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DISCLAIMER

This book, "The Ultimate Trading Playbook: Mastering Charts, Patterns, and
Indicators", is intended for educational purposes only. The information,
strategies, and examples provided in this book should not be construed as
financial or trading advice. The stock market involves a high level of risk, and
there is no guarantee that the techniques and strategies outlined in this book
will be profitable or error-free.

Readers are strongly advised not to make trading decisions based solely on
the content of this book. It is recommended to consult with a licensed financial
advisor or professional before making any trades or investments.

Please note that market conditions are dynamic, and strategies may become
outdated or ineffective over time. The creators of this book, including IQ
Trader, are not responsible for any financial losses, damages, or
consequences arising from the use of this book. Any trades made based on
the information presented herein are undertaken at the reader's own risk.

By using this book, you agree that the author(s) and publisher(s) hold no
liability for any financial or personal decisions made based on its content.
Always conduct your own research and exercise sound judgment when
engaging in any form of trading or investment. @iq_trader_01

This book is for learning purposes only.

Additionally, we hold exclusive rights to this book. Reselling,

copying, or redistributing this material, in part or in whole, without
our consent is strictly prohibited. Unauthorized reproduction or
sharing will result in legal action being taken to protect our
intellectual property.

This book is made for only educational purpose, the materials given on this
book have been given to you learn, if you are interested in learning then read
this book only, if you trade at the given labels, then you must do your research
and consult your financial advisor–

Trading in stock market without knowledge can put you in trouble, so first
learn and then come to stock market– @iq_trader_01
 THE GUIDE
FOR
BEGINNER
TECHNICAL ANALYSIS
(English Edition)

IQ TRADER

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 Index......
Content Page No.

1. What is Candlestick ? 5

2. Why do Candlestick Work ? 8

3. Various Type Of Candlestick pattern 9

3.1. Hammer 10

3.2. Inverted Hammer 11

3.3. Bullish Engulfing 12
3.4. Piercing Signal 13
3.5. Bullish Harami 14
3.6. Morning Star 15
3.7. Bullish Kicker 16
3.8. Hanging Man 17
3.9. Shooting Star 18
3.10. Bearish Engulfing 19
3.11. Dark Cloud Cover 20
3.12. Bearish Harami 21
3.13. Evening Star 22

4. Candlestick pattern cheat sheet 23

5. Types of chart pattern 24

5.1. Double top pattern 24

5.2. Double bottom pattern 25

5.3. Triple top pattern 26
5.4. Triple bottom pattern 28
 5.5. Ascending Triangle Pattern 29

5.6. Descending Triangle Pattern 31

5.7. Symmetrical triangle Pattern 31
5.8. Pennant chart Pattern 32
5.9. Wedge chart pattern 35
5.10. Flag chart pattern 38
5.11. Head and Shoulders 41
5.12. Inverse Head and Shoulders 43
5.13. Cup With Handle chart pattern 44
5.14. Inverted Cup and Handle Chart Pattern 46
6. Chart pattern cheat sheet 48

7 Indicator 49
7.1. Moving average 50
7.2. MACD (Moving average conversation Diversion) 52
7.3. RSI ( Relative strength index) 53
7.4. ADX ( Average Direction index ) 55

8. Trading Discipline 57

Hello friends - This book is made for stock market learning, the materials given on this book have
been given to you to learn, if you are interested in learning then read this book only, If you trade
at the given level, then you must do your research and consult your financial advisor – Trading in
the stock market without knowledge can put you in trouble, so don't get fooled by whom, so
learn, understand and then come to the stock and never invest more than 10% of your savings
here.

If you follow all these things then read our book

- Thank you
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What are Candlesticks ?
Candlestick patterns are used to understand market trends.
A pattern, which is a specific structure that gives certain
signals in a certain way,
is called a pattern. Traders base their trades (decisions) on
these analytical patterns.
Any pattern typically consists of two or more candlesticks
formed in a specific manner.
However, sometimes a single candlestick can also represent a
pattern.
Therefore, candlestick patterns are categorized into single
candlestick patterns (i.e., patterns with one candlestick) and
multiple candlestick patterns (i.e., patterns with multiple
candlesticks).

