in either a doji or a spinning top. Note the presence of doji/spinning top represents indecision in the market.
- The occurrence of a doji/spinning sets in a bit of restlessness within the bears, as they would have otherwise expected another down day especially in the backdrop of a promising gap down opening.
- On the third day of the pattern (P3), the market/stock opens with a gap, followed by a blue candle that manages to close above P1’s red candle opening.
- In the absence of P2’s doji/spinning top, it would have appeared as though P1 and P3 formed a bullish engulfing pattern.
- P3 is where all the action unfolds. On the gap up opening itself, the bears would have been a bit jittery. Encouraged by the gap up opening buying persists through the day, so much so that it manages to recover all the losses of P1.
- The expectation is that the bullishness on P3 is likely to continue over the next few trading sessions, and hence one should look at buying opportunities in the market.
Unlike the single and two candlestick patterns, both the risk taker and the risk-averse trader can initiate the trade on P3 itself. Waiting for a confirmation on the 4th day may not be necessary while trading based on a morning star pattern.
The long trade setup for a morning star would be as follows:
- Initiate a long trade at the close of P3 (around 3:20 PM) after ensuring that P1, P2, and P3 together form a morning star
- To validate the formation of a morning star on P3, the following conditions should satisfy:
- P1 should be a red candle
- With a gap down opening, P2 should be either a doji or a spinning top
- P3 opening should be a gap up, plus the current market price at 3:20 PM should be higher than the opening of P1
- The lowest low in the pattern would act as a stop loss for the trade
10.3 – The evening star
The evening star is the last candlestick pattern that we would learn in this module.
The evening star is a bearish equivalent of the morning star. The evening star appears at the top end of an uptrend. Like the morning star, the evening star is a three candle formation and evolves over three trading sessions.
The reasons to go short on an evening star are as follows:
- The market is in an uptrend placing the bulls in absolute control
- During an uptrend, the market/stock makes new highs
- On the first day of the pattern (P1), as expected, the market opens high, makes a new high, and closes near the day’s high point. The long blue candle formed on day 1 (P1) shows buying acceleration
- On the 2nd day of the pattern (P2), the market opens with a gap reconfirming the bull’s stance in the market. However, after the encouraging open, the market/stock does not move and closes by forming a doji/spinning top. The closing on P2 sets in a bit of panic for bulls
- On the 3rd day of the pattern (P3), the market opens gap down and progresses into a red candle. The long red candle indicates that the sellers are taking control. The price action on P3 sets the bulls in panic
- The expectation is that the bulls will continue to panic, and hence the bearishness will continue over the next few trading session. Therefore one should look at shorting opportunities
The trade setup for an evening star is as follows:
- Short the stock on P3, around the close of 3:20 PM after validating that P1 to P3 form an evening star
- To validate the evening star formation on day 3, one has to evaluate the following:
- P1 should be a blue candle
- P2 should be a doji or a spinning top with a gap up opening
- P3 should be a red candle with a gap down opening. The current market price at 3:20 PM on P3 should be lower than the opening price of P1
- Both risk-taker and risk-averse can initiate the trade on P3
- The stop loss for the trade will be the highest high of P1, P2, and P3.
10.4 – Summarizing the entry and exit for candlestick patterns
Before we conclude this chapter let us summarize the entry and stop loss for both long and short trades. Remember, during the candlesticks study, we have not dealt with the trade exit (aka targets). We will do so in the next chapter.
Risk-taker – The risk-taker enters the trade on the last day of the pattern formation around the closing price (3:20 PM). The trader should validate the pattern rules and if the rules are validated; then the opportunity qualifies as a trade.
Risk-averse – The risk-averse trader will initiate the trade after he identifies a confirmation on the following day. For a long trade, the candle’s colour should be blue, and for a short trade, the candle’s colour should be red.
As a rule of thumb, the higher the number of days involved in a pattern, the better it is to initiate the trade on the same day.
The stoploss for a long trade is the lowest low of the pattern. The stoploss for a short trade is the highest high of the pattern.
10.5 – What next?
We have looked at 16 candlestick patterns, and is that all you may wonder?.
No, not really. There are many candlestick patterns, and I could go on explaining these patterns, but that would defeat the ultimate goal.
The ultimate goal is to understand and recognize that candlesticks are a way of thinking about the markets. You need not know all the patterns.
Think about car driving; once you learn how to drive a car, it does not matter which car you drive. Driving a Honda is pretty much the same as driving a Hyundai or Ford. Driving comes naturally irrespective of which car you are driving. Likewise, once you train your mind to read the thought process behind a candlestick, it does not matter which pattern you see. You will know how to react and set up a trade based on the chart you are seeing. Of course, to reach this stage, you will have to go through the rigour of learning and trading the standard patterns.
So my advice to you would be to know the patterns that we have discussed here. They are some of the most frequent and profitable patterns to trade on the Indian markets. As you progress, start developing trades based on the thought process behind the bulls’ actions and the bears. This, over time, is probably the best approach to study candlesticks.
Key takeaways from this chapter
- Star formation occurs over three trading sessions. The candle of P2 is usually a doji or a spinning top.
- If there is a doji on P2 in a star pattern, it is called a doji star (morning doji star, evening doji star) else it is just called the star pattern (morning star, evening star)
- Morning star is a bullish pattern which occurs at the bottom end of the trend. The idea is to go long on P3 with the lowest low pattern being the stop loss for the trade.
- The evening star is a bearish pattern, which occurs at the top end of an uptrend. The idea is to go short on P3, with the highest pattern acting as a stop loss.
- The star formation evolves over a 3 days period. Hence both the risk-averse and risk taker are advised to initiate the trade on P3.
- Candlesticks portray the traders thought process. One should nurture this thought process as he dwells deeper into the candlestick study
Hi Karthik
Is this a Morning Star ?
Yes Sir, you can treat this as a morning star. However I would have been happier if the prior trend (down trend in this case) was a bit more pronounced and the 3rd day candle a bit longer. But I guess with some about of flexibility, we can consider this as a morning star. If I were trading based on this, I would expose very little capital on this trade simply because of the two point I just mentioned.
Hi karthik
My Knowledge is very less infront of you , so if you say sir to me it looks lil bad pls call me Nitesh only . 😀
We are all on the same plane, forever seeking knowledge in markets 🙂
You might want to update the pdfs. While reading I found some mistakes that are corrected here on the Website.
A new mistake I came across is: “The long red candle indicates that the *buyers* are taking control. The price action on P3 sets the bulls in panic”.
Should be – “*sellers* are taking control”
btw, nice explanation. Thanks heaps.
Hey Sachin, thanks for pointing this out, will fix it as soon as possible.
I’m a little bit confused. In the image mentioned above in the comment you said that the pattern is a morning star. But the closing of P3 is less than the opening of P1. So how it could be a morning star?
Sorry, I seem to have missed the closing bit. Nevertheless, as I have mentioned earlier, you need to have some amount of flexibility. Finding textbook definitions is not easy in real market situations.
My question is based on chart what Nitesh’s posted in above comment.
1) Suppose if second day candle(P2) were formed as doji having BLUE short body then still we can consider as a morning start pattern ?
2) Let’s assume conditions for P1 and P2 are satisfied then body color (blue or red ) of doji (for P2) does really matters in morning or evening start pattern ?
prior to your morningstar didn’t you see the bullish engulfing clear cut signal
Hi Karthik
what if a stock has complied with all the other requirements for an evening star,
i.e —- prior trend is an clear uptrend ,
day 1 is a long blue candle
day 2 has a gap up
day 2 closses as a doji/spinning top
buy day 3 IS NOT A GAP DOWN opening….. still closes below or very near to day 1 opening.
How important is the Gap up and gap down?
I would treat this on a case to case basis. If such a pattern appears and all other checklist items comply i.e volume, S&R, Risk Reward Ratio etc…I would go ahead and trade this confidently on the merits of an evening star.
Hello Sir,
I am now comfortably able to trade single candlestick patterns and that increased my success ratio quite well these days. But coming to multiple candlestick patterns, 3 out of 5 trades that i take on multiple candlestick patterns are failing. Is that because i didn’t train my eyes and brain enough to identify them correctly?? Also, does the volume in the P2 and P3 must be higher than the volume in P1 to consider it as a valid pattern??
Thanks in advance..
Good to that you are comfortable with single candlestick patterns Jagadeesh. With regard to multiple candlestick pattern, please ensure the day you are taking an action i.e either buying or selling the volume should be above average. Also, one of the main things people miss is to validate the prior trend. So please make sure you are factoring this as well.
Yeah im not missing those two checklist points sir. I think i need to train myself in identifying support and resistance levels properly. The thing is, with the appearance of a candlestick pattern, i am totally biasing myself towards the trade direction and searching for the support around that area to support my decision. When the trade ended in loss, im realizing that area is not a major level.. 😀
I think i need to change this behaviour. 🙂
A trader and a doctor are pretty much similar..the more cases you examine, the better you get at it 🙂
Point noted sir.. 😀
Hi Karthik, First comment is to thank you for helping all of us with this. I have read through all the candle sticks over and over agin, but your explanations are state of the art.
My question for these kind of patterns is, why can’t a risk lover can take the position at start of the day itself. Why would we wait for the confirmation till EOD. The same for the peircing and other patterns too. I am a bit confused here.
Hi Ashwin,
Because you cannot cosider the pattern as valid until it completely appears on the chart. I think the main difference between the risk lover and the risk adverse is the former doesn’t need a follow through after the pattern appeared and the risk adverse guy need a follow through after the candle formation. But both these guys need a completed candlestick patter to appear on the screen which happens at the close of the day.
Makes sense Jagadeesh!
Thanks for the help Jagadeesh! I got the point..Restlessness of the trade doesnt like to miss the golden opportunity..:)
Thanks Ashwin.
Even for risk takers it would be prudent to wait for a confirmation. Think about it, the whole of candlestick patterns is actually based on price action and the markets reaction to it. We should give time for the price action to pan out. Hence for both risk takers risk averse traders it would make sense to wait proportionately (wrt to risk they want to take) ..before initiating a position.
Thanks again Karthik! I completely understand and appreciate your statement ”Reaction of the market to the price action”,but sometimes due to market volatility and external factors affecting the market as a whole, there wont be any confirmation in the next day,it might become counterproductive for the risk lover,who has initiated the call only at 3.20 PM ,to get a loss the next. So, I am only trying to understand how early any breakouts like this can be capitalized.
I have got the essence of both your point and the candle stick pattern, so may be with time and experience I might be able to answer it.
Absolutely, with time, experience, and the knowledge you have gained you will develop your own techniques of identifying markets. In fact in the long run this manifests as your edge as a trader 🙂
What kind of discipline you’re referring to. like being able to constantly monitor the stock price during the day, keeping your news channel on for any update news or any other livewire news online? I really want to know this because, I’ll tell you something about myself. After working for 6 years in corporate world I Ieft my job in 2014, since then I have been looking for a job but no luck. Now I’ve started to think about making trading as my full time career. Thants why learning TA so that I can make money everyday. My first goal is to earn an avg income of 1 thousand daily by investing 10000 and doing margin trading. please share your thoughts on the same.
Many people quite their mainstream job to get into trading full time. The problem with this is, moment you put targets like Rs.1000/- per day then you are subconsciously adding a layer of stress on yourself, and when in stress, you cannot make rational decisions which is very crucial while trading. Frankly, the approach you are taking to markets is not correct. You will eventually come under a lot of stress and will find it very hard to benefit from markets. This may sound discouraging, but this is what happens to most of the people in your situation. How ever hard it is maybe, get a full time job, stabilize, and then trade without any sort of pressure (like making 1000 per day). This is when you will really start benefiting from markets.
Hi Karthik,
Thanks for the advise. On the contrary what I’ve experience in the past that it is very difficult and inefficient to do your day job in the office and place your trade, because once a person have placed the trade, then he/she tends to distract from his office work in order to keep a track on the trade and this creates a situation of see-saw where the attention is divided, which not good either. I did search for jobs a lot in the past two years, but no luck as of yet. That’s why I thought why not do trading full time, of course after getting a good understanding giving a time period of 3-6 months.
True, juggling a full time job and trading gets distracting. But I do know people who manage this well….common trait across all these traders are that they place longer term trades. Something like a 1 week futures position or even equity position.
Good luck and I hope you have thought through this well.
Dear sir,
Adding to the MANISH’s query (below), Is it possible to make money in market on daily basis and run your house, means Is it possible to generate a salary type income from trading.
Regards
I’ll be frank. Its tough.
Have a steady source of income like a salary and trade with capital that does not hurt your family needs. When you trade this way, the stress to make a fixed amount via trading is reduced, which means you can afford to be highly selective and trade only when you are thoroughly convinced.
Place your family first, markets next.
Good luck.
Hi Nitesh,
How did you manage to copy the chart of “LT” from icharts?
Sorry Nitesh, Got it.
HI Karthik,
I know you haven’t touched the Head & Shoulders Pattern. But still would like to know from you that in the Wipro chart, can we say Head & shoulders Pattern is forming ? I think it is in the stage of forming it’s right top & also volume characteristics seem to be satisfying..
Your thoughts pls..
I personally don’t like to track these formations. But yes, from what you have posted, it seems like it 🙂
Dear Karthik I have attach here a chart of HDIL .Please confirm is it a morning star & followed by bullish engulf. And can we initiate here a option trade.
Yes indeed, please do make sure other variables in the checklist comply.
HDIL give tremendous results in JAN. Though I have not trade the same ,is good example for study !
That’s why I love ZERODHA !
Thanks.
Glad to know that, hope your trade gets better and better 🙂
hi
i think in HDIL stock bullish engulfing pattern is not at rite place becauase it should be at bottom of trend and here at bottom trend morning star is formed,
am i right or wrong?
I don’t really see a bullish engulfing pattern, Chirag.
hi can u tell me how to attach file here in comment box
Upload to google drive and share the link.
The long trade setup for a morning *start* would be as follows:, correction – *star* 🙂
Thank you for pointing out the error. We have made the necessary corrections.
In 10.3-evening star , point 5. On the 3rd day of the pattern (P3), the market opens gap down and progresses into a red candle. The long red candle indicates that the *buyers* are taking control. The price action on P3 sets the bulls in panic,
correction – *sellers* 🙂
Hello sir, this is a chart of Dabur EQ.. Can that second circle (right one) be classified as morning star? It does not have either doji or spinning top precisely.. but other conditions of gap openings are observed.. even volumes are not very impressive, but not less and qualifies our requirement.. while RSI is near 30, MACD does not give signals as Signal line is above Macd line.. first circle, which is an evening star, satisfies almost all conditions.. therefore, what do I classify it as?? and How to determine support for stocks that are in continuous uptrend since past two years and no prior levels at this range are available?
The doji/spinning top has a specific purpose in the star formation, hence it is mandatory for them to appear. Yeah, the 2nd pattern on the right looks like a morning start but I would be hesitant to call it the same. For stocks that are in a continuous uptrend S&R can be determined by drawing a upward sloping trend line. I have not spoken about in Varsity, but I guess it is necessary to do so considering there are many stocks displaying this pattern. Will do the same shortly.
Oh yes sir.. Did you observe? the above stock I did analysis yesterday, rose by around 18 rupees today.. my target breached within same day.. what might have led to such a spectacular growth of this stock in one day.. I had expected these targets within 3-4 days..
Hi Karthik, You are hesitant to call it so because of the less volumes?
Pattern wise I would agree it is a morning star, but as you said the volumes look a bit less, although it is better to read the numbers rather trusting visual instincts.
I am not able to view any of the charts mentioned.
Pls tell me where to view them ?
Which chart are you talking about, Abhilash?
dear karthik ji…
is this bullish sir…this is a paper umbrella indicator sir..?
thank you sir…
This cannot be called a bullish engulfing because there is no prior trend, which is mandatory. At best it can be treated as a marubuzo. Even then, the volume seems to be a bit low.
This is a bearish engulfing see the prior signals all indicate bearishness in market
Dear Karthik Sir,I am posting here IDBI eod chart,confusing to read it. does it consolidation after breaking resistace of triple top,OR is it inverted H&S,OR a flag breakout , OR a dark cloud cover because it again closing around multiple resistance.
Thanks
Haridas
This looks bullish for me for these reasons –
1) It is a breakout with good volumes
2) Also, in has take out a multiple resistance zone (triple top), again bullish
3) After a brief run up, the stock has consolidates and moved up again…this is also a good sign.
dear karthik sir.
thank you very much for best tutorial ta… almost i 10 chapter going well with reading with practice, few weeks i’ll send you all my practice pics with details karthik sir…may i ask you your mail id sir, because lot’s of pics i have practiced, here it’s not possible to add all those ta pics….
thank you sir…
i’m very happy to fun this ta, i feel like i’m a one of the nasa team….ha ha ha ha….thank you
it’s very interesting, amazing learning technical indicators….one day i’ll also find imagine through indicator…
I’m glad you are liking the topics here Girish. Please upload 1 or 2 images here so that it can benefit others as well.
dear karthik sir.
yes sir, others also must benefit of this ta indicators karthik sir…okay i’ll update one by one each related chapters.
here i’m updating morning star indicator sir…but it’s looks like morning star, still i’m practicing…
thank you sir.
Good luck Girish. Although I would prefer to see a clear downtrend before spotting a morning star 🙂
yes sir….thank you sir…
Sir, Can the 3 day candlestick pattern formed in Nifty on 30th March be termed as Morning Star ?? Asking since the 2nd candle wasnt gap down opening nor a doji. Now even a spinning top has formed the next day. Thanks
Charles, for the same reason that you have mentioned classifying this a morning star is a tough ask. However the fact that there is a spinning top right after a bullish candle is enticing for a long trade. However please make sure other variables are also suggesting the same. Good luck.
Leave morning start see it as a hammer in downtrend with bullish confirmation but hammer is in red color contradicting the confirmation so leave the trade or wait for more signals.
Hi Karthik
I have some doubts
1. What is single vertical line in chart? What is meaning of this?
2. If this single line comes in between 2-3 chart pattern (for both intra-day or day wise chart), should we consider that chart pattern?
3. In moneycontrol chart, instead of taking open price as you mentioned in your chapters, they use previous day closing. This make any changes in chart pattern or any conditions?
Some suggestions:
1. Can you provide PI on web and mobile app also.
2. Provide stable Zerodha app for Andriod 5 (Lolipop) version.
I hope I am not bombarding you with too many questions.
