If you were to learn only one candle by name, this would have to be the one. A "common" doji, as I call it, is shaped like a cross. A doji has no real body. What it says is that there is a stalemate between supply and demand. It is a time when the optimist and pessimist, amateur and professional are all in agreement. This market equilibrium argues against a strong uptrend or downtrend continuing, so a doji often marks a reversal day.
A doji in an overbought or oversold market is therefore often very significant. The opening of the next day should be watched carefully to see if the market carries through on the reversal. Note, a candle with a very small real body often can
be interpreted as a doji.
Let's See Doji In a Chart
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2.LONG LEGGED DOJI
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A "long-legged" doji is a far more dramatic candle. It says that prices moved far higher on the day, but then profit taking kicked in. Typically, a very large upper shadow is left. A close below the midpoint of the candle shows a lot of weakness. Here's an example of a long-legged doji:
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Let's See Long Legged Doji In a Chart
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3.GRAVESTONE DOJI
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A "gravestone doji," as the name implies, is probably the most ominous candle of all. On that day, prices rallied, but could not stand the "altitude" they achieved. By the end of the day they came back and closed at the same level. Here's an example of a gravestone doji
Let's See Gravestone Doji In a Chart
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4.DRAGONFLY DOJI
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Finally, a "dragonfly" doji depicts a day on which prices opened at a high, sold off, and then returned to the opening price. In my experience, dragonflies are fairly infrequent. When they do occur, however, they often resolve bullishly (provided the stock is not already overbought as shown in a chart
FLAG AND PENNANT PATTERN The flag and pennant patterns are commonly found patterns in the price charts of financially traded assets stocks, bonds, futures, etc. The patterns are characterized by a clear direction of the price trend, followed by a consolidation and range bound movement, which is then followed by a resumption of the trend.The continuation patterns which we have taken up so far in this Study the various types of Triangles and the Rectangle have one FLAG PATTERN The flag pattern is encompassed by two parallel lines. These lines can be either flat or pointed in the opposite direction of the primary market trend. The pole is then formed by a line which represents the primary trend in the market. The pattern is seen as the market potentially just taking a “breather” after a big move before continuing its primary trend. The chart below illustrates.Thus, the first requirement of the Flag formation is a nearly vertical price movement on th
OPTION STRATEGIES Options allow the investor to sculpt the returns in their portfolio. When you buy a stock and the price rises $1, you make $1. You lose $1 if the price declines $1. Your profits are linear and directly related to only the change in the price of the stock. Interest and dividends will make a slight change to the outcome though these factors are also linear. Options blow apart this linearity. Options are called convex instruments because the returns are not linear but curved. We saw that in the previous chapters. You can literally create millions of possible returns through the use of options. You can mix and match options to create just about any return possible. Selecting a strategy is a multi step process. You should go through a systematic process before initiating a trade. Each step should lead to further refinement of the strategy. It can be very dangerous to your bank account to disregard some or all of the major factors that affect options prices.
TYPES OF BUY SELL IN OPTION Having reviewed the basics of option characteristics, we are now aware that we have a number of investment choices: stock, calls on the stock, and puts on the stock. For each of these, we can initiate a position either by purchase (referred to as a long position) or by sale (referred to as a short position), thus giving us six different initiating strategies : * Long stock * Short stock * Long call * Short call * Long put * Short put These tools are what we can use to construct all option-based strategies. By combining these building blocks, the individual investor can create strategies ranging from basic to complex. Mastery of each of the individual building blocks is essential for understanding how they work in combination. Therefore, we will now look at each of these six alternatives in some detail. Retail investors are already familiar with one of these building blocks: long stock. With an understanding of the oth
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