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A candlestick consists of a body and two wicks. The body

of the candlestick is typically filled, symbolizing bullish
and bearish market sentiment. A Bull Candle has its body
extending from the bottom to the top, indicating an upward
(bullish) market, while a Bear Candle has its body
extending from top to bottom, indicating a downward
(bearish) market. The body of the candlestick reflects
market sentiment. Traders make decisions based on the
size and direction of the body, helping to identify market
trends and potential reversals. The wicks reflect market
volatility and the pace of price movements.
Two lines or wicks are drawn in the form of a
candlestick. These wicks represent the high and low
points of the given period. The body of the candlestick is
at the top, while the wicks below reflect the high and
low points during that time.

Candlestick trading reflects market sentiment. A green

candlestick indicates bullish sentiment and is called a Bull
Candle. A red candlestick represents bearish sentiment and
is called a Bear Candle. The body and wicks of the
candlestick show market fluctuations. Traders can identify
market trends and potential reversals by analyzing the size
and direction of the candlestick.
 Follow

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Market sentiment in a specific direction is called a trend. When

the market moves upwards, it's considered a bullish trend, and

when it moves downwards, it's a bearish trend. Identifying

market trends is crucial for traders as it can lead to profitable

trades. Trends in the market signal whether there could be

continuity in a certain direction. Therefore, recognizing market

trends is essential for traders to make the right decisions at the

right time.
 2. Why do Candlesticks Work ?

There are several ways to understand and read Candlestick

Patterns. Candlestick Pattern Analysis depends on your
preferred Trading Strategy and Timeframe. Some strategies
use combinations of candlesticks to identify Price Action.
When reading a candlestick chart, you need to keep the
points mentioned below in mind.

Candlestick Charts come in many types, which are highly

useful for trading. Candlestick Charts are commonly used for
Day Trading, as they help identify price direction effectively.
Reading these charts with the right techniques makes it
easier to understand price movements.

Incorporating Candlestick Chart Analysis into your Trading

Strategy is crucial, as it helps in recognizing and acting on
the projected signals of candles. Understanding this can
enhance your trading decisions and make them more
effective.

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3. Types of Candlestick Pattern
A candlestick pattern provides insights into the price
movement, indicating increases and decreases in value. In
trading, technical charts often display these patterns, which
can give traders potential buy and sell signals. Some specific
patterns are particularly used as indicators for buying and
selling. It’s important to remember that while these
patterns can give signals, they are not always accurate.

Internally, the pattern can be interpreted as both a flash

and a trend reversal. A flash pattern may indicate that the
price is moving upwards, while a trend reversal pattern
could signal that the price may be about to fall.
 3.1 Hammer

A hammer candlestick is a specific candlestick pattern that indicates

a potential reversal in a prevailing trend. It forms after a downtrend,
with a small body and a long lower shadow. The hammer suggests
that despite significant downward movement, buyers managed to
push the price up, indicating a potential reversal. The hammer
candlestick is typically seen at the end of a downtrend and is
associated with a bullish reversal. If it forms after an uptrend, it is
called an inverted hammer, which, while still signaling a potential
reversal, has a slightly different interpretation.

The Hammer candlestick is a specific candlestick pattern that signals a potential

trend reversal. It has a small body with a long lower shadow, giving it a
hammer-like appearance. It usually forms after a sharp decline, signaling a
possible trend reversal. Typically recognized as a bullish reversal pattern, it
represents strength and the potential for a change in direction with its small body
and long shadow.
 3.2 Inverted Hammer

The Inverted Hammer is a bullish reversal candlestick

pattern. It is a small candlestick pattern that indicates a
potential reversal after a downtrend. It is considered a
reliable candlestick pattern. It works best when followed by
a strong reversal. If this candlestick pattern forms in the
middle of a downtrend, it doesn’t hold much significance.
The Inverted Hammer can be green, but the color (green or
red) is not as important. However, if the Inverted Hammer
is green, it is considered a stronger signal.

