Reading Special Bar Combinations - Crypto Academy / S5W8 - Homework Post for @sachin08.

in hive-108451 •  4 months ago 

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(1) Explain Price Bars in your own words. How to add these price bars on Chart with proper screenshots?

(2) How to identify trends using Price Bars. Explain both trends. (Screenshots required)

(3) Explain the Bar Combinations for Spending the Day inside for both conditions. (Screenshots required)

(4) Explain the Bar Combinations for Getting outside for the Day for both conditions. (Screenshots required)

(5) Explain the Bar Combinations for Finding the close at the open for both conditions in each trend. (Screenshots required)

(6) Conclusion

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INTRODUCTION: Good day @sachin08 and every member of this great community. Welcome to my homework post for the last week of season 5. Do have a great holiday.

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(1) Explain Price Bars in your own words. How to add these price bars on Chart with proper screenshots?

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The price bar is the basic building block of technical analysis and this is because price action which is what made up the price bar is the basis of all technical analysis. It describes and defines the trading action in a security for a given period. The price bar represents all the transactions disclosing both supply and demand at each point graphically.

Price bar is the graphical representation of price action which is referred to as price movements of an asset over a period of time (ranges from minutes upward) and which is plotted on a chart.

Understanding the price bars very well will go a long way in helping one to identify what trend the market is undergoing which will consequently curb trading against market trends.

Most of the market indicators make use of the arithmetic manipulation of the four standard price bar components which I am going to explain shortly.

The image below shows the four standard components which are Low, High, Open, Close.

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  • Open: The opening price is denoted by the little horizontal line on the left.

  • High: The top of the vertical line defines or denotes the high.

  • Low: The bottom of the vertical line defines or denotes the low.

  • Close: The closing price is denoted by the little horizontal line on the right.

To add the price bar on a chart, I go to Tradingview

  • I clicked on the Candle logo and selected Bars as depicted in the image below.

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And with that, I have successfully price bar to the chart as shown below.

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(2) How to identify trends using Price Bars. Explain for both trend. (Screenshots required)

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Before I go ahead to identify trends using price bars, I will like to quickly

What is a trend? A trend can be defined as the general direction of the price of a market or asset and it could be an uptrend or a downtrend. As you can see, there are now two terms which are uptrend and downtrend.

Uptrends are trends that are marked by rising data points, such as higher-highs and higher-lows.

Downtrends are trends that are marked by falling data points, such as lower-lows and lower-highs.

Now, what are Higher-high, Higher-lows, Lower-lows, and Lower-highs?

  • Higher High: When the current or latest high is higher than the previous high, then it can be regarded as a Higher high.

  • Higher Low: When the current or latest low is higher than the previous low, then it can be regarded as a Higher low.

  • Lower High: When the current or latest high is lower than the previous high, then it can be regarded as a Lower high.

  • Lower Low: When the current or latest low is lower than the previous low, then it can be regarded as a Lower low.

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Bullish Trend (Uptrend)

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The formation of higher highs and higher lows by the price bar depicts or denotes a bullish trend. Don’t forget bullish trends are trends that are marked by higher highs and higher lows and this kind of pattern are formed because of two reasons listed below

  • The current price doesn’t trade below the previous low point or price.
  • The current price also closes above the previous high point or price.

We should also note that bullish trend is a result of high demand from buyers and this will consequently make the price goes higher and we should be careful with our trading decisions.

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Bearish trend (Downtrend)

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The formation of lower-highs and lower lows by the price bar depicts or denotes a bearish trend. And also, don’t forget bearish trends are trends that are marked by lower highs and lower higher lows, and this kind of pattern is formed because of two reasons listed below

  • The current price trades below the previous low point or price.
  • The current price doesn’t close above the previous high point or price.

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(3) Explain the Bar Combinations for Spending the Day inside for both conditions. (Screenshots required)

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The charts are characterized by numerous bar combinations and being able to identify some will go a long way in the analysis of market trends.

Spending the day inside is a price bar combination and it is a situation in the market where the current high is lower than the previous day's high, and the current low is higher than the previous day's low. It is a situation in the market where both the buyer and the seller could not make a move. i.e, buyers are not too sure of buying more, and sellers are not confident enough to sell.

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Bullish Trend (Uptrend)

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For a bullish trend, Spending the day inside is said to occur whenever the price bar components formation meet the following criteria,

  • An Open is formed at the Low of the previous price bar and at the same time the Close is found at the upside.
  • Also, the High is formed below the High of the previous price bar.

All these are met in the image below.

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Bearish Trend (Downtrend)

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For a bearish trend, Spending the day inside is said to occur whenever the price bar components formation meet the following criteria,

  • A Close is formed at the High of the previous price bar and at the same time the Open is found at the downside.
  • Also, the Low is formed below the Low of the previous price bar.

All these are met in the image below.

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(4) Explain the Bar Combinations for Getting outside for the Day for both conditions. (Screenshots required)

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Getting outside for the day is a bar combination that occurs in two different ways, it is either getting outside in a continuous trend movement from bullish to bullish or bearish to Bearish or getting outside for a day for a trend reversal from bullish to bearish or bearish to bullish. This situation is said to occur whenever both the open and close components appear outside the day bar.

Just as said earlier, The outside day has a higher high and higher close by definition which could imply continuation in an uptrend and likewise reversal in a downtrend. Also, the outside day has a lower low which could also imply continuation in a downtrend and likewise reversal in an uptrend.

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Bullish Trend (Uptrend)

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For a bullish trend, Getting outside for the Day is said to occur whenever the price bar components formation meet the following criteria,

  • The Open will be at the Low and the Close will be at the High

This criterion is met in the image below.

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Bearish Trend (Downtrend)

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For a bearish trend, Getting outside for the Day is said to occur whenever the price bar components formation meet the following criteriion,

  • The Open will be at the High and the Close will be at the Low

This criterion is met in the image below.

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(5) Explain the Bar Combinations for Finding the close at the open for both conditions in each trend. (Screenshots required)

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The Finding the close at open is a bar combination that can be identified in two ways which are for either bullish movement continuation or reversal or bearish movement continuation or reversal.

Whenever the Finding the close at open is formed in a bullish trend, If the open and close are near the high, then the uptrend might continue (Trend continuation) and If the open and close are near the low, then the bullish trend might reverse (Trend reversal).

Likewise, whenever the Finding the close at open is formed in a bearish trend, If the open and close are near the low, then the downtrend might continue (Trend continuation) and If the open and close are near the high, then the bearish trend might reverse (Trend reversal).

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Bullish Trend (Uptrend)

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From the image below, we can see the formation of both the Open and Close facing each other near the low. Since this is formed in a bullish trend, a trend reversal should be expected which is exactly what happened.

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Bearish Trend (Downtrend)

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From the picture below we can the the close an open components formed at the low and since it is formed in a dowtrend, it indicated trend continuation.

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CONCLUSION

The price bar is the basic building block of technical analysis and this is because price action which is what made up the price bar is the basis of all technical analysis.

Just as said earlier, understanding the price bars very well will go a long way in helping one to identify what trend the market is undergoing which will consequently curb trading against market trends.

The price bars has four standard components which are Low, High, Open, Close.

NB: All screenshots are taken from **Tradingview

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