No you are not bombarding us with you questions, always a pleasure relying to queries 🙂
1) The single vertical line could be to highlight a specific day. So if there are two single vertical lines in a chart, it is simply referring to the time period encapsulated between the two vertical lines. Also, please note the vertical line is just a highlighter, it can be used for many things…so always view this in the given context.
2) I guess the above answer also gives you clarity on your 2nd query
3) It does make some difference, for charts I would suggest you look at chartink.com, they are quite good.
4) For queries related to Pi, I would suggest you email [email protected]
Hi Karthik
Thanks for reply.
I have one more doubt:
As you are mentioned that bar should be more than 1% and less than 10%. what should be bar length in case of intra-day?
Can you suggest some app for intra-day or website which can be opened on mobile?
The same rule can be applied for intraday trading. Not sure about an app for intraday charting. Have you tried moneycontrol?
In intra-day there might not come candle of length more than 1%. For example, in nifty 1% is equal to approx 82 now. In 5 -15 minutes chart, I think one bar may never come of 82 or more. Then what should be bar size?
Moneycontrol chart is simple line chart with no option.
True. In such a case you should visually develop a sense of the average size of the candle. Have you seen chartink.com?
chartlink.com is also NOT for intra-day.
I am basically interested in intra-day for future and option. If you can suggest some chart app/website, it will be very helpful for me.
Have you tried http://www.chartnexus.com/ or http://www.icharts.in/? They provide intraday charts but for a fee I suppose.
Sir,
Iam unable to understand this rule “As a rule of thumb, higher the number of days involved in a pattern the better it is to initiate the trade on the same day`. Is it to enter on day 3 i.e P3. Thanks
It means, for example – a bullish engulfing pattern (2 day pattern) is more dependable than a hammer (1 day pattern) and a morning start (3 day pattern) is more dependable than a bullish engulfing (2 day pattern). So higher the number of days in a pattern the higher the conviction to trade. Please note this is just mu personal observation while trading.
How to interpret a Hanging man and a consecutive Bearish Harami after a prior uptrend? Thanks
With 2 consecutive bearish pattern, the outlook certainly turns bearish.
is this what is called exhaustion?? multiple bear candles. do you see a recognizable pattern?
Exhaustion is when the rally (be it upward or downward) starts to lose its momentum. This is bearish for sure, but no pattern as such.
there have been 4 attempts to breach 772 on this chart of century textiles, including yesterday. based on the 5 minute chart i went long at 773 yesterday and the price reversed. should the previous unsuccessful attempts to breach 772 been a signal for me not to enter the trade. also, yesterday the price of 773 was above R2 on pivot signals.
On what basis do you consider 772 as a resistance?
just that, the stock made four attempts to cross 772, as indicated by the blue line. my query was should that have been a signal not to go long at 773 as the price immediately reversed. on the pivot indicator for the day the price was way above R2.
Well, Madhu that itself should not be considered as a valid signal. These are just daily swings without concrete patterns…I would always prefer to set up trades based on time tested candlestick patterns.
Hi,
Can any body tell below pic (in last) has Morning Star in KPIT?
Although the required gaps are missing, I would be flexible enough to classify it as a morning star.
Thanks for Reply Karthik, But unfortunately stock down 20% to day…So from these type of situations how we have to escape? SL is the only way or is other options are there to survive in the market?
Saikiran, I have mentioned this somewhere in the module, unfortunately I cant seem to track it. But anyway, here is the thing – whenever you expect any sort of fundamental news, please do not trade the same stock on the basis of technical analysis. So KPIT had the qtrly results announcement, and the trade was set up based on a technical pattern…which should not have been done in the first place. Unfortunately even I was not aware of this, else I would have flagged you. For all these reasons and more keeping a SL is mandatory.
Hi Karthik, can we classify the pattern as an evening star? the gap up with a spinning top and the gap down on the third candle fits the bill. my worry was on the length of the third candle in the pattern. the volumes were strong and the RSI in the overbought zone. the pattern formed above the resistance line. was it too high from the resistance line? the stock did correct thereafter.
Exactly, the length is a bit worrisome, everything else seems fine to me. Also, the pattern has a good support below, which means tht could have served as a target for this trade.
Karthik, could have one gone short on the basis of the immediate black candle after an uptrend? it was formed with volumes too. can it be classified as a bearish marubuzo, albeit it had a lower wick. an other bearish formation with volumes was formed today. is it prudent to go short when you spot a bearish marubuzo with volumes anywhere on charts? thanks.
Yes Madhu, whenever you spot bearish marubuzo with convincing volumes consider a short. However if you are not really certain or confident to short I would suggest you take a short exposure via options (buy a put option or sell a call option). If you have missed the short trade completely then I would suggest you wait for a low volume retracement (stock going up in this case) and again initiate a short. Good luck.
Hi Karthik, in this chart we have an evening star which satisfies all characteristics. As the pattern is formed at new highs can the zone be treated as new resistance as indicated by blue line? thanks.
Yes, this looks good and the level can certainly be treated as a short term resistance.
Hi karthik, can we be flexible and call the formation on support the morning star? gap down with a spinning top though , the first and the last candles have a lower and upper shadow respectively. the volumes are strong. The stock did rally today. would like to have your view. thanks.
In fact this is a fairly decent morning star pattern, I would be happy to set up a simple options trade on this 🙂
Karthik, can we classify the pattern formed at a new high as an evening star? the reason i ask is, the second candle is a black candle. should the second candle in an evening star always be bullish?
The second candle in a star formation is either a spinning top or a doji. In both these candles (spinning top & doji) the color does not matter. The fact that the real body is so small in these candles suggest that the price action is not significant, hence the color does not really matter.
Got that …so would you say the formation was an evening star?
Yes, I would.
Hi Karthik,
Thanks for these tutorials. Really enjoying it.
Just wanted to confirm that I am reading the charts right. Attached is todays (13/5/15) NIFTY chart (2 months). Pls confirm …
6th candle from right – Long red Marubozu…..signal to go short.
5th candle from right – a gap down red Spinning top…. Uncertain markets (but it is a red candle which confirms the bearishness signal given by red Marubozu)
4th candle from right – a gap up white candle.
**Question 1**…Can these 3 candles be considered a Morning star pattern?…. doubt is regarding the 4th candle…even though it is a gap up opening, the length does not cover the 6th candle. Volumes are ok. (if I had gone long on the next day opening, I could have achieved my target of 50 to 60 points in intraday itself )
3rd cable from right – a normal white candle (confirms the bullish signal of Morning star pattern)
2nd candle from right – a long red Marubozu… signal to go short.
**Question 2 **… Can candles 3 and 2 be considered a Bearish Engulfing pattern? (Trend is minor uptrend in a general downtrend)… (if I had gone short the next day opening i.e today, I would have achieved my target of 50 to 60 points in intraday itself )
1st candle from right – a white Hammer…. Signal to buy. (general trend is down)
**Question 3 **… Can candles 2 and 1 be considered a Bullish Harami pattern? (general trend is down).
Please confirm if my reading of the candles are right…and also pls answer the 3 question.
This has been a long posting… Thanks for reading this and thanks for ur time.
ROBIN
That’s a long list 🙂 But glad to know you are taking time to read up. My answers are as below –
1) It cannot be considered as a morning star for reasons that you have stated yourself. The length does not justify. As far as the target goes (50 -60 points), your guess is as good as mine. It could be achieved on the same session or in few successive session. Cant really predict the same.
2) Although the candle does appear to look like an engulfing pattern the lack of an uptrend prevents one to classify it as a Bearish engulfing. Again one cannot comment on the time for target.
3) Yes, 2nd and 1st candle combined forms a bullish harami, you need to evaluate other parameters required for setting up the trade.
Hello Karthik, Thank you for the usefule info. It helps to build confidence of a newcomer like me. Just one thing – When a gap is formed between closing of one day and opening of next, actually there was no activity happened in the market. But, the movement in market happend due to difference in demand and supply. Since market is closed, although sentiments might e high, but how did these sentiments got reflected in the closed market to pull (or push) it and made a gap?
Thanks for the feedback Aditya.
Well imagine this…you goto the vegetable market at 9:00 PM (assume you were the last customer) and buy a 1 KG of onions @ Rs.25. At 6:00 AM next day the truck drivers decide to go on an indefinite strike…therefore impacting the vegetable prices (because of the truck strike supply will get affected). Now imagine you goto the same vegetable market and same vegetable vendor (you are the 1st customer) to buy another KG of onions. Do you think he will sell it to you at Rs.25? Maybe not, he will sell it at Rs.28 or Rs.30/-. So the overnight change in sentiment has affected the onion prices and therefore the price of onions is said to have gapped up. Likewise in the stock markets!
Thanks for the prompt reply Karthik and the easy explanation. But one more question popped up. With your reply, I can now think that the sellers decided to go with the mood of market and accordingly decide price. But, there might be different sellers who are not even in contact with each other and might want to quote different prices at the opening of market yet the market opens with one price how this final price is arrived? Sorry to dig in so deep.
Well, the markets are interconnected. Information flows easily…and if a seller does not have the latest information he obviously has a disadvantage. In case of stock markets, the quotes are electronically updated and with the help of market depth the traders can see and gauge the mood of the market…hence majority of the traders are kind of in sync.
Hello Karthik,
You are doing a great job by writing these modules. It’s really good for beginners as well as for those who have mastered the art. Keep up the good work. An average Indian is scared of the Stock Market as he has no financial knowledge. But your modules are really informative and easy to understand. It will encourage new investors. Request you to make all the modules available in PDF format for download. As of now, only the 1st Module and Ch 1-9 of the 2nd Module are available. Looking forward for the other Modules to be available for download.
Thanks.
Thanks for the kind words Sunil. Words like these encourage us to do better and better 🙂
We are working on converting the chapters into downloadable PDFs. Please bear with us for sometime. Thanks.
Karthik, an evening star was formed at a new high which probably is a short term resistance. The day after the formation the price did fall but recovered to form a doji . ideally the price should have fallen and stayed low. do you think the uncertainty as shown by the doji day would lead to price fall the next trading day? would like to hear your view.
Too tempting to stay short here – the presence of doji is conducive for a further fall in the stock. Good luck.
karthik, an evening star at resistance was formed a couple of days back. the fall though following that has been muted. do you think after a three candle bearish pattern the price correction should have been steeper? am i reading it correctly?
Well the job ends after spotting a valid pattern and placing the trade 🙂
Once you place the trade, you just hope that the stock moves in the expected direction. The same is applicable here – its a valid pattern (and assuming everything else is well aligned) – the expectation is that the stock price will correct – when and how is difficult to estimate !
i agree. what do you think of the other alignments? the volumes were good. the RSI is at over brought , the MACD signal blue line though was still above the MACD red line. how strong were the indicators for a short trade?
Both these indicators are good. But honestly my dependence on indictaors as such is low – especially for intrady trades. I prefer to emphasise more on candlesticks, volumes, and S&R levels…needless to the current news riding on the stock also matters to me.
secondly karthik, an other evening star at resistance with volume. my question is can this be considered as ES? the stock seems to be in a trading range. or, can it be treated as valid since it seems to be a part of secondary trend of the overall primary bearish trend. also, i am using a 14 day moving average for volumes and you have advocated a 10 day MA. hope that is fine.
More than the ES pattern (which btw is not very convincing due to the lack of a proper uptrend)…the fact that it has formed a double top along with a ES is attractive.
thanks. appreciate that. i am using a 14 day MA for volumes rather than a 10 day MA as you have advocated in the module. hope that is fine?
Hello Karthik Sir, I want to ask that 2nd candle in Morning Star needs to be a blue candle or it can be a red candle & 2nd candle in Evening star needs to be a red candle or can be a blue candle?
The 2nd candle in the star patter is either a Doji or a spinning top. Hence it does not really matter if it is bullish or bearish colored candles. It can be anything.
Ok Sir. Thanx a lot.
One more thing, the time showing in the questions or answers do not match the ones when we post it.
Dear Karthik,
1) Is there any classification of CANDLESTICK PATTERNS , as power or intensity of that pattern for trend reversal ?
2)Since we are using EOD charts for trading , should we take stop loss as closing basis or to put in system in live session. Because several times SL get triggered in live session but closing gets below SL and then target also gets achieved.
Thanks.
1) People do classify candlesticks based on success ratio, but I dont really rely on it much. I think it makes far more sense to classify it based on your own experience of trading the pattern, adaptability, etc.
2) SL is usually on closing basis…however dont wait for the close. In case the mkt closes below your SL, next day could be a gap down and you could lose far lower than what you had originally budgeted for. Hence watch the close and in case the price is your lower than your SL level by 3:20, close the position. Also, having said this also be aware that the next day could also be a gap up :). I’m not trying to confuse you, but just being aware of possibilities helps!
Thank you so much.
Welcome!
Hi Karthik
I am bit confused with p1 as 1st day p2 as 2nd day and p3 as 3rd day, if one is doing intra day trading with 5 min graph, if successive 5 min graph making morning or evening star will be considered.
Thanks
Alok
Yes, just treat each candle in the 5 mins time frame as you would treat the candles in EOD charts.
Hi Karthik,
Can i expect last three candles are formed a Evening star in Ashok leyland chart
Difficult call…the uptrend is not really convincing.
Thanks Karthik..
Dear Sir
please check weather the attached chart of RS software is giving MORNING STAR SIGNAL,i feel it is following the 03rules(marked in circle) .
1. P1 is red candle(13/11/15)
2.With a gap down opening, P2 is doji or a spinning top(16/11/15)
3.P3 opening is gapup, plus the current market price at 3:20 PM (should be higher) is little lower than the opening of P1 but if consider another rule BE FLEXIBLE ,QUANTIFY .
can it be consider as morning star ??. if yes what should be the targets.
Technically right, but I would not classify this as Morning Star….for a simple reason that P1 does not have convincing range for the day. It appears more like a hammer formation.
Hi Karthik, At what time do we need to analyze charts for pattern confirmation in commodities & currencies trading? Adding to the above we have global economic events/news almost on a daily basis which impacts the movement so wouldn’t it be risky to take overnight positions if compared to equities
I agree. Overnight risk for currency and commodities is quite high. Hence while trading currencies and commodities it is always advisable to have sufficient margins to accommodate for these swings and M2M movements.
I would suggest you look at the pattern formation on a EOD basis.
Hello Karthik & Team,
Thanks for everything…This is really helpful..!
I have a small doubt…all the candlesticks concept like engulfing,doji,star etc ..1) Can we apply all these concepts on any type of charts(specially Heikin-Ashi Candlestick chart)?
No, candlestick patterns are best applied to Candlestick charting alone…best not to mix it with other charting techniques.
Hello Karthik Sir,
First of all thanks a ton for your effort you have put in here, its really very very helpful. Could you please tell me which Candle chart pattern is best for PI Users between the normal Candle Chart and Heikin Ashi for 5 mints or 15 mints intra day trade. Thanks in advance.
Glad to know you liked the content here 🙂
I would suggest you use normal candle chart, its more than sufficient to spot great trading opportunities in the market.
Thanks Sir !!
Welcome!
Sir… for Nifty Fut Intra Day trading which are the best Technical indicators to follow like. EMA/MA, RSI, MACD etc. I mean which indicators are most suitable to comprehend the Nifty trend for intra day trading. Thanks in Advance.
Like I mentioned earlier, you can choose to use any indicator. Just makes sure you know the mechanics of the indicator well so that you can differentiate between noise and signals.
Thanks Sir, I am following your Candle chart pattern and other indicators you have spoken about here and find it really great while trading in Nifty and other. Thanks a lot again. 🙂
Glad to know that Raja, good luck for all your trades.
Thanks Sir, I am following your Candle chart pattern and other indicators you have spoken about here and find it really great while trading in Nifty and other. Thanks a lot again. :-). Sir I have just one concern regarding L&T, I have few shares of it but it is falling like anything, cud you plz suggest what would be next technical support level for it and all of a sudden what went wrong with it. Thanks in advance.
1000 is a physiological level, hope it holds up!
Thanks again Sir. Sir is there any chapter regarding India Vix and cud you please suggest is there any free site where we could track it live while doing intra day trading.
Everything about India Vix is detailed here – http://www.nseindia.com/products/content/equities/indices/india_vix.htm
And to know how to trade it, check this post – http://zerodha.com/z-connect/queries/stock-and-fo-queries/trading-india-vix-simplified
Is this marking area bearish engulfing pattern?
Not really since the prior trend requirement is absent.
Is nifty forming a perfect evening star in last three candles
Does it means a sharp fall is coming
It does not really look like one Rachit 🙂
hi karthik, all analysts used to give stop loss and shirk away from the responsibility of their calls,on normal days which could work perfectly :), but my doubt is what an investor can do on occasions like august 24th kind of 400 points fall ,jan 2016 fall on account of china ,in such cases when the market open itself it would be in deep red and much lower than your otherwise stop, while making up your mind it shall down further….it hurts option buyers most, itm contracts can become virtually worthless, what strategy can be adopted? how overnight risk can be managed?is any methodology in order placing that your order will execute first when such situation by which can salvage what ever can be redeemed?
As you evolve as a trader you will realize that a spread position is far better than a naked directional position, its probably the best way to deal with overnight risk. A spread position reduces your overall profitability but at the same time gives a greater visibility on risk. In my opinion this is a far better deal. We have bee discussing spread positions here – http://zerodha.com/varsity/module/option-strategies/
hi karthik,admit that send some comments, as i am really excited to see what i have been searching, feel pity that i have not realized such thing existed while i was searching on YouTube and elsewhere, how your material stands above others cause you are perfect blend of both,good teacher with vast knowledge in finance domain besides active trader,normally will not get that mix…kudos
Thanks for the kind words Kumar. Zerodha is really committed to provide the best and most practical trader education at free of cost. Comments like yours keep us motivate to do even better! Cheers.
Hi karthik,Thanks for your prompt reply that is inspiring..one suggestion from my end …why can’t design the comment page desing like fb…like,share etc…it would give nice interface and social media kind of advantages…Thanks.
Thanks for the feedback Kumar, will bounce this off internally and check if this is doable. Cheers.
Reading all these modules I must say Karthik, you are simply outstanding! I had no idea of these candle chart stuffs before reading this module but can now confidently proclaim that I’m not getting this. As usual apologies for some silly questions that I have while I read all these modules(since I trade in commodity)
1. What is your recommendation to choose a time frame (whether 5 minute, 10 minute, 15 minute etc…) for a day trader like me ?
2. I don’t keep any overnight positions, in that sense does these stars(morning, evenings:)) applicable?
3. Last but not least with so many indicators we have what indicators I should use for day trading( I normally trade 3 hours 6 PM to 9 PM).