In the market, the benefit of the Inverted Hammer pattern is that the
candlestick formed should be bullish. This means that the candlestick's
open price should be higher than the open price of the hammer, or
nearly the same. Additionally, its close price should be higher than the
open price of the Inverted Hammer. You can view this as a signal that a
bullish trend may be starting in the market.
 3.3 Bullish Engulfing

If you see a bullish engulfing pattern on one day and the next day

shows a gap-up candle, it indicates that the market is likely to move

upward. In this case, you should consider buying at that time. You

can also choose not to buy until the price goes above the high of

the previous candle of the bullish engulfing pattern. Once the price

goes above that level, you should buy and place a stop loss below

the low of the previous candle of the bullish engulfing pattern.

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3.4 Piercing Signal

The Piercing Candlestick Pattern is similar to the Bullish

Engulfing Pattern. It involves a large candle that attempts to
cover the lower part of the previous day's candle. This
pattern is generally seen as a reversal pattern that signals
the potential for an upward trend. It is considered effective
when the price moves back up after a previous decline,
indicating strong buying pressure.

For example, if there is a bearish candle here and the next

day's candle opens higher than the previous one, it signals a
"Piercing" pattern. This indicates a potential reversal,
suggesting that there is a possibility of an upward trend.
After the bearish candle, buying pressure starts to
dominate, leading to a trend reversal.
 3.5 Bullish Harami

The Bullish Harami Candle is a candlestick pattern made up of two types

of candles, as you can see in the image above. The term "Bullish
Harami" is derived from two Japanese words: "Bullish" and "Harami,"
meaning "pregnant woman." In the image, the first candle is large, and
the second candle is small, symbolizing a child.

The Bullish Harami Candle is a bullish candlestick pattern, indicating a

rise in prices. When this candle forms, it suggests that the bearish phase
in the stock has ended, and the bullish trend has begun. The Bullish
Harami Candle is made up of two candlesticks: the first is a long bearish
candle (red in color), and the second is a small bullish candle (green in
color). This pattern always forms after a significant downtrend, meaning
it forms at the bottom. Follow @iq_trader_01
 3.6 Morning Star
A regular candlestick pattern is made up of one or two candles, but the
Morning Star candlestick pattern consists of three candles. The Morning Star
candlestick is a bit tricky to identify on the chart, but with some practice, it
can be easily recognized. The Morning Star candlestick means "the morning
star," which is also called the sun.

In the Morning Star candlestick pattern, the first candle is a long bearish
(downward) candle, the second candle can be either bullish or bearish, and
the third candle is a long bullish (upward) candle.

The Morning Star Candle Pattern is a bullish pattern. When the Morning Star
candlestick pattern forms clearly on the chart, it increases the likelihood of a
price rise in the stock.

You can make good profit through intraday and swing trading with
the Morning Star candlestick pattern. If you're looking at it for
intraday trading, you should check the 10-minute chart, and for
swing trading, the 1-day chart should be observed.
 3.7 Bullish Kicker
A kicker signal, also known as a professional gap, occurs when the following
conditions are met:

1. The price is rising in a trend.

2. Suddenly, a gap appears on the chart. A gap is defined when the opening price of
one candlestick does not match the closing price of the previous candlestick; there
is a price difference. This difference indicates momentum, and it is in the opposite
direction of the trend. For example, imagine the price closed at 10 after a rally over
several days. The next day, the price opens at 8. In this example, we

have a gap, or a bearish kicker. On the other hand, if the price drops
from 10 to 3 and then opens at 5 the next day, it will signal a bullish
kicker, which is a sign of upward momentum for traders.

A bullish kicker signal can be a very powerful indication that a

trend is reversing. It is often interpreted as a sign that
professional investors have quickly realized that a trend is over, and
they are looking to exit immediately. As such, this signal often
indicates a rapid reversal of the previous trend.
 3.8 Hanging Man

The Hanging Man candlestick pattern is a bearish reversal candle. It

appears after an uptrend and has a lower shadow that is at least twice

the size of its body, or even more. The Hanging Man candlestick typically

has no upper shadow, or if there is one, it is very small. The body of this

candle is also very small. You can see this in the image below.

