Education
An outside day is a two-candle pattern that suggests a potential reversal or consolidation & then continuation of the current trend. This pattern is also known as “engulfing pattern”. In an outside day the relationship of the two period candles has the following characteristics:
i) the high is higher than the previous day’s high &
ii) the low is lower than the previous day’s low.
The resulting pattern is a smaller candle totally wrapped by a larger candle. An outside day at resistance might be considered bearish – Bearish Engulfing Pattern (where close of current day’s bar is less than yesterday’s close) while an outside day at support might be considered bullish – Bullish Engulfing Pattern (where current day’s close is higher than the previous day’s close).
Generally, the larger the candle with high volumes preceded by small candle has greater potential for reversal.
DOJI
DOJI is a candlestick with a body so small that the open & close prices are virtually equal. DOJI convey a sense of indecision or tug-of-war between buyers & sellers. Prices move above and below the opening level during the session, but close at or near the opening level. The result is a standoff. Neither bulls nor bears were able to gain control on the market.
It’s a single candle reversal pattern. DOJI often precedes a change in a trend to sideways or in a reverse direction. Thus, DOJI is relevant in a trending market. We ignore DOJI in a sideways market. In an up trending market doji’s appearance on the chart signals that the buying pressure is starting to weaken and in a down trending market doji indicates that the selling pressure is starting to diminish.
QUOTES
Famous trader Jesse Livermore says: “Remember, the market is designed to fool most of the people most of the time. Sometimes, the market will go contrary to what speculators have predicted. At these times, speculators must abandon their predictions and follow the action of the market. Never argue with the tape. Markets are never wrong, but opinions often are. I only try to react to what the market is telling me by its behaviour."
Mike Price Says: “More people have talent than discipline. That’s why discipline pays better.”
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