I think you should write a book Karthik that will benefit millions of retail traders in India! who knows you could be the next popular like Robert Kiyosaki for ‘Rich Dad Poor Dad’!
some typo mistake in my first statement Karthik….please read as
I had no idea about these candle chart stuffs before reading this module but can now confidently proclaim that I’m now getting this.
I got the gist anyway 🙂
Joe, I’m glad you Varsity is helping you 🙂
1) For day trading I’d suggest you look at 10 or 15 mins data
2) Yes, they do matter. For example assume last two days the stock has formed a bullish engulfing…then on 3rd day you are much better off doing long intraday trades rather than short intraday trades in other words you need to be buying on dips
3) MAs are quite effective I suppose.
Hi,
Can i consider the circled candles as a Morning Star?
Sorry, cant seem to spot the encircled candles.
Hi sr ,
Double top,Double bottom,Flags,pennants,Cup and Handle, Wedging,Island Reversal,Head and Shoulder,
Rounding bottom….these are important patterns?
Do we need to learn these?
The more you know, the higher is your conviction on a trade. The higher your conviction, the greater is your probability of making a profit.
Hi
Could you include the patterns double top,double bottom,head and shoulder,flags,pennants ,wedging…in this module?
Double top/bottom, triple top/bottom is included in Dow Theory. Will include other patterns as well.
Could you please explain the thought process behind ‘The Stick Sandwich’??
Oh, I’ve not heard this myself – can you please share the context?
Hi Karthik, can we consider the below as morning star although gap down didn’t happen but it’s close considering flexibility.
https://kite.zerodha.com/share/UG5FTYIN51.png
Sort of yes I suppose 🙂
Dear Karthik,
In an multiple candlestick pattern, which day’s volume should be considered (as above average) for making a trading decision?
Both the candles should be above average Volumes or the Last Candle should be above average volume?
Thanks
Preferably the candle that triggers the action to buy/sell…this means the latest (P2 or P3) candles.
Karthik,
Quick noob question? Is making new high or new low is necessary for evening start or morning star respectively? The reason I am asking today Nifty looks like forming an evening star; but it is not at a new high
Thanks,
Abhijit
Not necessary…but if does coincide, then better.
Thnx Karthik,
Could you please verify then if May 16/17/18 is an evening star? My apologies if its too much of a ask; please ignore it in that case
It certainly seems like one!
Sir, for Morning star pattern – should the P3 candle close be higher than the P1 Open or P1 Close? please clarify
Higher than P1’s open.
HI Kartik, In case of gap up opening, does previous trend matter. So for example if last 3 candles are red then suddenly a gap up opening and if last 3 are blue candle and suddenly a gap up opening, do we need to read both these cases differently.
Yes, it would but the gap up should be significantly higher than the last 3 candles.
Sorry I didn’t understand your answer, trend will matter or not
Gap will matter if the gap opening is much higher than the last few trading sessions. For example if over the last few session stock has declined by 5%, but today the stock opens gap up 5%, then I’d assign more importance to the gap up opening.
Hi Sir,
IDEA Cellular formed a Morning Star Pattern right?
It is at support level and Resistance is at 100 as per mine,Can you confirm it please?
Last ten days avg Volume is 63,36,509 and to day’s Volume is 10044807.
Regards,
SaikiranGarapati.
Yes, the pattern can be considered as a MS. However, I think the resistance is around 93.
HI,
Due to India Pak War issue,this has been hit SL..
Sorry to know that. The news was sudden and hence an extreme over reaction in the markets.
No Sir,I did not trade…Just for observing..i do not have money to trade…
Can you tell me whether ceat has a pattern of Evening Star?
No, not really.
Hi Karthik,
First of all thank you for all the knowledge sharing through varsity.
Would like to know your perspective on the following 2 points
1. For a day trader scanning for stocks to trade the next day, what time frame candle stick chart should be researched and at what time?
2. Does Zerodha have a stock scanner to notify say buy or sell signals generated with supertrend indicator on a 5 minute chart of all nifty stocka at a particular point in the day.
Regards
vighnesh B
Vignesh, I’m happy to know that you liked the contents on Varsity 🙂
1) End of day is good enough
2) Check this – https://zerodha.com/expert-advisors/
What happens if a Evening Star formation appears in a downtrend ? If you look at the Tata Elxsi share, its showing a evening star formation in a downtrend.
An evening star by definition requires a the market/stock to trend higher as prior trend, absence of which it does not qualify as an evening start. So an evening star at down trend is not really an evening star.
Would a pattern be classified as Evening star if instead of 1 doji, there are 2 dojis ?
Yes, in fact its better that way.
I am quite confused here. Could you please check the daily chart for BHARATFIN ? Do you think its an evening star that has been formed from 28 nov till 2nd dec ? and why ?
And one more thing.. If in an uptrend on P1 Hanging man is formed and P2 forms a Shooting star, it means the end of an uptrend right ? It would call for shorting the stock ?
It indicates the possibility of an end of uptrend. Remember, there are no guarantees in markets!
No, its not a valid pattern as there is no prior trend.
So I guess almost all the candlestick patterns that we have studied are useless if the prior trend is flat right ?
Prior trend is an integral part of the pattern, you cannot isolate the candle formation (on P1, P2 days) from prior trend.
I understand. So, what can we do if the trend is absolutely flat ?
Can’t do jack shit I suppose ?
Patience is the greatest virtue of a trader 🙂
I want to ask you though. What made you write this module and who else are involved in creating it ? When will module 9 be ready ?
Our love for educating market participants made us write this and everything else on Varsity.
Most of the content here is written by me, the module on Taxation is by Nithin. Along with this, we do have someone else for all the nice illustrations.
When will Module 9 be ready ?
Early next year I guess.
hey if after a evening star a doji is formed what does that mean ? would it have bigger implications than the evening star alone ?
Yes, it tends to have a bigger impact. I’ve discussed the same in these chapters.
Hey, if a stock on P3 opens marginally lower than P2’s close and goes on to form a long green candle will that qualify as a Morning star ? Can you please check HUL daily for Morning star and do you think on the weekly chart its forming a bullish harami ? Thanks again.
Yes for both 🙂
What does it mean when a hammer and a inverted hammer are formed next to each other ? This is quite common and confusing as well. I cannot paste links here for some odd reason.
I know what you are talking about. Usually these formations occur when there is no trend in the market…very typical of a sideways market.
I am just astonished, the quality information you have provided on TA. How come I could not come across VARSITY FOR SO LONG. I am constantly on internet.
I have just read twice the TA till candle stick and have a query.
You presented the idea of the presence of Doji in the Bullish/Bearish Engulfing pattern. My question is that can this be combined with other single candle stick patterns or double stick patterns or this theory should only be applied with Bullish / bearish engulfing patterns.
For example
1) what if a doji is preceded by a Bullish/Bearish Marubozu pattern.
2) what if doji is preceded by a Bullish / bearish harami
Other General risk related questions:
1) You suggest that one who is new in trading should start with swing trading as opposed to Intraday. But I think swing trading can be riskier than the intraday. Because what I have observed is that market is very dynamic and is being affected by global news actions and stock markets like dow jones, etc. so keeping a trade overnight can be affected by the news action after the close of the market.
what do you think about my thought process?
Manish – yes, you can combine dojis with other patterns as well. No problem with it.
Intraday trading requires great amount of discipline and technique, you can nurture these qualities with swing trading.
Dear Karthik, I read your TA both modules. Hats off!!! Thank you. One small correction that I noticed..(I know it is a typo error..) Under “10.3 – The evening star” just below the image, under point no. 5. of “The reasons to go short on an evening star are as follows,” ………red candle indicates that the SELLERS (it is printed as buyers) are taking control……….. Kindly, do the needful. Thank you again for such a magnanimity to share your wisdom! Warm Regards…
Thanks for pointing this out, will look through and me the corrections 🙂
Also, happy to know you liked the contents here! Good luck and happy learning!
Hi Sir, Thanks for a great article. very useful. My query is: Has Maruti on Jan 13 formed a evening star pattern on Daily charts. Please clarify. Thank you.
Looks like. Would have been happier to see a higher P2 opening compared to P1.
Hi Karthik,
Thanks for all you are doing for novice traders like me . At many places, you have mentioned that you will trade a particular stock using options. I want to know in what situation, you trade a stock using option.
There are multiple situations which could require you to trade options. I’d encourage you to read up this module – http://zerodha.com/varsity/module/option-strategies/
sir suppose (from the Point of view of intraday) we found a Bearish Engulfing Pattern on EOD chart,and found a overbought stocastic crossover on EOD CHART and the TREND on Hourly and daily chart both are UP and if i follow 10 Min chart so whether should i look for long or shorting opportunity ?
here if i go short i will be against trend and if i go long then i m ignoring the EOD bearish pattern?
I’d avoid trading the scrip if there are opposing views. Look for opportunities where there is more clarity.
Hello, I’ve a few queries.
A.
1) In this BPCL chart, as you said the 1st curve is a down trend. Can we call the 2nd curve marked with question mark an uptrend ?
2) Also the last 3 candlesticks, does it form a morning doji star ?
3) Lastly, if the volume is almost near average line but not touching it, can we take it as a yes ?
Link – https://drive.google.com/file/d/0B0bePrdjZCDoVFBiRTlrTkZ2SUZHUEFqT3VyVHlKMnphdkI4/view?usp=sharing
B.
1) In this INFY chart, has it formed a double bot dow pattern ? And the point which it is at right now can lead to either a breakout or back to in range ?
Link – https://drive.google.com/file/d/0B0bePrdjZCDoVFBIQnFyWjRReERmNGtCUlkyc3VvaDFBTXFv/view?usp=sharing
2) A doji/spinning top after any candlestick pattern catalyses it ?
C.
1)In the chart below of Ambuja Cement
Its a downtrend and further 2 hammer forms following a doji with good volume yet it didn’t go bullish. Why
Link – https://drive.google.com/file/d/0B0bePrdjZCDob0JKbWxvci1QV0U/view?usp=sharing
1) Yes, you need at least 5 trading sessions to confirm a trend
2) Yes
3) Yes
4) Yes – its a double bottom
5) TA only increases the probability – does not give you guarantees.
Thank you for the reply.
1) So, we can say that there could be a downtrend/uptrend in between of a overall uptrend/downtrend ?
2) In the BPCL chart you said that it is forming a Morning doji star but in the chapter above, you’ve mentioned that the P3 must close above opening of P1 which is not the case in the chart then why is it a morning doji star ?
3) So if the volume is little below the average volume it is ok and can be considered as a yes for trading checklist?
4) Does a doji/spinning top after any candlestick pattern catalyses its effect ?
1) Yes – these are called primary and secondary trend
2) No harm being a bit flexible. It is hard to find textbook patterns in real markets.
3) Just below average is still ‘ok’. Maybe 5%. Not drastically below.
4) Yes. I’ve discussed this in the chapter.
Thank you for replying, as you’ve suggested earlier that above average volume signifies a strong pattern. So the patterns in which there are 2 or 3 candlesticks(like star and engulfing), are all of the candlesticks in the pattern
are required to have above average volumes to be a strong pattern ?
Yes, higher the volume, the better it is.
😀 Thank you for all the replies! Could you please tell me how do I build up confidence even when trading in CNC that what I’ve figured out by lookin at the charts and matching it with the checklist is correct ? Because sometimes some patterns that are fulfilling everything doesn’t work but some patterns where volume or some other factor is quite less it still works and goes per the pattern..
Also how much money should I start with as per a newbie
The only way to build confidence is by actually placing trades and executing your ideas. Start with capital that you are not scared of losing.
Hi can these candle-stick patterns be used in forecasting the market for intraday trading using 5 mins candlestick??
Yes, TA can be applied to any timeframe.
Thank you for the advice! I’ll definitely try to place the trades by overcoming the fear.
Is this an uptrend ?
Because after a correction it made a new high
https://drive.google.com/open?id=0B0bePrdjZCDoR0F0YklXa091X00
It appears so.
Hi, ty for the reply.
Is this a valid downtrend ? For me it looks like it made new low after those greens
https://drive.google.com/open?id=0B0bePrdjZCDobUY4VnVQM20xWTA
Yes, it is.
Is the downtrend till the pointed candle is correct ? If yes, is it a valid bullish harami pattern ?
Sorry, here is the link for the asked question –
https://drive.google.com/open?id=0B0bePrdjZCDoUGFmOVlpYXR4dmM
Sort of, yes.
Is this a valid uptrend and forming an evening star at the end ?
https://drive.google.com/open?id=0B0bePrdjZCDoeUdnTFdDUGtYSmc
Yeah.
Is this a valid 100% trade scenario ?
https://drive.google.com/open?id=0B0bePrdjZCDob0RBbHlHWERkaEk
Above avg volume, downtrend and then bullish harami pattern, near support, RSI showing near oversold
It really depends on your conviction.
Sorry, but i didnt get u. If all the parameters r giving a yes signal according to TA then y rely on conviction? If u had to take this trade wud u take it? If no, pls explain me the thought behind it.
Your conviction should be high if all the checklist items are aligned. I would take the trade if such was the case.
https://drive.google.com/file/d/0B0bePrdjZCDoRlRKckR6RDI5TDg/view?usp=drivesdk
I went for the trade as it was fulfilling the checklist but yet the next day it went in the opposite direction and breached the stoploss, giving a loss. What could be the reason behind this? It was agreeing on 5 out of 6 checklist points, I know nothing is guaranteed but still it was a must trade according to the checklist..
Any way to prevent this? Or even a professional TA trader would’ve gone wrong here too?
Can you list our your reasons why you went long?
As I mentioned above, I went long cz of bullish harami pattern after a downtrend, above avg volumes for both candles, stoploss near support, RSI indicator was almost near 30.
I guess you need to do few overnight trades before getting into intraday trading.
The trade that I’m talking about was overnight trade(CNC)(SONATA) . The next day after buying it breached the stoploss so I had to exit with a loss. That’s why I’m asking when 5 out of 6 points in checklist are agreeing to trade and making the conviction high then why did the trade went wrong? As you said even you would’ve taken the trade so is this an inevitable thing in TA? Even a pro would fall for this? Please help me out with this ;(
Well, if the conviction is high, you got to take the trade. Does not matter if its aa pro a newbie. However, over time, over and able the conviction you will start developing a feel for the trade, this cannot be quantified (or described). You will know which trades to take and which ones to discard. I guess this is the difference between a newbie and an experienced trader. But the starting point is the same for all.
Good luck.
Thank you very much for the deep insight, so as of now as I’m a newbie I’ll have to stay dependent solely on the checklist and trade on if the conviction is high, which may result in a profit/loss and only with time I’ll be able to feel with experience if the trade is yes or no even being a high conviction trade?
Thanks again for all the help :.)
Cheers! Good luck and stay profitable!
Thanks Karthik for really useful content. I have one basic question. I know how to place intra-day short trade. But, How do we short shares of a company at 3:20 using Kite without having those shares in demat ?
It is the same way as you’d short intraday…except that you need to cover the position before 3:29 PM. I’d suggest you avoid doing this as it can get quite risky.
So, when you are saying that a risk averse person will initiate trade(let us say short trade) at 3:20PM of the day after pattern, he will have to square off at 3.29PM? But then, how did he gain from it as actual gain is expected on next day.
No, it means he is taking the trade (on futures, not spot) with an intention of holding it for few days – either till target is hit or the SL triggered.
Ok thanks
Welcome!
Who sets the gap up opening & gap down opening price.
Hi Kartik,
At the outset let me thank Zerodha for starting this initiative to spread knowlede on stock markets. This is truly a masterpiece.You surely have the flair for explaining such complex subjects in clear and lucid way. I have not come across any materials on technical analysis on web that is so simple and easily understood. Truly this is amazing!!!
Coming back to technical anaysis, I request you to download the below link of Nitin spinners chart for your ref.
https://drive.google.com/file/d/0BxpxOUxrE_YbSE9wa2h3WG53cGs/view?usp=sharing
I see a spinning top at top indicating a possible fall in price. But today I see that this stock has made a breakout abv 125 and is at a all time high@129. Can you please help in aanalysing what went wrong?
Thanks for the kind words, Shyam.
Spinning top does not convey a change in trend. It just tells you that the current trend has paused. It may or may not continue. Expecting a fall solely based on ST is not justified.
Hi Karthik,
Thanks for reverting. Though ADX is strong and even the +DI is way above -DI I exited my position after seing ST and even volumes were falling. Now that it has given a breakout at 125 ,i am thinking of re-entering this stock at current level and go long . Can you confirm if this is ok?
Yes, re entering a stock is perfectly valid. Please make sure you are checking all the parameters right. Good luck.
Hi kartik,
Can you please advice what parameters should we consider?
Regadrs,
Shyam
The parameters vary for each pattern.
Hi Kartik,
Noted Parameters are diff for each pattern. For the above pattern if nitin spinners what shd be the parameters?
Sorry, I’m not too sure which parameters would work on this stock.
Hello sir,
I am learning about stock market from this platform and i must say the work you have done to make it possible to feel stock market easy is incredible….
sir, I wanted to ask you that is Harami pattern is exactly opposite to engulfing pattern????
It is another pattern, similar to engulfing. The parameters are different, but works similar to the engulfing pattern.
Hi Karthik,
Firstly I would like to thank you for amazing tutorial. I wanted deeper insight into the components of a single candlestick (Upper shadow, real body, lower shadow). I was able to describe the meaning of only some of them and it is as below. It would be very helpful if you can verify if the meaning of candlestick components mentioned below is correct and give the meaning of components I was not able to define.
The meaning of the candle components individually without taking into consideration other parts of candlestick:
1. Long upper shadow: The bulls tried to push the price higher but were not successful.
2. Long lower shadow: The bears tried to pull the price lower but were not successful.
3. Short upper shadow:
4. Short lower shadow:
5. Long blue body: The bulls tried to push the price higher and were successful.
6. Long red body: The bears tried to pull the price lower and were successful.
7. Thin body (color does not matter):
1) Yes – they tried to push the price higher, but the high point wan not sustained
2) Yes – they tried to push the price lower, but the low point was not sustained
3) Means that the high was near to the close/close
4) Means that the low was near to the open/close
5) Yes
6) Yes
7) Yes
hi Sir, on Apr 28 2017 close, has TVS formed a bearish evening star pattern on daily charts. My concern is P3 is a green candle but still the p3 close is near to p1 open. please share your thoughts. Thank you.