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The Hammer candle always appears after a downtrend, while
the Hanging Man candle always appears after an uptrend. The
key characteristic of the Hanging Man candle is that the smaller
its body, the stronger the bearish signal it provides. The color of
this candle is not very significant, but if it forms as a red candle,
the chances of a trend reversal increase.
3.9 Shooting Star
The Shooting Star Candle is a bearish candle pattern,
meaning it signals a downtrend. This candle frequently
appears on charts, especially in intraday trading, where it
often forms daily. The Shooting Star Candle typically
appears after a strong uptrend, and when it forms, it signals
the end of the upward movement and the beginning of a
downtrend. It signifies the complete exhaustion of the
bullish trend in the market, increasing the likelihood of a
bearish reversal.

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The Shooting Star Candle Pattern appears on intraday

charts, daily charts, and weekly charts. If you are engaged in
intraday trading, you should look for it on 5-minute, 10-minute, or
15-minute charts. And if you are involved in positional trading, you
should observe it on daily or weekly charts.
 3.10 Bearish Engulfing
This Candlestick Pattern is considered a signal of a decline
in the stock. It is formed by two Candles. The first Candle is
Bullish, and the second Candle is Bearish. The Bullish
Candle is smaller in size, while the Bearish Candle is larger.
The Bearish Candle fully covers the Bullish Candle, which is
why it is called the Engulfing Pattern.

This Pattern is more effective after a Strong Uptrend. If this

Pattern appears in the middle of a Trend, we should ignore
it. When this Pattern forms after a Strong Uptrend, many
Sellers start selling the stock, which causes the stock price to
fall. If this Pattern forms near a Resistance level, Sellers also
dominate Buyers in this case.
 3.11 Dark Cloud Cove

Before the Dark Cloud Cover pattern forms, the stock is in an UP TREND, and
the price keeps rising. In the session before the Dark Cloud Cover pattern, a
green (BULLISH) candle forms, which is common in an UP TREND. However, in
the next session, a red (BEARISH) candle forms, where the OPEN PRICE and
HIGH PRICE are higher or more than the previous green candle. But the CLOSE
PRICE and LOW PRICE are significantly lower than the previous green candle,
with a difference of about 50% or more.

And as a new bearish candle forms, it is expected that the

previous UP TREND of the stock will now break. As a result,
the market is likely to stay bearish, and we should look for
an opportunity for SHORT SELLING in our trades.
3.12 Bearish Harami

Before the bearish harami pattern forms, the stock is in an UP

TREND and continues to rise. In the session before the
formation of the bearish harami pattern, a large green (bullish)
candle forms, which is common in an UP TREND. However, in
the second session, a small red (bearish) candle forms, where
the OPEN PRICE is above the HIGH of the first candle, and the
CLOSE PRICE is slightly lower than the CLOSE of the first candle.

After a strong bullish trend, the formation of a new bearish

candle signals the possibility that the previous uptrend in
the stock will break. As a result, the market is expected to
remain bearish, and we should look for opportunities for
short selling in our trade.
 3.13 Evening Star
The market is in an uptrend, and Bulls have full
control. The first candle of the Evening Star is a bullish
candle, indicating the strength of the bullish market and
showing that more and more people want to buy the stock.
The second candle of the Evening Star starts with a gap
down opening and eventually forms a Doji or Spinning Top
candle, indicating indecision in the market, with no clear
direction for what’s to come. The third candle of the
Evening Star is a bearish candle with a gap up opening,
signaling the return of the Bears to the market, and
showing that the strength of the Bulls, who have firmly held
control for several sessions, is weakening.

