PRICE ACTION TRADING STRATEGIES: PART 2

THIS IS PART 2 read part 1 for prior Information 3. Candlestick Patterns for Reversals Price action traders often use candlestick patterns to signal potential reversals or continuation of trends. Some popular candlestick patterns used in price action trading include Doji, Engulfing, Pin Bar, and Inside Bar. Strategy: • Bullish Reversal Patterns: A bullish engulfing, hammer, or morning star near support may indicate that the price is likely to rise. • Bearish Reversal Patterns: A bearish engulfing, shooting star, or evening star near resistance may indicate a reversal to the downside. Entry Signal: • Buy when a reversal pattern occurs near support or after a downtrend. • Sell when a reversal pattern forms near resistance or after an uptrend. 4. Pin Bar Reversal Strategy The Pin Bar is one of the most popular price action candlestick patterns used to trade reversals. A Pin Bar has a long wick and a small body, indicating that the price tried to move in one direction but was rejected. Strategy: • Bullish Pin Bar: A pin bar with a long lower wick at a support level signals that the market is rejecting lower prices and could reverse higher. • Bearish Pin Bar: A pin bar with a long upper wick at a resistance level signals that the market is rejecting higher prices and could reverse lower. Entry Signal: • Buy after a bullish pin bar forms near support, with the close above the open (price rejection of lower levels). • Sell after a bearish pin bar forms near resistance, with the close below the open (price rejection of higher levels). 5. Inside Bar Strategy (IB) An Inside Bar is a candlestick pattern where the price action forms within the range of the previous candle (the "mother candle"). It is a pattern of consolidation or indecision and is often used to anticipate a breakout. Strategy: • Inside bars represent a consolidation period, where price is compressing. Entry Signal: • Buy when price breaks above the high of the inside bar.