Hmm…along with P3, P2 also seems to be a concern. The gap is not convincing enough.
Hi Karthik,
Request you to please look at TCS chart today….is it forming a valid Morning Star…I see that there is no gap down on P2 but can we consider it..Does it look good to place a trade?
I’m not able to upload images here…can you help me with that also?
Thanks
Not a MS for sure. You will have to validate the pattern and make a fair assessment 🙂
Thanks Karthik. I have one doubt – how do you identify a uptrend or downtrend…should it be a steep slope…or variations are allowed. What if I calculate percentage for uptrend or downtrend…what is a good value to consider it…like 10% downtrend or uptrend starting from the 1st day I identify the trend till the most recent candle.
If there is any other method that can be used please let me know.
For all CS patterns, prior period trend should be at least 5%, but yeah something like 10% is great. I’d look at only the percentage basis. Slopes can be a little misleading at time.
Hi Karthik, these modules are amazing thanks for them.
My question is where to use these technical analysis? i mean for equity in CNC or MIS?
You can use it across any order type (NRML, MIS, CNC) and across any assets like EQ, Commodity, Currency etc.
Thanks, and here you have used one candle for single day. can it be replicated on 1,5,15 mins candles also?
Not sure about 1 Min….bit yes for 15mins and above.
Hello Karthik, had a question regarding the candle stick pattern. Are these pattern valid for 5 min candle stick pattern also.
your early response will be highly appreciated.
Yes, CS patterns works across all timeframes.
I am not able to grasp the pattern ONGC is following this days… please help me explain
Bearish Marubuzo ?
Could you explain in detail why is the reason for stop-loss being the highest of high for bearishness and lowest of low for bullishness… With an example if possible…?
The highest point in case of bearish patter represents the level at which the bears managed to push the prices lower. Hence its perceived that this level will hold for the next few trading sessions. Likewise for the bullish patter with its low as the SL. Have included many examples in the chapter and the entire module.
Hi karthik, I have a doubt. All these chapters ask me to initiate a trade at 3:20 .But Zerodha doesnt provide margin for trades that carry for next day.So how to go about this. Will zerodha give margin for 5 days like many other brokers do(although the charges are very high).If not how to make a profitable trade without that option?
You can always take the trade under NRML product type. It us a leveraged product anyway.
karthick how is fortis health care in charts ?
is it good or shall i sell?
No idea sir, I do not track the stock.
can we use this patterns in intraday (5mints & 10 mints )charts also ? it gives same results
TA can be applied to any asset across any time frames.
Hi Karthik,
You were telling that a trader can go long when it is morning star etc. Do you mean that the trader have to buy normal CNC stocks to keep with him for more days and not intraday buy or sell stocks? Is my understanding correct?
Please advice
He can buy CNC or if you have the appetite for risk, you could buy a futures contract.
Dear Sir,
I have read yours so far single candle pattern only. There is one doubt if risk taker initiate call at 1520 hrs and on next day unfortunately call goes unfavorable to him, then on next he supposed to round off with minimum loss. But on the other hand there is some technical difficulties for next day selling.
Now what he is supposed to do? whether he should wait for T+2 days and avoid technical problems with more losses?
In that case, yes, he will have to wait till T+2. You may also want to consider trading futures.
In Points for thought process of a morning star the point 7 states that P1 and P3 is forming Bullish Engulfing. i am not getting how it is forming Bullish Engulfing. Condition for formation of Bullish Engulfing is P1 is red candle with P2 engulf P1 real body. but here P2 is not engulfing P1.
Bullish Engulfing in the sense that P3 covers up the losses on P1. You need to look at this from a very generic sense here.
Hi Karthik,
1. I think then candle stick trades can’t be fully utilized in cash trading and there will always be a loss if the pattern goes wrong somehow in the next two days after we make a trade, since the stock won’t be in our demat account (to sell off) in 2-3 days, correct?
2. So It is always recommended to trade in stock futures?
3. Also I don’t think we can play in options because we are looking at the stock price for patterns and not the option premium price, correct?
Thanks,
Ash
1) You can always opt for a futures or options trade instead of cash
2) Maybe, it really depends upon your risk appetite
3) You can. Premium is a function of the price in the spot market.
For your reply to point 3, Are you saying these same candlestick patterns can be applied to option premium price too and trade options contract same way? Asking since I don’t think options price is just derived based on the price of the stock but also on other factors like time to expiry, demand etc. Let me know.
1) No, what I mean to say is that you can look at Candlestick pattern on the spot data to make deductions…you can act upon this in the options market.
Hi karthik,
In the morning star pattern why should we wait for P3 when we have already know that formation of P2 is a trend reversal from single candlestick pattern. I think a risk taker would trade on P2 close when he himself understands it to be a doji or spinning top and expecting a trend reversal.
It really depends on how much risk you are willing to take. Also, A morning star is considered a morning start only upon the formation of P3, P1 & P2 forms nothing really.
Sir, when we look at prior trend, should every candle form higher high and higher lows (for uptrend) and lower high and lower lows (for downtrend)?
Yes, that is a very desirable situation.
Is this all technical analysis studies also works for commodity?
Yes, TA works for any asset which has a time series data.
In the candlestick chart there are 1 min ,5 min ,1 hr etc view and each one of the view make different pattern. which one should be consider for our technical analysis ?
It really depends on the time frame you opt to trade upon. For example, a 1-day chart works best of swing trading. Minute charts for day trading. If you want to place 1 or 2 trades in a day opt for 15mins charts…for a higher frequency of trades you can choose lesser time frames. But do remember, lesser the time-frequency, higher is the noise.
Hello Karthik,
There are thousands of stocks listed in the market. Obviously, it is impossible to use TA on all of them and then pin the few where one actually goes ahead for trading/investment. Any suggestions on how to narrow down the search for the stock? And if possible, can you tell this separately for short-term and long-term investment?
You can use a TA screener for this, something like https://screener.smallcase.com/
Hi Karthik,
To observe morning star which view of the candlestick would be suitable (1D, 5D)? This is a 3 day consecutive phenomena so in which view do we get the consecutive candlestick of three days?
EOD candles are best for 3-day candlestick patterns.
Hi karthik,
Do technical analysis works on Nifty future??
Plz share ur experience..
Depends on how you apply it and use it, Arun.
Don’t you think we should also look at traded volumes for any conclusion on Gap up or Gap down. Unless the preceding volumes are high & volume on the Gap up day is atleast 50% more than average volume isn’t it premature to conclude that Gap up is leading to a bullish trend. On many occasions I have seen gap ups & downs to be a passing feature. Pl clarify
Gaps (either up or down) is just a reflection of sentiment on price for the given moment. Really don’t think the previous day’s volumes will have an influence.
Sintex industries is forming bullish engulfing Or half morning star… Will it go up monday also volumes are high?
More like a morning star. Looks like it going up.
You mentioned about morning star (23 nov 24 nov 27 nov) which states – downtrend reversal signal. But the Sintex share price is going below and below. Could you clarify whether you find morning star wrongly or I am reading wrong?
Which Sintex are you referring to? Sintex or Sintex Plastic Tech?
Hi, karthik sir
The above all and previous module was based on candle stick pattern. But what about other chart pattern like:-
Flags & pennant
Triangle
Cup with handles
H&S ,etc.
What difference do they provide?? Will it be worthy to learn those?
And thanks for varsity programme , enjoying great learning…!!!☺
These all belong to Dow Theory. Have discussed this (at least a bit of it) in the same module.
How one can position himself as a bull or bear?
Buy initiating a market neutral strategy – things like straddle, strangles etc
Slightly off topic but is there any site where the LTP of each day for Nifty might be available? Most sites have the closing price, not the LTP.
Thanks!
Not sure, Sachin. NSE has strict data vending rules, not sure if websites can easily publish the LTP.
How much percentage is considered as a gap ?
Suppose a stock closes at 767.79 today and opens at 767.89 tomorrow… we canconsider it considered as a gap?an
Kindly reply
Thank you
Technically even a 0.1% move up can be called a gap up, but it is not practical to trade upon it. To trade, something like a 5% or more can be considered a good gap movement.
Thank you
Cheers!
Hi Karthik,
What a way to summarize candlesticks patterns with “What next?” section
“As you progress, start developing trades based on the thought process behind the actions of the bulls and the bears. This, over time is probably the best approach to study candlesticks.” By far it looks one of the best lines to me. Still hard to believe such contents are easily accessible to us.
Well I have one doubt related to Volume, what role volume will play here in morning/evening star patterns in entire setup, say p1, p2 and p3 candle, how much should it be. would be great if u could throw some light on volume?
Happy to note that, Prateek 🙂
In case of these star patterns – I would be happy to note higher volume on all three days…but maybe, considering flexibility, one can still be ok if the volume on P1 is slightly lower.
Thanks Karthik.
Cheers!
Hi Karthik
Very nice and interesting content.
I have following questions.
1) is there any priority among different candle pattern?. I.e. two different stock trade conform with different candle pattern, which one is better?
2) which indicator is used to detect fast momentum
3)how to decide target(sell), is it always always equal to resistance?
Regards
1) No, not really. You will have to experiment with patterns and estimate whats good for you over time.
2) Maybe use a leading indicator like RSI
3) No, not really – S&R gives you a good spot to identify targets and SL points. But this changes on a case to case basis.
Is the multiple candlesticks are equally useful in intraday or only meant for positional?
Pls clarify.
They are as useful for intraday as they are for EOD/swing/positional trades.
Hello Sir,
1)For intraday trading, in 15 min chart, how many candles define the uptrend or downtrend??
2)For intraday trading, to plot support / resistance, lookback period is 90 days??
3)While plotting support / resistance, should we consider only the long moves (peak and trough) or the smaller ones can be considered??
Thank u so much for all your efforts.
1) At least 5
2) Yes, thats good enough
3) Consider all candles.
Good luck!
Dear Karthik sir… I’m studying all this modules very deeply. It’s very very useful. Actually come before varsity I was thinking to join any TA course. But now It seems needless. You are explaining it in very simple language. Thanks thanks thanks for it. Now coming to my query : In candle stick patterns which type of candlesticks we should use on chart to confirm the pattern?
For example : On 17th Feb 18 there is a evening star on reliance capital Feb future chart. It clearly appears in heikin ashi type candlesticks chart but not in standard candlesticks type chart. Why so? Please explain…
I’m so happy to note this Rajesh! I’m glad we could help and save you some money, which you would have otherwise save on a course 🙂
Heikin Ashi is a different thought process altogether. Just like how a line chart differs from the candlestick, Heikin Ashi is different from the candlestick. I’d suggest you stick to candlesticks.
Thanks a lot sir
Welcome!
What should be the time frame window we should select to generate pattern. For e.g 1 minute, 15 minute or 1 day. I am asking is because for different different candlestick pattern is different. Candlestick pattern generated with 15 minute window refers we should sort market. Whereas 1 minute or 30 minutes candlestick pattern refers that we should buy.
pls advice.
Manu, this depends on your trading style. If you want to carry position forward overnight, then Id recommend 1-day chart. If you want to trade intraday, I’d suggest you look at 15 mins chart.
Good luck.
Thank you Krathik for quick reply. Information you have provided is very helpful.
Happy learning, Manu 🙂
Hello Mr Rangappa, if you look at the module 10.3 (the morning star) line 7 which says “In the absence of P2’s doji/spinning top it would have appeared as though P1 and P3 formed a bullish engulfing pattern”
Here if you look at the chart for the above mentioned reference, i dont think it should have been Bullish engulfing pattern as P3’s opening is higher than P1’s closing.
By the way, the Varsity is amazing and very helpful, good work…CONGRATULATIONS!
The presence of doji is a making a difference here, Chintan.
oh..ok, got it..thanks!
Cheers!
Hi Kartik,
Could you please explain what exactly is booking profit. Is it similar to Shorting?
Moreover, in the charts above 3-4 candlesticks have been encircled together which looks more or less like spinning tops. Does this imply that few spinning tops will always appear together over the period of trading sessions?
You buy an apartment at 1 Crore and after 3 years you decide to sell it at 1.5Cr. You have essentially made 50L profit on your investment or in other words, you have booked a profit of 50L. Booking profit is just a term used to convey the fact that you have made a profit and pocketed the same.
Shorting is a trading technique where you sell first and buy later. More on shorting here – https://zerodha.com/varsity/chapter/shorting/
No, there is no guarantee of spinning tops appearing anywhere in the chart. In fact, there are no guarantees for anything in the market.
Hi Karthik Sir,
Your notes are wonderful, i am in the learning phase right now and these notes really helped me in improving.
My question to you is, Is it advisable to enter into the market just after analyzing 2 or 3 five minutes candles after the market opening for intraday trade ?
Glad to note that, Manyank 🙂
Yes, that should be possible, as long as you look at it along with the previous day’s 5 mins candles. Btw, its best if you stick to 5 or 10 mins candles.
Hi Karthik,
According to the below statement
The stoploss for a long trade is the lowest low of the pattern. The stoploss for a short trade is the highest high of the pattern.
I assume “short trade” indicates – Sell and Buy.
Corrections Appreciated.
Thanks –
Siva
Yes, Siva. Short means sell first and buy later.
Hi Karthik,
Just for my curiosity and to understand whether i am in the right direction ,Can you confirm whether evening star was formed in Bank Nifty Jun Future on May 14 to May 16.
a)Market was in uptrend.May 14 was bullish.
b)May 15 was a gap up,not considering whether it was a green or red candle.
c)May 16 was a gap down and a evening star.
Thanks
Kumar
Not really, the P3 candle had to close at least halfway through P1.
On the similar lines has my above question ,Can we consider evening star was formed in Bank Nifty Jun future on April 9 to April 11.
If yes why wasnt it bearish? Is it because the red candle on April 11 was not within the body of April 9th?
Yes, April 9-10 is more like it, but still not very convincing. Candle patterns only enhance the probability. No guarantees, Kumar 😉
I am going thru ur chapters and learning a lot of things and also coming up with a lot of questions.I learnt about a pattern named ” Three outside up” which generally suggests a bullish reversal.
The description for “Three outside up” is as below
a)This pattern is a more reliable addition to the standard Engulfing pattern.
b)A bullish Engulfing pattern occurs in the first two candles.
c) The third candlestick is confirmation of the bullish trend reversal.
Now am bit confused since Engulfing pattern suggests Bullishness whereas depending upon the third candle it reverses the bullishness. How do we decide in such case.
Example is KOTAK BANK (1D chart ) for 23-25th May.
a)24th a Bullish Engulfing pattern was formed
b)25th was a bullish reversal according to “Three outside up” and next two days bears took control.
How do i decide upon this situation if am doing intraday in options?
Thanks in Advance
Kumar
What he means by a bullish reversal candle is that the bullish candle on the 3 day confirms the bullish reversal of the engulfing pattern, hence termed bullish reversal.
Hi Karthik,
Am still confused.The 3 rd candle is always bullish,So how can i decide whether the trade is going to be in uptrend or reversal of bullish reversal?
Can you please elobarate?
Thanks
Kumar
3rd candle may or may not be bullish, in case its a red candle, then you may not want to take the trade as there is no confirmation of the trend.
Infinite thanks to you, Sir for presenting the knowledge in such a lucid way. You are adding to your good karma 😉 coming to my basic question, I mostly get into swing or positional trades(very small positions since iam just starting), so is it better to trade 3day candlestick patterns over 2day patterns?
Ketaki, thanks for the kind words!
The number of candles which form a pattern does not really matter. When matters really is how well you know these patterns and the kind of conviction develop to trade the pattern.
Good luck!
Hi,
https://drive.google.com/open?id=1lZYBB6TC3EXij0wC1P9GoTK_d3RSJE5p
In tata motors chart can we say that this pattern is a morning star pattern?
It has found support at trend line and price reversal has happened in 3rd candle? Im just waiting for confirmation from MACD crossover and ichi moku indicator before taking the trade.
Also is that a bullish MACD Bullish divergence ?
Seems good for swing trading
Yes, it seems to me like a morning star. Make sure things like volume also confirms. Good luck, Shyam.
Hi,
I am a beginner. In the candlestick pattern disussed we are entering against the trend. How we can take trade with the stock trend direction. Please correct me if i am wrong.
In fact, we are anticipating a trend reversal. All the candlestick patterns discussed here trend reversals.
Hi Karthik,
could you please provide check list for TA ?
It will be helpful for me to trade..
Thanks
Its available in the last chapter of this module, Vijay.
Thank you Karthik
Hello Sir,
What is the meaning of below line:-
”As a rule of thumb, higher the number of days involved in a pattern the better it is to initiate the trade on the same day.”
3 candlestick patter like morning star is better than a 2 candlestick patter like a bullish engulfing which is better than a single candlestick pattern like marubuzo. By the way, this is my perception 🙂
I have the same opinion ..sir
Thank you for answering my question.
Good luck, Saurabh!
sir how many books you have study before making this chapters…
and plz give us some book name also.
Not books, but lots of practice. I’d suggest you read the book on Japanese Candlesticks by Steve Nison.
thank you kartik ji…
you are THE GURU.
Sir Please help me for intraday which patter i need to follow a single stick or multiple stick
I’d suggest you start with single candlestick pattern, Kaustubh. Once you are comfortable with it, you can increase the scope to other patterns.
Karthik Sir i went through all patterns so little bit confuse which one have to follow for intraday
Sart with simple single candlestick patterns, Kaustubh 🙂
Team Zerodha,
thank you so much for this primer, the content and the examples so very well structured and easy to understand.
I did have two questions though:
1) In long trades, the settlement cycle works on T+2 basis but would we be able to exit a position within two days? The shares would not have hit our Demat account in this time so would someone be allowed to sell something they do not have in their demat account?
2) In the context of Indian markets, are traders allowed to keep a short position for more than a day? I might short a stock expecting it to dip significantly over (let’s say) 3-4 days. Wouldn’t my broker force me to square off my short positions at the end of trading day?
Sorry if these have already been answered somewhere else in the course or user questions 🙂
Regards,
Siddharth
1) Yes, you can. This is called Buy today, sell tomorrow. Check this – https://zerodha.com/z-connect/queries/stock-and-fo-queries/btstatst-buyacquire-today-sell-tomorrow
2) If you intend to carry forward the short position, then the only way possible is by shorting the stock in futures. Short positions in equity cannot be carried forward beyond the trading session.
Hello Team Zerodha,
Can you please tell me why there is no 2 Min time frame, we have 1 Min or 3 Min but why not 2 Min ?
i wont mind if 3 Min is replaced by 2 Min !!
Please share your thoughts.