And with the weakening of the Bulls, confirming the Evening Star
pattern, it is expected that the market is likely to turn bearish, or there
is a high possibility of a bearish trend reversal. Follow__@iq_trader_01
4. Candlestick pattern cheat sheet
 5. Various Types of Chart Pattern
5.1 Double top pattern
It looks like the shape of the letter 'M'. According to this
pattern, when a stock stays around a certain price level for a
long time, then moves up to a higher price, comes down
slightly, and stays there for a while, and then moves back up
to the same level from where it came down. After staying
there for some time, it then moves down again, back to
where it originally moved up from, the pattern is considered
complete. When this pattern forms, it strongly indicates that
the stock has started a downtrend, and its price is likely to
fall further.
5.2 Double bottom pattern
This pattern is the exact opposite of the Double Top
pattern, and it looks like the letter 'W' in English. While the
Double Top pattern indicates that the stock price will fall,
the Double Bottom pattern suggests that the stock price
will rise. This pattern forms when a stock is falling and,
after reaching a certain point, starts to rise again, then
pauses at another level, drops slightly, and after some
pause, rises again and reaches the same price level from
where it initially dropped. In such a situation, it is highly
expected that the stock will now rise, meaning the price is
likely to increase significantly. You can easily understand
this pattern from the attached image.
5.3 Triple top pattern

The Triple Top chart is a bearish reversal pattern,

indicating that the bullish trend is coming to an end and

the market is likely to enter a bearish phase. A Triple

Top forms after a prolonged uptrend. For a Triple Top

chart to form, it is necessary that the previous trend is

an uptrend, and top1 must represent the highest high of

the prior trend. After top1 forms, a reversal occurs, and

the price drops, which can be a decline of 10%-20%

 After the decline, when the volume normalizes
and the price moves back towards the highest high, it
signals a Take Profit. This is where the support forms at
top2, which can be 3% higher or lower than top1.
Additionally, the volume of top2 is higher than that of
top1. After top2 forms, the price drops again, finds
support, pauses for a while, and then moves up again to
form top3. In the Triple Top chart pattern, after top3
forms, a sharp decline begins. In the chart above, you
will notice a neckline. A sell position should be taken
when the price of any candle closes below the neckline
after top3 forms.
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 5.4 Triple bottom pattern
The Triple Bottom chart pattern is a bullish reversal
chart pattern. This means that the bearish trend in the
market has ended, and a bullish trend is about to begin

In a Triple Bottom chart, after Bottom 1 forms, the price rises

with support, and this upward move is typically between
10%-20%. After reaching resistance, the price comes down and
forms Bottom 2. The volume at Bottom 2 is less than that at
Bottom 1. After Bottom 2 forms, the price rises again, reaching a
rise of around 10%-20%, but then comes down with resistance
and forms Bottom 3. The volume at Bottom 3 is less than the
volume at Bottom 1. In a Triple Bottom chart pattern, once the
third Bottom (Bottom 3) is formed, the price rises very quickly.
 5.5 Ascending Triangle Pattern
When higher lows are formed on the chart, and
resistance comes from the top, creating a flat top, this
pattern is observed. This chart pattern falls under the
continuation chart pattern type. One side of the triangle
is flat, and the other side is inclined at an angle. This
pattern is categorized as a continuation type chart
pattern.

In this pattern, we have to wait for the breakout. If the

breakout occurs upwards, it indicates the right direction. In
the ascending triangle chart pattern, the target is equal to
the length of the third side of the triangle, which is shown in
red color.
 5.6 Descending Triangle Pattern
When Lower Highs are formed on the chart and a flat bottom
appears due to support, this pattern emerges. This chart
pattern falls under the Continuation Chart Pattern category.
One side of the triangle is flat, while the other is slanted. In this
pattern, one must wait for the breakout. If the breakout occurs
downward, it indicates the correct direction. In the Descending
Triangle Chart Pattern, the target is equal to the length of the
third side of the triangle, which is shown in red color.

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 5.7 Symmetrical Triangle Pattern

In this pattern, one must wait for the breakout, which can occur
either upwards or downwards. The Symmetrical Triangle Chart
Pattern is a formation where both sides slope inward and
converge gradually.