Regards,
Amanpreet Singh
Traders, generally use 1, 3 and 5 min timeframe charts. Most charting libraries follow the same pattern.
This is the first we are hearing about a request for 2 min timeframe 🙂
Thanks for explaining the different candle stick patterns and en-lighting us. I have basic doubt, does chart software are capable to encircle and inform it is Morning star or evening start or Bearish or bullish engulfing patterns rather than looking manually. Once it highlights then we can confirm manually.
Regards,
Prasad
I’m afraid this is not possible, Prasad.
I have went through all the lessons. But I need some more explanation on Candlestick patterns. If we change the time period (say 1 min to 1 month) each time the pattern that we get is different so how am I derive some conclusion out of it?
Yes, Rohan..this is quite expected. When time periods change, the data also changes and therefore the pattern!
So how do I come to the correct conclusion?
This is with regard to?
Dear Karthik Sir,
I searched your profile on wiki but didn’t find. I think it is the high time your profile should be on Wikipedia.
Lol 🙂
I really don’t think bandwidth should be wasted on a wikipedia page about me.
It will not be waste Sir, the great work you are doing makes curious to know about your journey……
Its really big of you to think so, Gaurav 🙂
is there any way to use Steve Nison candle scanner software in Zerodha?
Unfortunately no, Raghu. But will look into this. Thanks.
Sir I have a doubt.In market there is a saying which ever trade we initiate our losses should not be more than 1/2% how is it possible.If we do swing trades for example swing trades in nifty futures means there will be obviously 100-150 points difference in the price from the lows or highs on p2 on which ever pattern we initiate a trade so stop losses will be more than 7500+ since nifty lot size is 75 how can we restrict the losses to only 1/2%.
The percentage loss is expressed as a % of your capital. Have discussed more on this here – https://zerodha.com/varsity/module/risk-management/
sir i have a question. i understand that we can CNC buy a stock at 3:20 if the patterns are favourable but i dont understand the concept of shorting the stock at 3:20 because in CNC shorting is not possible because we dont hold the particular stock in the demat account ? please enlighten me on this topic
Like for example im wathcing the stock “X” and i get a bearish engulfing pattern on top of the uptrend and as a risk taker i would like to short the stock at 3:20 . my question is , is it possible to short sell a CNC product because you dont have the shares in your demat in the first place ?
Yes, like I mentioned, this has to be done in the futures (Derivative) market.
For shorting, you need to look at the futures market, Hari. Not possible in the spot market.
In the Morning Star Example, (7th point) you mean to say it forms a Piercing Pattern and not bullish engulfing since it doesn’t engulf the close of the red candle?
Yes, that’s right. In an engulfing pattern, the P2 candle completely engulfs P1.
Hey karthik. Actually i have tried to analyze many of the stocks and study the candles. I saw about 10-15 stocks. But i was unable to find any of the single or multiple candlestick patterns in it. So is there any mistake i am making in my analysis or it is that i should look out for and study more stocks? If it is so, then how much stocks should be studied by me so as to shortlist 2 or 3 stocks for trading?
That does not seem possible, Sumeet. I guess you are going wrong somewhere. Please look at the candles carefully.
Hi Karthik,
Suppose when I look at the intraday 6 hour candlestick chart, the last candle is a bearish marubuzo or a similar candle depicting a strong bearish tresh, however when I switch the candle timeline to 6 months or 1 year, the last candle becomes a bullish candle, indicating a bullish trend. In such case, which one should be weighed more for a swing trader?
Maaz, in such situation, pay more attention to the time frame that is relevant. For example, if you are doing swing trades, then 6-hour candlestick makes more sense.
Hi Karthik,
6 hour timeframe is relatable to an intraday trader, right? My question is, suppose I intend to hold stocks for a week, or a month, then the candlestick chart timeframe that should I be looking at, shouldn’t the charts be 1/3/6 month charts? Is there a correlation between the number of days you intend to hold the stock to the number of days you should look at on a chart?
Also, when I plot the support and resistance lines, should I do that on a 2 year timeframe, irrespective of my holding period (ie intraday/swing trading)?
Maaz, in my experience the EOD charts fits all purposes perfectly well. Yes, 2 yrs gives you good insights into past demand and supply activities.
Are there any implications of gap up or gap down?
Like if a stock opened gap down there could be less possibility of it being bullish that day or if it opened gap up it may not go bullish further? any such?
Nope, no such thing 🙂
https://drive.google.com/file/d/1-Adu5K56LCHSj1RxCaoeTssJ9RR9qDSn/view?usp=drivesdk
Sir here is the link for India Bulls housing charts it has formed 2morning Star formations the first morning star has breached the stop loss and again it has formed morning star here but both formations are at 52week lows only.And I have back tested on so many stocks which has failed to hold the pattern formations formed at 52weeks low whats ur opinion on this.
This is interesting, I’ve hardly seen two consecutive MS formations on the chart, thanks for sharing 🙂
The reason why it may not hold up is that the sentiment at 52 week low is quite bearish and any bounce is looked up as an opportunity to sell. Perhaps, this is the reason so.
hey Kartik,
really awesome material. i have read your all other materials and i can say that it is my bible for trading.
i have few questions, i hope you can help me. i mainly trade intraday.
1. i have been using Heiken-Ashi charts since couple of months with Supertrend and RSI and it has not been working good for me . so i thought of learning candlestick patterns and i am learning since a week, my doubt is that all the patterns like three white soldiers, three black crows,hammer,etc work on Heiken-Ashi charts or do i need to use standard candlestick to trade patterns ?
2. if they only work on standard candlestick, how can i smooth it like Heiken-Ashi.
3. i have read in few forums including Tradingqna that candlestick patterns do not work most of the times, can you please guide me on this. my plan is to study candlesticks pattern for better entry/exit and for trend reversal, and also i will use supertrend and RSI.
it would be great if you help me, waiting for your reply.
regards
Rudy
Rudresh, thanks for the kind words. I’m glad you like the content on Varsity.
1) I’ve personally never used Heiken-Ashi, so I cannot comment on it. For the same reason, I’d suggest you look at candlesticks 🙂
2) I need to do some research and figure this out myself
3) Most of them fail to follow the checklist and the guidelines, so naturally, it won’t work for them. Besides people expect the CS patterns as a guaranteed way to make money, which is not possible. They need to understand that these techniques only improve the odds. This expectation has to be set right from the start.
Good luck.
hey Kartik,
thanks for your reply, i really appreciate it. i have given a link here which has a snap of the chart. i have marked a bullish engulfing and bearish engulfing with black lines. the supertrend tells to short the stock. my doubt is that
1) after shorting the stock based on supertrend, should i exit the trade as soon as i see a bullish engulfing, you can see in the image that bullish engulfing was formed as soon as the supetrend indicated to short.
2) after few minutes, a bearish engulfing was formed and the stock went further down,but if i had exited the trade based on seeing the bullish engulfing i would have made loss and missed the profits. so what should i do in these type of situations ? should i take the trade in which both the pattern and indicator are telling the same thing, or should i do anything else ?
3) should i trade based on just patterns or should use a indicator ? if yes, then what are the indicators i should use with patterns ?
This chart is of crudeoil , 5mins chart.
https://ibb.co/JqBTGDk
my setup is of Supertrend,RSI and volume chart, this was not working good so i thought of using patterns and hence all these doubts.i would be really happy if you solve my doubts.
regards
Rudresh
1) This is dependent on the trader. I give more importance to candlestick patterns, so I would pay more attention to it
2) This is again dependent on you as a trader, identity which system (indicators or candlesticks patterns) matter more to your risk-reward temperament
3) I’d say patterns 🙂
Dear, i m confused wrt gap up and gap down.
I observed that daily stock open up or down wrt last day close, so is every day is gapup or gapdown?
Also, if after gapup opening, stock down or bearish movement, whether then also it called as gapup??
Hmm technically yes, but it really depends on the amount of gap that the stock creates. For example, a closes at 75 on day 1 and opens at 75.1 the next day, then this is not really worthy of considering a gap up opening. However, if it opens at say 74 or 76, then may it is. Look at it from a % movement perspective.
hey kartik,
sorry to bother you again. till now patterns have helped me to reduce my loss by telling me when not to enter in a trade, but at the same time i have missed many trades because maybe i could not identify the pattern or there was no pattern before the trend started.
i have few questions for you,
1. i have given a link to a snapshot where there was good volume and indicator showed to buy but after a long candle, the crudeoil was not in a trend and there was a formation of three black crows and a hanging man, what should i do when patterns are formed in not so trending time. after few candles(intraday 5mins chart) there was again a good move of 15-20 points and i regretted not entering the in the trade.
https://imgur.com/mQahpRa
2. how to decide if the trend will continue after a consolidation period or it will reverse, even if there are any pattern formation in the consolidation phase, we can not trade it because the market is not trending ,right ?
like in the above example there was a good move and for few minutes the stock was in consolidation and again it resumed its movement. here is another snapshot, where i have drawn a arrow where all the confusion is and then you can see that the trend resumed.
https://imgur.com/zqJ1cAh
your help will be appreciated.
thanks a lot.
Rudresh
1) This depends on the priority you assign to indicators and patterns. I primarily look at patterns, indicators are secondary. By the way, that was a classic entry point 🙂
2) This is hard to figure out. The ones that you’ve marked are classic retracement setups post-breakout.
hey,
thanks for the reply,really appreciated.
1) i mean how did you figure out that it was classic entry point/retracement. because the prices moved in a range for about 30 minutes and then the trend resumed. can we trade based on the patterns formed in a rangebound. for example if a hammer is formed in a rangebound, can i go long ?
2) if there is a breakout in a particular direction with huge volumes, will the trend continue in that direction.
3) i know that the color of the volume candle does not matter, but there have been times when prices move up supported by huge volumes and then the next candle, prices move down supported by huge volume, so what should in these situations?
i think i am really bothering you now, i am sorry. and yes that was a classic entry point because it gave a good move of 35 points after it.
thanks a lot.
Regards
Rudresh
1) Based on the low volume retracement. Guess I have discussed this either in this chapter or somewhere else in this module
2) It is likely to continue, but as I’ve said before, there are no guarantees in the market 🙂
3) These are indications that the volatility has increased, I’d stay away
No problem, please feel free to clear up all your queries 🙂
hey Kartik,
thanks a lot for quick reply. i have removed all indicators from now on and using S&R,patterns and volumes. will let you know the progress as soon as possible. you are the best.
regards
Rudresh
Good luck, Rudresh. Happy learning and trading 🙂
hey kartik,
i hope you earned some profits from yesterday’s crudeoil. here is the image where i have encircled my entry point and volumes. my strategy was that if the price closes above the support line and the 9-21 ema crossover happens i will go long. all the criteria met and i went long but after that the price came down touched the support and again continued the uptrend which was around 60-70 points which i missed 🙁 . i do not know where i went wrong. there was no pattern formed which would have told me that prices will go down. i have encircled in yellow where it bounced backed from the support line. if i had know that the prices will go down, i would have gone long where the yellow circle is and the profit would have been enormous.
https://ibb.co/MRGhWY1
thanks a lot.
regards
Rudresh
Rudresh, buy on strength (green candle) and sell on weakness (red candle), is the very first violation here. 2nd, when you entered, did you estimate the reward to risk ratio?
i agree to your first point and i did not calculate RR ratio as i always keep stop loss as 10 points by default. in this case my support would have been stop loss and the RRR would come to 1:2, which is not good. my bad. should i always keep RRR in my checklist ?
regards
Yeah, thats always a good practise, Rudresh.
thanks for the reply kartik. I don’t know why my every reply is showing as a new comment. we need to buy on green and seep on red, suppose i am want to buy and the candle is green but after i buy the candle turns red and closes in red….i follow 5 min candle, should i buy at the 5th min ?
regards
Rudresh
Rudresh, once you buy (or sell for that matter), you need to act only when your SL or target is triggered.
hey karthik,
my doubt is specific to crudeoil as there is no spot market for it. so finding S&R for it becomes very difficult and also we can not find any patterns on EOD data as only current month is active. so how should we approach this problem ? crudeoil trades is ranegbound everyday from 9am to 1pm approx, so i draw S&R on this range, is this the correct way ?
regards
Rudresh
Rudresh, you can use the crude’s futures price for this. I understand this not the best approach, but that alright in case of commodities and currencies.
hey Karthik,
i have read many of your posts and in the comments you have mentioned sometimes that 5min candle for intraday is good enough for both price action and indicators and sometimes you have mentioned 15min candle is good enough. what timeframe would you recommend for crudeoil considering its volatility. in my experience 5 minute candle generates more of false signals and less accurate signals.but i want to know your views on this.
regards
Rudresh
Rudresh, I agree with you on the whipsaw from 5 mins candle. I’d suggest you look at 10 or 15mins candle for this.
The trade setup for an evening star is as follows:
Short the stock on P3, around the close of 3:20 PM after validating that P1 to P3 form an evening star
To validate the evening star formation on day 3, one has to evaluate the following:
P1 should be a blue candle
P2 should be a doji or a spinning top with a gap up opening
P3 should be a red candle with a gap down opening. The current market price at 3:20PM on P3 should be lower than the opening price of P1
Both risk taker and risk averse can initiate the trade on P3
The stop loss for the trade will be the highest high of P1, P2, and P3.
How can some one short at 3:20 at the end hours
You can short this with a futures contract, Prateek.
Hey Kartik,
i am back with few of my doubts, what can i say. there is so much to learn, specially in intraday trading.
1) The trend is up or down and then there is a range bound phase..what happens after this is phase is that the trend continues most of the times or a trend reversal happens. my question is that how to confirm that the trend is going to be resumed instead of a reversal, because it’s in a range bound phase and even if a pattern forms we can’t trust it right ?
in the below image i have marked a hammer which was formed after a range bound phase instead of after a downtrend and it went up after the hammer. so how should we approach this problem.
https://ibb.co/Cb6jJvR
2) when the market opens at 9:15 and everything is telling to short the stock except RSI…. it’s under 30 but the stock keeps falling. because of this i have missed many chances. i know that indicators are distorted at the start. if i wait till 9:45, then as you know i would have missed some major move. so what is your approach to this.
i really your appreciate your efforts and time and i can’t thank you enough.
regards
Rudresh
Rudresh, the image does not load, but I do get your query –
1) The stock can be range-bound for many weeks or months. Remember, Reliance was rangebound between 800 – 1000 for almost 3 years. It is hard to figure which way the stock will trend after the sideway movement, but in case of a strong prior trend before the sideway movement, then the trend is likely to be in that direction. This is just based on empirical observation, like always, there are no guarantees in the market 🙂
2) I’d pay less attention to the indicators, the bulk of the analysis is on the candlestick patters.
hey karthik,
thanks for the reply. today there was an amazing chance in ZEEL stock, it made a hammer at 216 (around 9:40AM) and went till 250. i went long at 220 but BO were disabled on this in zerodha, i don’t know why. i hope i keep finding more chances like this. here is my last question which i forgot to ask in the last comment.
suppose there was a pattern formed at 3:15PM on a 5 min candle,let us say that it was bullish engulfing. will the stock go up the next day ? because the pattern was formed on 5 min candle at EOD. i am attaching a picture for exmaple. the circled pattern was formed at the EOD and the next day the stock went up as you can see in the image.
https://ibb.co/GpPmXVK
regards
Rudresh
Rudresh, it is not a good idea to look at the intraday chart of the previous day and make calls for the next day. So I’d suggest you have to look at the EOD chart and see what pattern the stock has formed for the day.
Hey Karthik,
Just a quick question. how many bars would you consider for a trend in intraday ?
Now i am using 5 bars. if the last 5 bars went up,so i would classify it as a uptrend.
Regards
Rudresh
At least 10-15 bars/candles would make me comfortable to call it a trend.
Hi Karthik,
You had advised to make a list of which candlestick pattern is applicable on which stock by backtesting. Is this method also applicable on the Indicators?
Should I make a list of which Indicators have worked on which stocks most of the time by backtesting?
Thanks in advance.
Nikhil
Hmm, not really Nikhil. I’d suggest you do this exercise for stocks + candlestick.
hi Karthik sir
Ar u explained lot of candlesticks beautifully.but is this candlesticks used for intraday trading.
->By these candlestick patters ar we trade intraday
->Ar they used for entry and exit points in intraday
Yes, you can use this for both entry and exit.
Sir ,
In The Same Context Question Number , Q4 – At 1.14PM , a Technical Analyst is Looking at the 5- Minute Chart of Indigo . The OHLC Of this 5 Minute Candle will Represent – Selected a wrong answer but your Answer is confusing ,Could you please Explain – How can any one Know the Closing Price at 1.15.59 when the Current time is 1.14.00 ? , How can one Find a Closing price of future for sure the Difference is 1.59 Minutes . Are you saying He predicted the future ? if yes on what basis ? the Complete Candle Forming time should be 1.20.00 on a 5 minute Candle , Right ? what is the Logic behind 1.15.59PM ? . or else you were thinking of 1.14.59PM and 1.15.59PM was a typing mistake ?
I Also Counted the Number of 5 minutes Candles not once but several times to make sure it adds up to 9.15 AM but that is where i lost my time .
Can you please help me identify where you spotted this question? Will help me get the context better. Thanks.
Hello Sir ,
in this link : https://www.tradingview.com/x/4wvqIJCp
Will This first one Qualify as an Evening Star ?
Will The second one Qualify as an Morning Star ?
For Gap up and Gap Down Patterns , Prior Trend is Essential is that correct ? if the trend is wrong is that not going to work , or it will Work But will not have so much of impact ? .
Also to Point Target and Exit in mean to say S&R : is Dow Pattern the Only option for a swing trader ? a Combination of two or more points over a period of 6-12 months ? what if the prior trending is Too High or too Low . The Prior Trend was Souring high as far as yes bank is concerned . in such cases what do you advice in therms of determining S&R .
Please Advice .
Evening star – no, because there is no prior trend
Morning star – no, because P2 does not satisfy the condition.
Gaps – not really as this is more of dow theory. The prior trend is core to candlesticks.
how do you differentiate between a single candlestick pattern and multiple candlestick patterns
If you are trading based on only 1 candlestick, then it is a single candlestick pattern, else it is multiple.
so you can choose which one you want to look at it as
In a sense yes, you can choose to trade just the multiple candlesticks and ignore the single candlestick pattern
Hi Karthik thanks for this excellent article, I gained some insights in to reading candlestick patterns. My question is ,how significant are these patterns when they occur on an intraday charts (say 1min,3mins and 5mins),can we initiate intraday trades based on these patterns?
As a thumb rule, the higher the timeframe, the better is the quality of the signal. Hence, I’d rely more on a 15min compared to a 10mins candle…and maybe more on 10min, compared to 5 mins one.
Hi Karthik,
Can you please tell what wrong am l doing.
1. TCS stock (NSE) 03/12/19, bullish harami pattern, stop loss hit.
2. EMAMILTD stock (NSE) 02/12/19, bullish harami pattern, stop loss hit.
3. TORNTPOWER stock (NSE) 04/12/19, piercing pattern, stop loss hit.
4. Apollotyre stock (NSE) 15/11/19, morning star pattern, stop loss hit.
5. INDIGO stock (NSE) 25/11/19, morning star pattern, stop loss hit.
Is there anything wrong i am doing. Please guide.
Yogesh, have you checked and complied with the checklist?
Yes Sir, I have complied with the checklist. In all the cases there was a downtrend, volumes were above 10 days average, the low of the candlestick pattern was around the support level, in the case of torntpower and apollotyre double bottom is also forming. I humbly request you to please check all these trades and guide me if I am doing something wrong. I will be very grateful to you. I have spent two years doing research in market but couldn’t get any lead yet. Thank you for replying.
1) TCS, no downtrend. Downtrend should last for at least 6-8 session leading to at least 5-10% erosion in value.
2) Same as above, also these are not harami patterns
3) This is unfortunate, although the low of P2 was not lesser than the close of P1 and the volumes were just about ok
I was unable to check the rest, suggest you give it another look at figure what really went wrong. Mainly on identifying the prior trend.
With due respect Sir in the case of TCS 1 day candlestick chart the price of TCS fell from Rs. 2284 to 2016 which is 11.73% and it has fallen this much in 21 candles. Will it not be considered as a downtrend. Also I want to know that in harami patterns whether the P2 candle including its body and shadow must appear to be contained within P1’s body or is it only the body that must appear to be contained within P1’s body. Thank you once again for replying.
Yogesh, I will double-check TCS. I just skimmed through the charts in a hurry. 11.73% over 21 sessions can be considered as a downtrend. It is best if the entire candle of P2 is contained within P1.
Hi Karthik,
Can we trade options using the candlestick data? I mean, if it is a bullish candle day, can i buy options. If not, can you guide me to which chapter in varsity should I be looking at to understand the bulishness in option if there is one?
Regards.
Yes, Siddhart. CS patterns help you build a point of view. How would you want to use that POV to trade is upto you. You can choose to trade with cash, futures, or option.
How it is possible to Short the stocks at 3:20 PM (in case of patterns like evening star) as shorting is intraday?
You can do that via futures or options.
Hello Sir,
Pls suggest any best web-site , software or application in which we use Screener to find out Candlestick Chart patten easily.
Hmm, not sure if there is one like that.
Sir morning star and evening star are 3candles formation can we consider if there are four candles formations like this in m&m.
Here is the link:
https://drive.google.com/file/d/1YonP3YOgnfL0KF80n0Bxy-rlSOaj9eZo/view?usp=drivesdk
Unable to see, but 4 candles may not work. At least I’ve not tested it, please do look for past behaviour before placing the trade.
In 10.3 , while explaining evening star , the picture depicted does’nt satisfy the rule because the P3 candle has not opened on a gap down so how does the scenario satisfies to be of the evening star?
Sort of. But this is ok for a pattern which develops over 3 days. Remember, one of the rules of TA is to be flexible, quantify and verify 🙂
How the gap up and gap down prices are decided if there is no trading activity. also understood the concept of gap up and gap down price behaviors but how it increased if there is no trading between the closing and opening day. If the above example you mentioned ABC ltd price went from 100 when it closed to 104 when it opens the next day. how this 4 rs increased is decided? I’m a bit confused. I have got the positive news about ABC lead to this but how this 4% change occurred or calculated as the market was closed during that time.
Think of it as the overnight demand-supply. Imagine this, onions today cost 30/- per KG…night 8PM there is a news saying there are no more onions in the city, so will the seller still sell the onions @ 30 the next day morning? No right? He will sell it at a higher price due to short supply. Just like this, the demand-supply situation influences the stock’s opening price.
Hi Karthik,
I didn’t get one thing. What do you mean by shorting opportunities? During the evening star formation when we already know about the market going down why to even trade at such time? I have seen similar things in the previous lessons also. I’m quite sure I’m missing something here as I have just started. Please help me out and thanks in advance.
Guess you should read this chapter – https://zerodha.com/varsity/chapter/shorting/
If you think the stock is going to be bullish(up), it means you “long” the stock. i.e., you buy the stock first at lower price and sell later at higher price. Similarly if you think stock is going to be bearish(down), it means you ” short the stock” i.e., you sell the stock first at higher price and buy the stock later at lower price. The shorting opportunities will be provided by SEBI in intraday, derivatives and commodities. Basically, you cannot short delivery trades.
SEBI does not provide any trading opportunities 🙂
You can short in the futures market though.
Hello, thank you for sharing your knowledge with us 🙂
I would like to ask if multiple candlestick patterns can be applied on intraday basis with a time frame of 15minutes?
Yes, you certainly can.
Hi Karthik, this information and the queries posted in the forum are very useful for learning. For some reason, i couldn’t see any of the charts people have been posting their queries based on. I tried it both on Safari and chrome latest versions. Can you please help
These are user uploaded charts, if they have deleted it then we won’t have access to it. The charts posted in the chapter remains.
Hi Karthik,
I have a confusion for the multiple candlestick patterns. For the bearish patterns (evening star, bearish engulfing pattern etc), it has been said that we can short the stock by end of P3 (around close of 3:20 PM). However, shorting is valid for intraday which ends at 3:20 PM. So should we buy and sell in that short time frame (5-10 mins)
You can use a futures contract to short and carry forward the position.
Hi karthik!
I was looking at some 4-hour chart, it shows a perfect entry point for going long. but then I look at the same chart at 1-hour or shorter time frame it just shows the bearish trend. How to proceed in that dilemma.
You have to stick to1 time frame. The different time frame has different data points, hence different outcomes. Does not help.
Hi Karthik,
Firstly, I would like to appreciate and thank you for putting your intellect in such a flawless manner. Zerodha Varsity material helped me to identify proper trade set up and make capital (at the same time it also emphasizes on exiting the trade when SL is hit)
Secondly, I would like to share some trades as under I took based on TA in the month of May 2020. Thanks to Kartik sir.. 🙂
1. Reliance Industries Limited formed an evening star pattern on 12 May 2020. (short selling opportunity)
2. HDFC Bank formed a bullish harami pattern (due weightage was given to Volume, Support, RSI and Bollinger Band) on 20 May 2020. Entered a trade at 838 and sold at 878. I wish i could carry it but the noise around the RBI presser made my trade vulnerable.
3. Asianpiants formed a morning start pattern on 21 May 2020 (due weightage was given to Volume, Support, RSI and Bollinger Band & MACD). Entered a trade at 1515 and sold at 1595.
Currently, I am analyzing L&T Infotech which may provide us with an opportunity to short sale soon (hope an evening star pattern gets formed on Tuesday). Also keeping a tab on banking sector, what’s your say on it @kartiksir 🙂
Thanks a tonne.. 🙂
All I can say is stay profitable 🙂
Good luck and happy trading!
sir can u check and tell chart of ABB 22 may 2020.last 2 candles and what does that say and what is that pattern called as.
Looks like the stock is in a bearish trend.
Hi Karthik,
Varsity is excellent in explaining all these concepts in such a simplified manner. Keep up the great educational work.
I had one doubt. For the trade setup for an evening star pattern you had mentioned short the stock on P3 at the close of trade ? From what I’ve read on the Zerodha FAQ pages short selling needs to be closed in the intraday window itself or is it possible to carry forward shorting trades ?
You can short and carry forward the position overnight in the futures market. If you short in the equity market, then you will have to close the position the same day by end of day.
sir could u pls check, not able to see any chart which someone has attached in the comment. if someone has shared a link able to see it. earlier u said that if someone has deleted the chart, we can’t see it, but it is happening with every comment chart. hard to believe that everyone has deleted it. Could u pls check sir, would be a great help to see the chart and see ur reply against that query.
I will get this checked, Siddharth. Thanks.
hi sir,
why do i am unable to see charts of comment section. i have tried various browsers , on mobile too, even on ipad ….TIA
Trying to figure out. Not sure why.
Dear Mr Suyash, I was going through the comment. On 20th may, the closing of HDFC was 857 after Bullish Harami was formed.
As per your comment, you entered the trade at 838. Can you tell when did you entered the trade and when you made an exit. I am newbie here and trying to understand the candle stick pattern.
Hello,
“As a rule of thumb, higher the number of days involved in a pattern the better it is to initiate the trade on the same day” Not understood this point. Could you please clarify again?
Thanks!!
A bullish engulfing is better than marubuzo and morning star is better than engulfing. So on a so forth. That’s what I mean by this.
Initiate a long trade at the close of P3 (around 3:20PM) after ensuring that P1, P2, and P3 together form a morning star.
My question is:
Then product type should be MIS or CNC?
If we place MIS then
All open MIS orders are auto squared-off by our RMS team at 3:20 pm* and you will be charged Rs. 50 (+GST) for that.
what should be the product type?
Morning star is usually a swing trade, hence a CNC.
Hi Karthik,
In the gap up chart, the upper shadow shows that the bulls are pulling the market up right, so shouldn’t the upper wick be longer
Not necessary, Shreya. What matters is the real body of the candle.
Dear Sir,
I’ve studied all the candle stick patterns you included in this module of TA.
I have a doubt.
In explaining all the patterns, you took reference of 1 day candle.
Can all these patterns be applied to 1 minute candle in options trading as well?
Please let me know.
Thank you.
Hmm, you should not be looking at the options chart to trade options in my opinion. But anyway, yes TA can be applied to any time frame. However, I’d personally avoid looking at 1-minute charts.
Hi Kartik,
Please explain the following statement a bit, as it is still unclear to me ? Are you talking about the higher no. days in the prior trend or higher no. of days for the pattern itself (single candle, 2-day pattern, 3-day pattern etc ? )
“As a rule of thumb, higher the number of days involved in a pattern the better it is to initiate the trade on the same day.”
I’m referring to the pattern itself. For example, you may want to act quickly on a morning star but may want to wait a day more for engulfing.
Very well explained the patterns, with good examples.
Looks like, need rigorous practice to apply this learning to take right calls.
Thanks a lot, it’s very informative.
Thats right. Good luck with that Naresh.
Hi Karthik,
In the attached NIFTY day candle chart, it seems to be an evening star pattern formation. off course third candle (P3) doesn’t open as a GAP DOWN but it seems to have all other factors in it!!! it even engulfed First Candle(P1). could you advise whether it can be considered as evening star or not.
Thanks.
You can ignore the missing gap-down, although I’d not be very comfortable 🙂
Can you also help to teach us on heiken aish pattern. This I guess is a very important pattern for traders.
Not very familiar with that, hence have not included in the module.
Dear Karthik,
When I look at a monthly timeframe chart, it shows banknifty is below support.
But when I look at a daily chart, it shows some positive candles formed.
In this scenario, how to decide which timeframe to follow.
Thanks and Regards,
You will have to stick to 1-time frame and take your trades accordingly Satish.
INFY today’s Gap-Up (https://imgur.com/a/es1JA6E)
Sir my doubts are,
1) Is it possible to catch the GapUp initial trend?
2) Is it advisable to trade based on the financial result?
3) since there are 4 quarter result, and an annual result in a year, when will companies usually post these result and is there is any place to track the upcoming results?
1) Not unless you have a position the previous day
2) Yes, but you need to have the right setup
3) They usually let the investors know when the results would be announced in advance. You need to keep track of the announcement.
Hey Karthik , had a doubt does the color of the doji/spining top make a difference provided it has opened gap up/gap down respectively .
No, the colour of doji/spinning top does not make any difference.
On an average how many previous days need to consider for detecting prior trend for swing trader?
Is it last 5 days trend or 10 days or more than that?
At least 15-20 days of EOD is good to get started.
Whats the time frame for morning star
The pattern spans over 3 days.
Dear Sir,
Thank you so much for educating us.
My doubt is , here you’re teaching us to predict the trend with 1,2 or 3 day candle.
But what about a day trader, I’m actually not a day trader but does trading in futures of stocks, whenever a sudden spike comes, I don’t know when to exit.
So during day trading what candle patterns to be followed. Pls guide.
I’m using EOD data to set up EOD trades. You can use the same technique for intrday trade. YOu just have to look at an intrday chart and apply the same.
Hey Karthik,
As per my understanding, look back period for any stock should be 6-12 month for swing trade. Hope I am correct? If not,what should be look back period for swing/positional trade ? Also, in current scenario of pandemic whether this rule is still applicable ? Kindly guide.
Thanks in advance.
Regards
Yes, that right. You need to ensure the look back is at least 6 months.
Thank you so much for prompt reply.
Please let me know what is bullish harami cross pattern ?
Bullish Harami cross is P1 = regular red candle, P2 = doji/spinning top.
Okay. Thanks a lot! Should we take long trade on Bullish harami cross pattern ?
Yes, the bullish harami pattern requires you to initiate a long trade.
Hi, I know we should go long on bullish harami pattern. My query is should we take long trade on Bullish harami cross pattern ?
Yes, may not have the same conviction as a bullish harami pattern, so you may want to reduce the exposure to the trade.
Thanks a ton!
In all the candlesticks patterns in the modules you are explaining using 1 days candles.
My question is can i take a trade by recognizing patterns in 15min or 30min candle?
Do all the patterns work in lower time frames? Else please list out which can work well in shorter time periods for intraday trading
Yes, its the same. Candlestick patterns works the same across all time frames and assets.
Hi Karthik,
As you explained w.r.t to Gap up and down, that it occurs due to new information or change in sentiment while markets were closed.
But how are these new information quantified into a price. What formula is used to calculalte this price change or new price? As trading is closed and markets participants cannot affect price.
There is no price definition for such new information, hence the gaps form in the first place.
Hello Sir! On Friday Morningstar Pattern was formed on the daily chart of Bharti Airtel. The prior trend was a downtrend and the pattern formed near the support and yet it failed today. Here is a screenshot of it
https://drive.google.com/file/d/1EWsJyu2H9AcKpyykbZV_sDiB25TGHruh/view?usp=sharing
I’ve been trading for 3 weeks and the market is hardly respecting any pattern. It’s been a frustrating experience for a beginner like me. Please give some advice.
Markets will rever respect the patterns, if only it was that easy. Patterns indicate the probability of an event occurring. There is no guarantee here 🙂
Lol! Sir are you trolling your student? If markets would never respect patterns, how are we supposed to get the trades right?
Not trolling Prashant, its the truth. Imagine a situation wherein a pattern occurs and markets have to obey that pattern and behave in a certain way? That would make life easy for everyone right? Patterns are only an indicator of what is likely to happen, not a guarantee. Thats what I meant to say 🙂
Sir, here can the encircled one be marked as an evening star?
https://www.tradingview.com/x/GI9lCUn3/
Sort of, yes. This can be considered.
Hello sir,
I noticed in chat IQ , it identifies some multiple candlestick patterns ,not described in varsity,
What can be a good place to read about these , or is there a detailed manual on zerodha’s platform itself?
Also , there are a big variety of indicators in “studies” section.
Where can we find a detailed explanation of each of them?
Dr.Gargi, the list of CS pattern is endless. Instead of learning all, it is better to figure the price action context so that the moment you see the chart, you’ll now if its a bullish or a bearish setup.
Hi Karthik,
10.2 Morning Star, pointer # 7 : In the absence of P2’s doji/spinning top it would have appeared as though P1 and P3 formed a bullish engulfing pattern.
My question is – Is it necessary for P1 & P3 to appear as ‘Bullish Engulfing’ only or it can also appear as ‘Piercing’. In the morning star tutorial chart, P1 & P3 don’t really appear to be bullish engulfing and looks like piercing instead as P3 doesn’t really engulf complete P1 candle.. Kindly advise! Regards, Gaurav
It can appear as a piercing pattern also, and if it does then you will have to treat it the same way as you’d treat the piercing pattern.
one more point to clarify – or P3 can also be further gap up and green candle instead of Bullish Engulfing or Piercing? would it be considered as morning star?
Yes, you can.
Okay, Thank you!
Hello Karthick!
First of all thanks for the wonderful content.
what is the exact reason for gap up or gap down? can we assume it is bought or sold between 9-9.15am?
Ganesh, sudden excess demand or supply leads to the gap in prices.
Hi karthick..
with reference to the previous comments,
My Question: what is the exact reason for gap up or gap down? can we assume it is bought or sold between 9-9.15am?
Your answer: Ganesh, sudden excess demand or supply leads to the gap in prices.
How will the exchange know there is excess demand or supply overnight, i mean after market hour? can you please elaborate?
Thank you so much..
It is the supply and demand that kicks in right at the pre-open and at the opening of the market.
In P3 gap up opening and candle closed 50%the range of P1 candle can be considered as morning or evening star
I’d not be very comfortable with just 50% recovery.
Evening star: How to short at 3:20 PM (Intraday shorting square off will be done by 3:15 right?)
You can short using the derivatives instrument.
Sir,
How many candles should be considered to recognise the trend (uptrend/downtrend)?
Most of the times, there are only two or three consecutive candles going in the same direction and then it reverses.
You need to look for at least 10-15 sessions before calling it a trend.
Thanks
Sir,
If there is a doji at P3 I am sure both risk takers n aversers wouldn’t want to invest, right?
Beautiful explanation
Not really, end of the day, different opinions is what makes a market!
I would personally not make an investment in this case. Would it be wise considering the formation of a doji?
Thank you.
Depends, on what strategy you are following. Short term trades can still be considered, but maybe not investments.
Hi Karthik,
Aren’t short positions only intraday?
If we short at 3:20 they will be squared off at 3:30
Thats right. But you can short futures positions, Soban.
I am sorry but I didn’t quite understand that.
Should we short future contract of our target price? or something else
but even they will be squared off by EOD?
No, futures can be carried overnight.
Hi Karthik!
Are these pattern and strategies equally profitable for any Time Frame. What Time-frame is considered the best, Daily, weekly or Monthly? What has been the most profitable from your experience?
The analysis remains the same across all time frame, Hamza. I personally prefer the EOD candles.
Dear Sir
The way you explained the candle stick patterns is just amazing. Feels the hard work you did to prepare this material, that to free of cost. Thanks again for spreading great content. Happy trading!!