The target in this pattern is equal to the length of the third side
of the triangle, as shown in red. This pattern typically forms
during market consolidation and often precedes a significant
price move.
 5.8 Pennant Chart Pattern
What is the Pennant chart pattern?
This is a continuation pattern where a triangular

structure is observed. When a stock price moves

upward from a low point and then comes down, each

subsequent decline is smaller than the previous one (as

shown in the illustration below). In this pattern, the

stock price gradually consolidates within a defined

range, increasing the likelihood of a breakout.

The Pennant Pattern indicates that the stock price is gradually increasing

and may gain significant momentum in the future. This pattern typically

forms after a sharp trend, where the price consolidates briefly and then

continues to move rapidly in the same direction.

5.8.1 Bullish Pennants:
A bullish pennant pattern forms after a sharp
price increase. After a prolonged uptrend, traders
attempt to close their positions, anticipating a
reversal. As traders begin exiting the stock, the
prices start to stabilize. However, new buyers
simultaneously begin purchasing the stock, resulting
in a breakout in the same direction as the previous
uptrend.
5.8.2 Bearish Pennants:
A bearish pennant pattern forms after a sharp

price decline. Following a prolonged downtrend, traders

attempt to close their selling positions, anticipating a

reversal. As traders begin exiting the stock, prices start

to stabilize. However, new sellers simultaneously start

selling the stock, leading to a breakout in the same

direction as the prior downtrend.

 5.9. Wedge Chart Pattern
A wedge chart pattern consists of two trend lines

converging towards each other, indicating that the

magnitude of price movements within the wedge is

decreasing. This pattern signals a pause in the existing

trend. When encountered, it suggests that market

participants are undecided about the future direction of the

price.

● Falling Wedge: This is a bullish chart pattern typically formed in an

uptrend. The trend lines slope downward, and the breakout occurs

upward at the end of the pattern.

● Rising Wedge: This is a bearish chart pattern typically formed in a

downtrend. The trend lines slope upward, and the breakout occurs

downward at the end of the pattern.

 5.9.1 Rising wedge
This is a reversal pattern. Initially, the market is in an uptrend and

attempts to move higher, but gradually, a downtrend begins. In this

pattern, Higher Highs and Lower Highs are formed, and the stock or

market range appears to shrink.

For this pattern:

● Entry: Take a trade below the low of the breakout candle.

● Stop Loss: Place the stop loss either based on the risk-reward

ratio or just above the high of the breakout candle.

 5.9.2 Falling wedge pattern
This is a reversal pattern. Initially, the market is in a
downtrend. In this pattern, Lower Highs and Lower Lows are
formed, and the stock or market range appears to shrink.

For this pattern:

● Entry: Take a trade above the high of the breakout candle.

● Stop Loss: Place the stop loss either based on the risk-reward
ratio or just below the low of the breakout candle.

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 5.10. Flag Chart pattern
What is Flag Chart Pattern?
As the name suggests, this pattern resembles a flag. After a sharp
price movement, when prices enter a consolidation phase, the flag
pattern forms.

This pattern indicates that the prevailing trend is likely to continue.

● Uptrend: If the market is moving upward, it forms a bullish

flag pattern.
● Downtrend: If the market is moving downward, it forms a
bearish flag pattern.

It provides traders an opportunity to enter the market during the

ongoing trend. Entering the market after the breakout allows
traders to secure a better position compared to the prices before
the flag formation.

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 5.10.1 Bullish Flag pattern
This pattern forms when the market is in an uptrend, i.e., when the

market is bullish, and the formation of this pattern signals the

continuation of the trend. In this pattern, it is important to wait for

the breakout. You should trade above the high of the breakout

candle, and place the stop-loss according to the risk-reward ratio or

below the low of the breakout candle.

Target:

The target can be set equal to the height of the flagpole, or it can be

set according to the risk-reward ratio.

 5.10.2 Bearish Flag pattern

This pattern forms when the market is in a downtrend, and its

formation signals the continuation of the trend. In this pattern, you
should wait for the breakout. You should trade below the low of the
breakout candle and place the stop-loss according to the
risk-reward ratio or above the high of the breakout candle.

Target:
The target can be set equal to the height of the flagpole, or it can be
set according to the risk-reward ratio
5.11. Head and Shoulders
This is also a reversal pattern, suggesting that after
the pattern completes, the stock price is expected to
start falling. The Head and Shoulders pattern is quite
popular among traders, and most traders consider it a
highly reliable pattern. As the name suggests, it forms a
shape resembling a head between two shoulders, and it
also has a neck line. The pattern has four parts, and
according to it, when a stock's price rises from the
bottom and crosses the neck line upwards, the pattern
starts to form.
 After moving up for a while, the price then comes

back near the neckline and trends there for some time.

Then, it breaks above the previous high, trends near that

high again, and comes back to the neck line.

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 5.12. Inverse Head and Shoulders
This pattern is the exact opposite of the Head &
Shoulders Pattern. It forms in the opposite direction.
While the Head and Shoulders pattern indicates that the
price of a stock is likely to decline, the Inverted Head and
Shoulders pattern signals that the stock price is about to
rise, meaning the price of the stock is expected to
increase.

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5.13 Cup With Handle chart Pattern
This pattern forms when a stock creates a

Rounding Bottom, followed by a correction before the

breakout, and then the breakout happens. This type of

pattern is called the Cup & Handle Pattern. Whenever

this pattern forms, after the breakout, a strong upward

movement is typically observed in the stock.

 You can see in this chart, if you observe carefully,

it looks like a cup, and the side resembles the handle of

the cup! This pattern is a Bullish Pattern. After this

pattern forms, the price movement is usually more

significant than the depth of the cup.

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5.14 Inverted Cup and Handle Chart
Pattern
The Inverted Cup and Handle Pattern is a Reversal

pattern and provides a momentum short signal as it

breaks from the 'handle' formation. It is typically a

topping pattern after a strong upward move, signaling

the end of an uptrend on the chart. The Inverted Cup

and Handle pattern ideally marks the end of a bull

market when the stock or index is at its highest level to

date. Follow@iq_trader_01
 The Inverted Cup and Handle Pattern has

the highest probability of success when it forms

after a clear uptrend. The chart pattern consists

of two key components: the inverted cup and the

price action that rolls into the inverted handle.

When profit-taking sets in, the cup portion of the

pattern is formed, and instead of rallying to new

highs, the market begins to enter a distribution

phase. As the stock eventually moves

downward, the inverted cup top forms, and

buyers start exiting at the new high prices, while

sellers start entering, causing the stock to

decline.

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6. Chart pattern cheat sheet
 7. Indicator

What are Market Indicators?

Traders successfully use stock market indicators

to make profits in their operations. The existence of

these indicators is because the stock market is not a

random market. Some economic theories confirm

that, under certain conditions, markets behave in a

specific way. But do you want to know the best part?

This behavior repeats itself, meaning that certain

price patterns appear repeatedly. The best trading

indicators aim to recognize these patterns and

capitalize on that knowledge to make profits.

Identifying these patterns helps traders anticipate

the direction of the market, enabling them to make

precise and profitable trading decisions.

 7.1 Moving average
Moving Average is a trend-following indicator that helps us
understand the direction of the stock market and stocks.
Moving Average falls under the category of indicators that
are simple but effective. Moving Average represents the
average price of previous days, helping us understand
whether the stock is moving up or down on average. Traders
use MA to identify buy and sell signals, while investors use it
for making long-term investment decisions. Moving Average
is particularly helpful in understanding market trends and
making decisions based on the current market direction.
In the stock market, moving averages of 7, 14, 21, 50, 100,
and 200 days are most commonly used. Just like the price
moves on the chart, the moving average also moves in the
same way. If you're doing intraday trading, you can use the
7-day to 21-day moving averages. These moving averages
help understand short-term trends and assist in making
quick decisions in fast-moving markets.