Paras, thanks for the kind words. Happy learning!
sir, if a big red candle(p3)(but forms a dragonfly doji) doesn’t form after a evening star and a big green candle(p3)(but forms a gravestone doji) doesn’t form after the morning star and yet the trend is downward and upward respectively, are the patterns qualified to be called what we usually call them?
There is no name as such, but I guess you would know the price action drift in such cases.
Sir, sorry for not being lucid. Let me try to ask again.
, if a big red candle(p3)(but forms a dragonfly doji) doesn’t form after a evening star and a big green candle(p3)(but forms a gravestone doji) doesn’t form after the morning star and yet the trend is downward and upward respectively, are the patterns qualified to be called evening and morning stars respectively?
Nikhil, you are saying big red candle but a dragonfly doji, both are contradicting right? Is there a chart you can share for me to understand this better?
Sir this candle is small but can it be called bullish engulfing?
https://drive.google.com/file/d/12KIJiOs0Ei42uELUAsHE-bqmXeQwwUdo/view?usp=drivesdk
Thank you sir.
Yeah, I guess you can.
Sir, in an uptrend it suddenly starts to consolidate and then a big green candle appears , do u call this support area? Please take a look at the pic shared and let me know your explanation 😊
https://drive.google.com/file/d/12YHzyjSva_QWu62_cyT7n0Enl1wPjv6z/view?usp=drivesdk
This could be supported at a trendline, Nikhil.
wow, what a point you just made sir. I wasn”t looking at it from the trendline support point of view. Sir, if there wasnt a trendline and I was just looking it from the previous support area, could you have called this candle a support area? Its a tad confusing sir.
No Nikhil, from a regular support standpoint, this does not appear to be.
Exactly sir. I thought the same bcz if changes it’s direction from there, you could call it support area. Even the below pic can’t be a support area, right sir?
https://drive.google.com/file/d/12YHzyjSva_QWu62_cyT7n0Enl1wPjv6z/view?usp=drivesdk
Thats right, Nikhil.
Hi Kartik,
would be very kind if you explain
All the candlesticks pattern you’ve mentioned it is only effective for day trading
can we use this pattern for 10,15,30 min. candles and is it the same like the day pattern
and I’m new to the trading could you give me some tips about it as i can’t afford to buy costly softwares for observing about stocks, wanted to trade some units initially for practicing & maybe in large in the future – (using zerodha kite currently)
and congratulations for all of your articles.These are very helpful and effective for the new people.
Thats right, Vibhor. You can use the patterns across all timeframes and are not restricted to just EOD trades.
Thank you sir😊
Good luck, Nikhil!
Hello sirji, aman here. how are you? I hope u remember me. Sirji, if I am entering the trade(long) on top of a candle should my stop loss be below the present candle or below the previous candle?
Yes, for all long trades, SL is below i.e. the low of the candle.
Sir , according to you should I enter after 1st resistance or second resistance? Let me know your opinion, sir.
Depends on your trading outlook and risk appetite.
https://drive.google.com/file/d/13H0GU1kiIUrzGo_p6EKqVar7JQF1g62T/view?usp=drivesdk.
I forgot to post the link in my previous message, sorry sir.
Tough call 🙂
Suppose there r two candles sir, the present n the previous, if I am entering at the top of the present candle, should I stop loss be below the present candle?
If the two form a pattern, like say bullish engulfing, then take the lowest low of the two candles as the SL.
Karthik sir, i would pershallt enter after it broke the first previous resistance. That’s a safe move? What would u do?
Then the first resistance becomes the new support. Remember, support and resistance levels interchange.
Sirji, I got you but if the green candle 2 opens above the close of the green candle 1, n I enter on the top of candle 2 , should my stop loss be below the candle 2 or candle 1?
Candle 2.
Sir when taking a short position should I even consider these small support zones? Please look at the pic, sir.
https://drive.google.com/file/d/13Q3hLYltohE1pBDt4XI_DqmrhQJ7tG6W/view?usp=drivesdk
Yes, makes sense to generally be aware of these price points.
Sir, no matter how trivial or insignificant a small support or resistat zone is it should not be overlooked? I have this bad habit of overlooking, plz enlighten me.
Yeah, it is always good to keep track of these price zones 🙂
Hi Karthik,
Is there a free software/chart which can identifiy the candlestick patterns automatically that you have mentioned so far?
The reason I ask the question is that I want some validation/verification that I am identifying the patterns correctly. Without that, it doesnt provide me the confidence to enter into a trade as a beginner. Is there a zerodha community chat/channel where these patterns & indicators are discussed?
Appreciate if you can guide me to the appropriate chat/channel which discusses about the pattern formation and analysis.
As many of them suggested, it will be really great if you can introduce some LAB/practical simulation sessions which can provide confidence for a novice.
Akil, you can use the candlestick pattern on ChartIQ for this, not the best, but will help you get started. Do check this – https://zerodha.com/varsity/chapter/the-central-pivot-range/
sir, is it really possible to calculate risk reward ratio while we are about to enter the trade? I mean it takes time and i could end up missing points. Please enlighten me, sir.
Yes, why do you want to punch in a trade in a hurry, you can always take all the time 🙂
sir, is this a 1: 2.82 trade? I am not understanding how to read it. can you please guide?
Thank you.
Looks interesting. I’m a bit confused about the entry-exit points, do apply this formula –
RRR = SL points/Target points.
https://drive.google.com/file/d/1764ReLdx16M72RjIl-EYLl3HuiNqh1al/view?usp=sharing
Sir risk to reward ratio is calculated from sl to entry n then till the target, right?
Thats right Nikhil.
Sir, should I rely on indicators in sideways or bear Market? In bull Run it’s not really needed. Can you please enlighten me?
I’d always rely more on the candlestick pattern, Nikhil compared to the indicators.
Ok sir, thank you.
Are these 1Day Charts?
Thats right, these are 1 day or EOD chart.
Sir kindly clarify
How it is possible to Short the stock on P3, around the close of 3:20 PM after validating that P1 to P3 form an evening star.
Case 1 INTRADAY Order
How is it is possible in intraday to Short the stock on P3, around the close of 3:20 PM after validating that P1 to P3 form an evening star?
CASE 2 CNC ORDER
How is s it possible to Short the stock on P3, around the close of 3:20 PM after validating that P1 to P3 form an evening star?
Sir could you please clarify when and how to short our position on P3 on 3:20pm. Can it be possible to carry forward our CNC shorting order for next days or or more days?
1) You will have to do short trade on F&O for this
2) CNC short is not possible
Sir, when the higher timeframe such as Monthly n weekly r down but I see a price hike in daily, hourly, can I just overlook them saying it’s only a correction n then the price will go down?
Hmm, that would be a tough call. You need to see the overall trend and get a perspective on how the market is moving before you take any action.
sir basically I have this doubt plaguing me. If the higher time frames such as monthly n weekly are down, I should consider any bullish pattern in daily or hourly as either short lived or invalid since the higher time frame is bearish. sir, in such cases I should treat lower timeframes as we treat them when the higher timeframes are bullish, right? Kindly clear my doubt, sir. Its been hindering me .
The shorter time frame could pose a secondary trend which can be a counter trend, although this may not sustain through. You need to be aware of this and trade accordingly.
I got it and that doesn’t mean I should back out from going long with a short time bullish mindset, right?
Thank you sir.
Yes, you need to ensure your position is in sync with the trend.
got it sir. Sir , do we even consider dojis or spinning top in bear or bull counter attacks?
Yes, they always play a role.
The colour of the (2nd pattern) evening or morning star doesn’t matter?
Thanks a lot.
Good luck, Kushal!
sir, I just now created a zeroda account . can I change my bank account linked to zeroda account anytime?
Yes, you can. Do check this – https://support.zerodha.com/category/funds/adding-bank-accounts/articles/how-do-i-change-my-primary-bank-account-linked-with-zerodha
sure sir. Besides if I see two bullish patterns at one time, is it a strong sign of a bullish reversal?
Strong maybe no, but signs maybe 🙂
It probably is.
sir, I have got the TPIN to avail e-DIS facility and while tracking the status of my account, its saying that the login crendentials have been mailed but I dont see any mail as such.
Nikhil, please do check this with the support team.
sir, I got the login credentials, thank you sir!
Good luck and happy trading, Nikhil!
Sir, what is the buy signal in ADX? I have chosen 60 and 40 for RSI. please let me know abt the ADX.
Thank you.
Hmm, have explained this in the chapter itself right?
sir, when the resistance is broken n the prices come back in we call it fake break out but when the price breaks resistance makes a U shape (rounding top)n come back in again, can we call it a fake break out? please take a look at the image below.
https://drive.google.com/file/d/1JqXC85qfCrjM_qwGszUcHjE-0ZqOzjtE/view?usp=sharing
Yeah, it is still a false breakout.
sir, the most important thing we have us understand is like support n resistance zones ,even a single candle(its high n low) acts as support n resistance, right?
Thats right, these are the building blocks of S&R.
Sir, cnc is equity and mis is intra day?
CNC is to take delivery of stocks, MIS is intrday.
hi kartik
the doji/spinning top (p2) should be bullish for morning star or can it be bearish ? And vice versa for evening star?
The colour of the doji/spinning top does not really matter, Bhavesh.
Ok sir, I want to start with equities so what option should I select?
Thank you.
Start as in like to trade intraday or make investments?
Thankyou Sir
Good luck!
Sir, for my equities I see that I got to choose CNC for delivery. Now what is trigger stop loss, sir?
SL is the price at which you intend to book a loss, in case the stock is moving against you. Tink of the trigger price as a means of activating the SL price.
sir, I have a doubt. when the candle closes above the resistance line and becomes support and then a red candle closes exactly at the resistance line that became support, sir should we say the red candle went to retest the support line?
Thats right, Nikhil. Support and resistance lines are interchangeable.
yes sir, they are interchangeable, a red candle after a green candle means it came to retest the support line,right ?
Thank you sir.
Yup. However, what matters more than the colour of the candle itself is the current market price with respect to the S&R lines.
sir, before trading in a stock from an index, in this case say Nifty Metal, should I check the Nifty Metal chart ?
Yes, that will add some value to your analysis.
one more thing what I am noticing is sir, the support and resistance zones of the sector n its stocks remain the same. Is it because the stocks move the sector?
That’s right, stocks from the same sector tend to move similarly. Hence similar S&R levels.
wow! sir, what is surprising is all the stocks from a sector move similarly, how is it possible?
Think about it – HDFC Bank, ICIC Bank, Kotak Bank, all Pvt sector banks and they move similarly. Do check their charts. Likewise TCS, Infy, HCL. BPCL, HPCL, IOC etc. This is because, for the given sector, the factors that impact the sector are all similar.
wow, that’s quite amazing as well as astonishing to know!
Good luck and happy trading 🙂
sir, all moving averages hold significance in all the timeframes, right? I have been giving more importance to 20 day moving averages in daily but not in hourly n 15 mins. Please clear my doubt.
Not really, for example, I’d not use any moving average on 1 minute chart. Its too much noise anyway.
Good evening Karthik ji, I have a follow up to the other gentleman’s question. is 50day Moving averages work as effectively in 15 mins as it does in hourly and daily? I see it does but I just want to know the expert opinion.
Thank you Karthik ji!
Although the answer is yes, I personally prefer EOD charts 🙂
Ok nice. Sir I traded Bajaj Finance today n my doubt is it’s a part of nifty 50 as well as nifty finance so which sectors chart should I look at? I’m confused.
Both, just to have a better perspective 🙂
karthik Ji, in your experience do 100 and 200 Moving averages act as support or resistance?
I’d say reliable 🙂
sir, but sometimes I feel its the stocks that move the sector, so why should I look at the sector? Can you clear my misconception?
They are all related, especially if the stock is a sector heavy weight. For example HDFC Bank is a banking sector heavy weight.
This is w.r.t to Morning star. In day 2 ,can we say that buyers feel that falling price as a good opportunity to buy at cheap price. This might be one of reasons for indecisiveness, hence doji formation?
True, these mixed opinions and weak efforts to buy/sell is what causes a doji/spinning top.
Sir, nifty auto sector is at resistance right now n is resisting, but I don’t see any resistance zone in bajaj auto but it’s still resisting, this is bcz of the sectoral impact?
Sector-wise resistance is different from stock-specific resistance, right?
sir, if sector is resisting, stock will resist na sir? Please give in your detailed explanation.
Not really, Nikhil. Why do think so? While a stock follows the sector trends, stocks can also have their own factors (unsystematic influences) which can move the stock.
sir, you mean to say its the stock that move the sector and bcz the stocks are at a resistance the sector is resisting?
Hmm, to some extent its true. But not always. Both have their own factors at play.
Sir for a better example, nifty 50 n nifty bank sectors are at an all time high and resisting, this is bcz the stocks are resisting, right?
Nikhil, what I’m trying to say is, yes there will be interdependencies, but its not necessarily true all the time. For example, a bunch of stocks can be a resistance zone, which means Index too may be at a resistance. However if an index heavyweight, like HDFC is trending, then the index is likely to move.
yes sir, if a stock with heavy capitalization starts to move , it will move the sector. But when a heavyweight starts to move does it also move other stocks?
Yes, it will exert some influence to impact other stocks.
sir , now why should I look a the sector? Just to see what majority of the stocks are doing ? I mean when I see sector going up, being at resistance I can deduce that the most of the stocks are going up and are at resistance respectively?
The easiest way to test this is by eyeballing and check what happened in the past. That will give you a quick perspective.
sir, I got what you are saying. I read them over and over and they gave me an idea. Sir now my doubt is if the sector is resisting then obviously most of the stocks are resisting and now if a few stocks start moving up, should I be suspicious or I should consider that they are moving up bcz of their own factors(stock specific)?
Thank you so much,sir!
Yup, likely that the stocks make the first move.
sir, when you say stock specific in this scenario it means despite the sector at resistance some stocks till move up bcz of their own factors?
Yes.
thank you karthik sir! you solved my big doubt.
Good luck!
Sir,
Please add multiple candlestick time frames analyasis chapter for the benefit of traders
Thanks
The concepts remain the same across all time frames and assets.
It will be so nice, if you guys make complete video guide, the learning would be at next level..:)
We are thinking about it, Kaizu. Hopefully, we will have something out soon.
Hi,
Hammer or Marubozu formation on weekly ,monthly chart is more strong signal to buy stock for longer duration ?
Yeah. If you are looking at weekly charts, then your holding period should be long enough.
7. In the absence of P2’s doji/spinning top, it would have appeared as though P1 and P3 formed a bullish engulfing pattern.
Did you actually mean PIERCING Pattern ?
As the Blue candle (P3) doesn’t cover the whole of Red candle (P1).
Thanking you in advance.
Engulfing, since there was a gap up opening.
sir, what trading platform does Zerodha use?
We have an in house trading platform called Kite.
Sir this was the far best interpretation of candle sticks i could have ever got.
nice words simple words point-to-point things and many other things which let us go more deeper in the chapters-modules.
Cant thankyou enough for writing this, you are a true insipiration sir :).
I’m glad you liked it, Harsh. Happy learning 🙂
Thank you for the clear and concise explanation on candlesticks. Is there any app/ site where we can practice predicting the trend based on the candlestick pattern? Thank you
Maybe you should try Streak.tech
What should be the trade if there is continuous Doji formation for the past 1 week and then (P1 Doji formation on P2 it is a bullish candle ) what we should be expecting eg Rpower
Wait and watch, since dojis and spinning tops convey indecision in the market.
Hi Sir,
What if there’s a situation where we see a gap up and also there is some bearish formation like shooting star on the same day. You can see it on the last example of gaps in 1st image.
I’d go with the shooting star since it’s the latest formation (wrt to the gap).
Zerodha university people explained concepts very well and Kudos and Hats off to you. I love zerodha professionalism in all aspects. Great platform to trade and great university to learn.
Thanks for the kind words, Reddy garu. Happy reading!
hey karthik,
I wanted to know if I can use these candlestick patterns in a pullback/retracement?
for example, the stock’s primary trend is uptrend but then it retraces or there is a pullback, and then it forms a bullish reversal candlestick pattern like a hammer or a bullish harami or a morning star pattern so then can I buy the stock, based on that bullish reversal patterns in pullbacks or retracements where the primary trend is an uptrend?
Of course, you can. The point is that candlestick patterns are manifestation of price action, hence you can use this to identify pullbacks and retracements.
Hi Karthik
A lot of the modules mention “the risk taker places the trade on 3.20 PM on the last day of a pattern”. If the trade is a short trade, how can one place a short trade at 3.20, the same day? Shorting for stocks only works intraday and auto-settlement kicks in at 3.20 PM on Zerodha, so how can the trade go through the same day? Are you always referring to futures when it comes to shorting?
Indranil
Indranil, you can always short via futures or options, there is no issues with that.
hello Karthik
suppose the stock is in an uptrend and then there is a pullback/retracement in the stock and then it forms a bullish reversal candlestick pattern like a hammer or an inside bar so in this case, I should be taking a long position in the stock. so how should i know that the momentum is strong and this is a good trade to take?
how should I confirm on a larger timeframe that the momentum is strong?
or
should I be looking at a larger timeframe or a smaller timeframe to confirm the momentum?
and how should I confirm the momentum? like should I be using an indicator for this on a larger or smaller timeframe? If yes, then which inicator should I be using?
The only way to get a sense of how strong the momentum is to look at the previous trend and figure how bullish the stock was. If you see a nice rally with very little volatility, then it indicates a strong bullish undertone.
but if then there is a pullback and a retracement then how will I know that that is the lowest low of the pullback or it is not the final low of the retracement then I should take the trade then?
Nobody can time that, I guess your own experience will help here 🙂
Hi Karthik
Hope you are enjoying the festive season.
I had a question regarding today’s bank nifty movement (14-Oct-21) from 38825 at about 1:00 pm to 39000 and beyond half an hour later. I didnt notice anything significant in the candlestick pattern and closed my call buy position with a minor loss based on the Stop Loss. But then it simply zoomed and I missed out on the opportunity. So wanted to know what did I miss in the charts? Thanks for all your help and support
Regards
Dipankar
Trading has multiple dimensions to it. While you pay attention to candle patterns, you also need to pay attention to the market demand and supply situation. Excess demands tends to increase the stock price and it may not always show up in candle patterns.
Sir,
How does a Gap Up or Gap Down opening actually occurs, what is actually going on at technical levels ? like when a stock that closed at 100 for the previous day, the next day the buyer’s intent would be to buy it at 100 only or rather less, right even if there is some good news? so why would he put down an ask for Rs.104 ( would he try multiple asks and try to get it at any cost – can you please explain the technical aspect of actually doing this on Zerodha like
1) maybe the buyer would place a Market order, so if the seller offers at 104 the buyer would get the stock at 104- but does this mean that the sellers come first on the market but when the buyer actually bought the share at 104 = then the system decided the Opening price of that particular stock ?
2) what happens if the buyer has put up a limit order to buy ? will his order will remain pending throughout the day? but then how was this new opening price decided on system /exchange?
Think about a regular vegetable market – the price of Onion is 30 per Kg on a closing basis. Market closes for the day. Overnight, there is rain destroying the crops. Do you think the price of onion the next morning will still be at 30? No right, it is bound to increase and will probably open at 40 or 50. Same thing with stocks, overnight news can after the open price leading to gap up or down.
Hii Karthik ji. Your lessons are super easy to understand. They are helping me a lot, who thought that it will be impossible for someone like me to even understand how the markets work. Thanks for this initiative! I have one doubt that might have been covered in the following lessons still I am asking anyway. If we are gonna buy only on the blue candlestick day and sell on the red candlestick day then how are we gonna make a profit in it?
Thanks for the kind words, Rutuja. The idea is to buy when the trend is picking up and sell when we identify a reversal. It is impossible to catch the entire trend, aim of the game is catch at least a portion of it, consistently 🙂
Do candlestick patterns still work? I mean, I have read a number of posts online which outrightly put down the effectiveness of candlestick patterns. Is that so? How reliable are the patterns today?
Riadh, each trader’s experience is different. I’d suggest you figure this by making your own observations and trades in the market.
1)How do we overcome false signals? is there any strategies?
if we take an example of TATA STEEL, 3 days back(21 dec) it forms bullish harami with satisfying check list like good volume and also met with good support area.But from yesterday it starts again falling,
2) In these conditions what to do? (not only tata steel, some times other stocks also do as it is)
There are no pre-set formulas to overcome these false signals, but over time, as you gain more experience in the market, you will know which signals to avoid. One thing that helps though is to check if the trade that you wish to take is aligned with the overall direction of the market. For example, if I were to go long on Tata steel, I’d be happy to see that the overall market is also bullish.
Sir,
I have seen your story on instagram, Congratulations for reaching that mark sir, your efforts made us to gain more knowledge about trading, markets and investing.
And also I noticed that your starting video series on marketing, is it true? if yes when will you releasing it, where and is it paid or free?
Thanks Pavan. The series is live, please click on the video icon (1st 3 modules), its right below the module name in the landing page.
P3 candle should close above P1 appears to be a bit confusing as texts elsewhere do not mention this. In fact P3 closes below P1. Kindly clarify.
Which pattern are you referring to, Veni? If its the morning star, then you need to ensure P3 closes above P1.
I have just started learning about stock markets in my investment journey, and after learning about all the candlestick patterns, I am longing for one question: How to apply these patterns ? I mean what time frame should I look for (days, weeks, months) if I am a beginner and want to learn long term trading (as suggested in one of the discussion forums) ??
I’d suggest you stick to end of day time frame till you get a hang of things, Kishore.
Sir.
I like to do Swing trading..which time frame is good to find candlestick patterns?
I’d suggest you look at EOD candles, Alex.
Sir
Is any continuation candles .
Is exist , how much they are because this time market goes in trend.
And many times also
Sorry, I dint understand your query, can you please eloborate.
Hi Karthik,
How can this morning and evening star pattern be used in intraday trades as well? Like in 15 mins and 30 mins or 1hr timeframe. Is it possible?
Just like the way you’d use for EOD. You can use 15 mins chart and trade these patterns.
What if the fourth day produces a doji or a spinning top, considering i am a risk averse trader?
Thats ok. Once your trade is initiated, you hold on to till the SL or target is hit.
I have a lot of similar doubts about patterns and their behavior. Also, how do I go deeper with technical analysis? This is because I am genuinely interested in the way these systems are created. I am not only asking for trading-related purposes.
I’d suggest you read the book by Edward Magee on Technical Analysis.
Hi Karthik
Can you please explain me the statement?
:::QUOTE::
The trade setup for an evening star is as follows:
1. Short the stock on P3, around the close of 3:20 PM after validating that P1 to P3 form an evening star
::UNQUOTE::
If I understand right, you can short equities only for intraday positions. This means on day 3 if you short at 3:20 PM, your position will be closed by 3:30 PM. This means that you will be holding only for 10 mins. Is my understanding correct?
Thanks
Regards
Kalyan
Ah no, for overnight short positions, you can use Futures or options.
Hi Karthik,
Good Day! Thank you for helping the retailers with your extensive knowledge.
Couple of doubts about candlesticks formation in the intraday chart.
1. What would be the minimum ideal timeframe to check for the candlestick formation? 5 mins /15 mins?
2. In Nifty and Bank Nifty, I see multiple candlesticks formation at consolidation, Eg: Bullish engulfing followed by a morning star and then a hammer. Or a failed Dark cloud, then an evening star followed by a 2-3 Doji etc.
Are all these candle stick patterns valid in consolidation as well?
Posted 2 charts of BNF :
https://postimg.cc/rdGp73zg (Morning star candle on 23 Jun 1:30 PM in 15min Time frame)
https://postimg.cc/47J3GP9G (Series of candle stick patterns on 23 Jun 10:55)
Please advise.
1) I personally prefer higher time frame candles. So 15 mins is better for me compared to 5.
2) Yes, this is quite common. Usually you act basis the latest candlestick pattern. So if you spot bullish engulfing and set up a trade, you wont exit that trade just because the following pattern is bearish marubuzo. You hold on to the initial trade either till your target is achieved or SL is triggered.
Sir, a different doubt than what you have taught in this module…..so sir in the first image where you shown the gap ups there there is blue long candle after a downtrend in the stock….can we say that the long blue candle is a bullish bald candle right?
You mean to say bullish marubuzo?
yeah
Hello Karthik,
I would like clarity on a query already posted by Rakesh Hansalia as I did find a clear response.
Let’s assume conditions for P1 and P2 are satisfied then body color (blue or red ) of doji (for P2) really matters in morning or evening star pattern?
Thanks.
Manoj, the body color does not matter for the P2 candle in an evening star.
Correction *did not*
Sir,I Would like to know one thing if you don’t mind please…My doubt is that you people by owning a Trading Platform with crores of rupees Turnover and also by painstakingly creating this zerodha varsity for educating common people about stock market trading,why you and other stalwarts of Zerodha try to demotivate people from entering stock market for trading in all your the interviews given and in various tweets ..being Highly paradoxical.. Could you please give some light in to it ..So that this will help people like us to know whether to learn this or stay away from this..
The problem is that people take up trading full time by sacrificing their primary careers. They look at stock markets as an easy source of revenue. But over the years, we have seen that it is not. You need to have a main profession that pays a salary, and your family’s safety is taken care of. Trading can be a supplemental source of income, provided it’s done right. We try to educate people on this aspect.
Thank you Sir for your reply ..So could you please clarify that, Is Zerodha Varsity just a business perspective to attract people towards Zerodha rather than educating people ..Sorry to be blunt ..Not trying to belittle your effort although..and I have also seen one of Zerodha owners Interview stating Zerodha’s 95% Revenue comes from stock traders rather than Investors.. So are all these people wasting their time and Money…or Is it a good profession if one is skilled in trading ..
No 🙂
Intent is to educate people interested in trading and investing to do it correctly. Provide them with all the information and knowledge without holding back anything. We try to say is that, dont make trading your full-time profession by sacrificing your main profession with an agenda to make a living out of your trading career, because of all the reasons I explained in my previous comment. Keep trading as a secondary source and do it well. The resources provided is to help you do that.
hello dear Karthik Rangappa sir
i have one question that is in gap up and gap down opening the trade transaction will take place at what time i am bit confused in this.
is it before pre marketing hours or after 9:15
Its always during the market hours 🙂
sir, as you have mentioned in module these are profitable patterns for indian market, is it not applicable on any foriegn markets?
These are good patterns to know, but over time you just have to understand the underlying price action, I’ve spoken about it here – https://www.youtube.com/watch?v=z0Rwoz6PduM&t=0s
Sir,
Can u plz tell what to expect when a doji occurs right after a bullish engulfing pattern?
I’ve explained this in the chapter itself. A doji after any pattern enhances the probability of the outcome that the patter suggests.
In evening star If we short at 3:20 it will square off automatically by Zerodha at the end of trading session… I don’t think you imply that gain will be made in just next 10 mins…next day a new short is to be opened… plz revert….
Certainly not by shorting in the cash market. The assumption is that the shorts are made in the futures market or via an options instrument.
Hi Karthik,
As per the explanation to form the morning star pattern we have to wait for 3 days and then take the trade.
What if the same morning start patterns come in an hourly time frame during intraday can we trade on it considering it as a morning star pattern?
It still works the same, the idea is to ensure that 3 candles form the pattern. It could be over 3 days or 3 hours, or even maybe 3 minutes.
Hi Kartik,
Why do gap openings occur? Is it due to the traders putting AMOs and/or bidding in the pre-open market?
Thank you
It is basically the overnight demand and supply pressure resulting in gap ups and downs.
As a rule of thumb, the higher the number of days involved in a pattern, the better it is to initiate the trade on the same day.
What does this mean?
And I am a big fan of yours karthik🙂
Amar, thanks for the kind words!
So what I mean by this is that….on a marubuzo candle (single candle stick patter), you can choose to act the day its formed or the next day. But something like a morning start, which takes 3 days to evolve, you are better off initiating the trade on the day the patter evolves.
what will be the conditions and code for 3 outside bullish pattern ,it is not defined in varsity?
Not sure which pattern you are referring to, Rakesh. Can you share more clarity?
As a rule of thumb, the higher the number of days involved in a pattern, the better it is to initiate the trade on the same day. what does this mean?
It just means that in longer patterns, even the risk-averse traders can initiate the trade on the pattern day only and there is no need to wait for another confirmation day.
Sir, Even if a company announces something which is super positive, it does not make sense that share prices are opened with a Gap Up the next morning without any trading activity. In fact, it suggests that there are factors which can easily manipulate prices other than trading activity.
Trading factors are derived from all these factors anyway 🙂
what should be the prior trend in Gap-Up or Gap-Down opening?
No prior trend for this as you don’t really buy or sell based on gaps.
Karthik sir,
can we use these single and multiple candlestick patterns also in 5 and 15 min charts?
You can, better on 15 or 30 mins compared to 5 🙂
Sir I have a confusion regarding shorting of the stock after identifying the candle patterns. As discussed in the earlier module it was said that shorting is an intraday activity but how can we short a stock @ 3:20 PM ?
In the text, it is mentioned that a risk-taker enters the trade on the last day of the pattern formation around the closing price (3:20 PM). If a risk trader shorts a trade at around 3:20 pm does he have to close the trade by 3:30 pm that day itself?
You must short via derivatives (via futures or options) to carry forward the positions, Gourish.
thankyou karthik and gourish.
Hey kartik
So going well with zerodha but does all these patterns we studied wroks on 1 day frame or any time frame?
Please reply
Yes, these patterns work on both intrday and swing positions. I personally prefer swing positions.
While analysing an intraday 15 min chart how do I check the bullish engulfing or any 2 day pattern without having the day complete and can you please also tell me the trade setup for a 15 min time frame?
TA can be applied to any time frame, Devak. Treat 15mins as an EoD candle 🙂
Sir I just want to know that what is the effective way to practice or use to with candlestick pattern as I am a beginner n eagerly understand the pattern style pls.n suggests some paper trading app or website
Pls
Check this – https://www.youtube.com/watch?v=1kQjXFL4Mfc&list=PLX2SHiKfualEyD05J9JsklEq1JFGbG6qJ&index=10
Karthik sir 🙏
Because of your teaching and great module I am understanding share market to some extent.
Now my problem is, I am unable to see the charts in comment section. I tried all way but has been failed to see the chart. Please help me in this regard.
Thanks for the kind words, Virendra. I’m glad you liked the contents on Varsity 🙂
The charts in comment section is uploaded by users, they usually provide links to Google drive from where one can see charts. If they deleted or changed the location of the file, then it will no longer be available for review.
Hey Sir,
Firstly, thanks a lot for the valuable resources; they’ve been incredibly useful. As a beginner in stock market trading. Should my initial focus be on shorter time frames, such as one day or less, to anticipate market movements?
Thanks, Akshit. Your initial focus should be on longer term investments 🙂
Hi, What is meant by long trade and short trade. I don’t understand when you say the highest of the high is the stoploss for long trade and lowest of the low is stoploss for short trade. Should I understand them as buy and sell respectively?
I’d suggest you read the earlier module to understand some of these basic nuances.
Hi Karthik. Can I follow the candel stick patterns on future and option? If yes what time frame(5mn/15mn/1hour) will I follow?
Yes, you can. I’d suggest 15mins or higher.
Hi Karthik sir,
Can doji or spinning top of be any color red or blue in both morning and evening star?
Yup, the colour does not really matter for doji and spinning top.
hi,
do you have any whatsapp group where you share knowledge and stock market update. if yes kindly add me.
9970250000
Not really, but you can follow us on Twitter and Instagram, look for ‘Zerodha Varsity’ 🙂
I did not quite get the technicalities behind the gaps. Lets say the previous day close is 100 and the buyers before the market opens today keep their buy order at last trader price. Then the traders gets executed one by one and the gap up occurs. Is this how it works? if so then how come the traders gets executed before the market opens and not displayed in chart?
Lets say the previous day the market closed at 250 per share for a certain company. After the market closes, the CEO makes a statement saying the next quarter will be tough for them as they are facing raw material challenges. This news, makes the stock unattractive and people may want to sell the shares.
The next day, the stock price will no longer open at 250, rather it will open a bit lower..maybe around 240 or 230, thus creating a gap.
Hi Sir, firstly thanks for all this content.
In previous module you tell us about that we can’t hold short positions for long term. So how a risk taker make short position at 3:20 and hold it till next day.
Thanks, Udit. You cant hold positions in the spot market, but you can in derivatives markets.
Sir,
You have not mentioned on P3 at what time Risk Averse WILL ENTER IN MARKET ?
Either at open or take a position for next day by close.
Hi Karthik Sir!
A captivating and insightful Module so far that brilliantly demystifies the stock market, offering both novice and seasoned investors valuable wisdom.
As a novice starter, I dare to ask if the color of the Doji matters in The Morning or Evening Star?
Glad you liked the module, Arun. No, the color of doji does not really matter 🙂
Hello Karthik, I had a question for you, can you tell me whether the multiple candles you have drawn in technical analysis can be used in Forex trading?
Yes, you can. It can be applied to any asset which has a historical time series data.
Hey kartik i would like to disturb you again and apologize for that.should i do paper trading to start trading.
No need to say that, I’m here to answer queries, so pls dont feel the need to apologize.
Paper trading, you can. But instead why not trade with very small amounts to explore how orders, patterns work?
Hi Karthik,
Is it necessary for a gap down in the P2 of a morning star pattern?
Can you kindly take a look at FINPIPE in Daily TF, the dates are 9,12,13 June 2023. The pattern seems to be morning star and the trend is also down and the following rally is also good, but p2 is a gap up doji
Awaiting your response
Thank you:)
Yes, gaps are required in both morning and evening stars.
Thank you for responding, but is it necessary that there is a gap-down if it is a morning star pattern, what if it is gap-up? Does it invalidate the pattern?
Also, how many dojis are acceptable in the morning/evening star pattern?
Thanks:)
It does not invalidate, its just that a gap down is text book definition of a morning star pattern. As I mentioned at the start, you can be a little flexible around these patterns.
Thank you, can you please help clear the following
1. So in a morning star instead of a “gap down in p2 and a gap up in p3” if it is “gap up in p2 and a gap up in p3”, it still works right?
2. how many dojis are acceptable in the morning/evening star pattern?
Thanks
1) Yes, it should
2) Nothing specific around this, generally 2-3 is also ok.
Thank you for responding:)
In varsity everything is explained every well but why is chart patterns topic is not there how can we trade without knowing about chart patterns everytime we can’t trade using candlestick pattern we mainly need about chart patterns
Candlesticks is a chart pattern right? Not sure what you are talking about.
Like you didn’t explained about chart patterns like cup and handle, double top, symmetrical triangle ,falling wedge, triple bottom,Head and shoulder
Have explained all the patterns that are important. Once you understand these basic ones, you can easily pick up any pattern that you’d want to learn.
Hii Karthik Rangappa even after completing technical analysis it seems difficult to me this my 3rd time completing technical analysis
it is difficult to find candlestick pattern and difficult to understand what’s going on the market please give me some advice
Where and which part are you finding difficult, Naveen? If you have any specific are of difficulty, then u can try helping you with it.
Regarding Chat patterns I unable to understand what going on market while learning it feels super easy I can easily identify candlestick pattern & chat pattern when I open trading terminal I unable to Identify what will happen
Next
Here is a suggestion, forget all the CS patterns, but pick one pattern that you’ve understood well – try to identify that across multiple stock charts. Once you are comfortable, move on to other patterns. Basically, go one at a time, this will help.
Will you please explain,what you mean by a long trade and a short trade?
Please do check the previous module for this 🙂
As a rule of thumb, the higher the number of days involved in a pattern, the better it is to initiate the trade on the same day. plz elaborate with example
So if its a 3 day pattern, you can initiate the trade on the 3rd day itself instead of waiting for the confirmation on 4th day. If its a 1 day pattern like Marubuzo, maybe you can wait for the 2nd day confirmation.
Hi Karthik,
In the Varsity modules, the trade examples suggest entering trades around 3:20 PM. My question is: how can one go short at 3:20 PM when we know that short positions can only be taken on an intraday basis in the spot market and cannot be carried overnight?
Looking forward to your insights.
You can short using the futures or options, Kashish.
Thanks for the prompt response, Karthik!
Cheers! Good luck Kashish!
What percent can be considered as gap up/down ?
Even if its 0.5%, it can be considered as a gap up/down opening.
How can i short a stock if i can’t carry forward my positions overnight in equity market.
You can do so via derivatives – futures and options 🙂
What is target to be reached or stop loss initiated??? From where do we we assume the target
Please do read through the module, we have discussed this in detail.
Hey, are the chart examples that are being taken single day candlestick charts?
For single candlestick pattern yes, otherwise it is over 2 or 3 days.