If you are doing swing trading, you can use the 21-day to 50-day
moving averages. If you are doing positional trading, you can use the
50-day to 100-day moving averages. And if you are investing, you can
use the 100-day to 200-day moving averages. These moving averages
help in understanding the broader market trends according to different
timeframes and guide your trading decisions in the right direction.
 7.2 MACD (Moving average conversation
Diversion)
MACD (Moving Average Convergence Divergence)

is a crucial indicator in technical analysis, used by most

individual and professional traders. We can use MACD

in various ways, but before diving into its trading

methods, let's take a deeper look at its nature and

explanation.

Follow@iq_trader_01
 The MACD indicator consists of two moving

averages - a longer one (by default, a 26-period

EMA) and a shorter one (by default, a 12-period

EMA), from which a signal line and a histogram

are derived. MACD provides a signal for both

momentum and the desired market trend. It is

displayed on the trading platform in the form of a

histogram. Along with this indicator, a 9-period

moving average is also used, which can serve as a

signal for entering a position. When the MACD

line and the signal line cross each other, it

provides a key signal that a market change may

occur. Additionally, when the histogram is

positive or negative, it indicates the strength of

the market trend.

 7.3 RSI ( Relative strength index)
RSI stands for Relative Strength Index, which indicates the strength of a stock,
i.e., whether the stock may go up or down. If we talk about intraday trading,
this is one of the most commonly used indicators. The RSI indicator shows the
momentum trend of stocks on a chart and is also referred to as an oscillator
because it moves between 0 and 100. It helps determine whether the stock is
overbought or oversold.

When the RSI is above 70, it is considered overbought, meaning the stock's
price may have risen too much, and a decline might follow. When the RSI is

below 30, it is considered oversold, meaning the stock's price may have fallen
too low, and a rebound could happen. Traders use the RSI to gauge the
momentum of the stock and predict potential price changes.
 7.4 ADX(Average Directional Index)
The Average Directional Index (ADX) is part of a group of directional

movement indicators that were developed into a trading system by

Welles Wilder. This group also includes the Minus Directional Indicator

(-DI) and the Plus Directional Indicator (+DI). The ADX measures the

strength of a trend, while the other two indicators, +DI and -DI, help

determine the direction of the trend.

The ADX indicator ranges from 0 to 100, where values between 0 to 25

indicate a weak trend, 25 to 50 indicate a strong trend, and values

between 50 to 100 suggest a very strong trend. By using this entire

group together, traders can evaluate both the strength and direction of a

trend and use this information to make more informed trading

decisions.
The ADX system consists of three main components: ADX, +DI, and
-DI.

● ADX measures the strength or weakness of a trend but does

not indicate its direction.
● An ADX value above 25 indicates a strong trend.
● An ADX value below 20 suggests a weak trend.
● If ADX is between 20 and 25, it does not give clear signals.

Trading Signals:
1. If ADX is above 25 and +DI crosses above -DI, it signals a buy
opportunity.
2. If ADX is above 25 and -DI crosses above +DI, it signals a sell
opportunity.

How to Set Stop Loss?

● For buying: Use the low of the candle where the buy signal
was generated as the stop loss.
● For selling: Use the high of the candle where the sell signal
was generated as the stop loss.
● The trade remains valid until the stop loss is breached.

Look Back Period:

The standard look-back period for ADX is 14 days, which helps in
calculating its value and signals effectively.
 THANK YOU FOR PURCHASE

Thank You for Your Purchase!

We sincerely appreciate your decision to invest in this

Ebook. We hope this Ebook enhances your understanding
of stock market strategies and helps you on your trading
journey.

Please note that this Ebook is intended solely for

educational purposes. It is important to consult with a
professional financial advisor before making any trading
decisions, as mentioned in the disclaimer. We are not
responsible for any losses incurred from the application of
the strategies outlined in this book.

Additionally, we hold exclusive rights to this book.

Reselling, copying, or redistributing this material, in part
or in whole, without our consent is strictly prohibited.
Unauthorized reproduction or sharing will result in legal
action being taken to protect our intellectual property.

Thank you once again, and we wish you all the best in your
trading journey!

Happy Trading!

— The IQ Trader Team