How to predict share price with zig-zag movement of candlestick

 Candlestick chart: zig-zag movement of candlestick 

Zig-zag motion of the candle stick chart help in approximation of price movement of a stock in the market, which further helps us to track price action of a stock in the market, which further helps us to make buying and selling decision.

We talked about bullish and bearish market in previous blogs,  how in bullish and bearish we make buying and selling decision for a particular stock; now we are going to study about how a zig-zag motion creates uptrend and downtrend and how uptrend and down-trends in the candlestick chart? how it affects the price action of the stock in the market?

1      What’s up-trend and down-trend?

first let’s understand what’s the zig-zag movement of candlestick, before we proceed about the learn with uptrends and downtrends in a candlestick chart.

Zig-zag movement of the candlestick is rise and fall of price of a stock reflected on the candlestick chart in form a wave which is in upward or downward momentum.

An uptrend occurs when zig-zag wave is in upward momentum; that means price is constantly rising, which is a harbinger of bullish market.

A downtrend occurs when wave is in down-ward momentum, indicating a steady fall in price; in such case the probing in the market accelerates a bearish trend in the market.

As, it a zig-zig motion, the way goes through constant uptrend and downtrends inn the market, which constantly recycle opportunities to buy and sell the stocks in the market, or you can say, Uptrend and downtrends create a healthy ecosystem in the market.

Now you have known what is zig-zag motion in the candle-stick and what it indicates in a chart, how it maintains ecosystem and gives you opportunity to buy and sell a stock.

But next question is how it gives you buying and selling opportunities and how can you notice and exploit the opportunity?

This is what you are going to learn in the next point, zig zag motion of the stock 

2      Benefits to study zig-zag motion

The Zigzag motion of stock is one of the many trend indicators out there. On its basis, both bulls and bears take actions that would profit them. It can tell a lot about the market.

2.1     It helps to identify potential support and resistance zones

The zig-zag motion of the stock over the chart can help traders to identify areas where the stock price has previously bounced back and is likely to do so again (support levels) and areas where the stock price begin to fall after it has peaked to its utmost limit,  and is likely to do so again (resistance levels).

These levels can be used to set stop-loss orders or profit targets.

Support and Resistance levels talks about a pause and reversal in the prevailing trend. Support is the lowest a stock has been as per the Zigzag line and is likely to start rising after touching this buyer tend to increase in the market.

Resistance is the high a stock has been as per the Zigzag line and is likely to start falling after touching this point, due to increase in sellers in the market.

Stop-Loss order is a decision to sell or buy a stock once it reaches a particular price.

2.2     Identifying Overall Market Direction:

Otherwise known as market trend, traders can identify the market direction with the use of Zig Zag lines over the candlestick chart.

An Uptrend is portrayed by continuous Higher Swing Highs and higher Swing Lows. While a Down trend is portrayed by continuous Lower Swing Highs and Lower Swing Lows

. During an uptrend, traders want to buy more stocks with the hope of selling in future as prices are continuously increasing. On the contrary, during a Down trend traders want to sell off their stocks with the hope of buying in future when the prices are even lower as prices are continuously falling.

Identifying Price Pattern:

Price patterns are recognizable fashions of price movement.

The Zigzag motion can help identify a reversal, a wedge, a flag, double top, head and shoulders and triangles and other price patterns.

You will learn about it more moving forward in this chapter.

2.3     Volatility:

Volatility is the rate at which the price of a stock increases or decreases over a particular period.

 The size of the candles on the chart can indicate the volatility of the stock, if the candles are relatively small l— It may indicate that the stock is experiencing low volatility, whereas, if the candles are larger, it may indicate that the stock is experiencing high volatility.

Higher stock price volatility often means higher risk as the stock is uncertain and fluctuates a lot, trading here puts the trader at greater risk of loss.

 Trades are done more on stocks with low volatility.

Knowledge, they say, is power. Knowing how to interpret the Zigzag motion amongst others in the stock market is what draws the line between the best and worst traders, continuing the same, in order to interpret, the candlestick chart we need to first know how to mark a zigzag on candlestick chart.

3         How to mark zigzag on candlestick chart

In order to mark a zigzag on the chart, we need to first mark a starting point, then mark first high and first low or vice-versa and then mark high or low form a v like structure or inverted v like structure.

You need to repeat the process again and again, till we get yearly report of the chart, if chart get lows of zig-zag are lower value then it is beneficial to trade on the stock else it will only incur losses.

Check out this example in order to mark a zigzag on candlestick chart.

EXAMPLE

First, I have marked a starting point at 18^th, the market price of the stock peaks at 4^st April this form first leg of zig-zag, later the market price of the stock crashes low at 27^th may forming second leg of the zig-zag.

Keep in mind the price crashes or low of 18^th Jan and 27^th may, we need to collect more lows in the zig-zag on the candlestick chart.

Then, again the market price of the stock rises from low of the 27^th may to 1^st September forming the third leg of the zig-zag, again the price crashes in 13^th November forming the fourth leg of the zig-zag.

Again, keep the price crash in your mind.

Then stock enters the from 2021 to 2022 in this year stock rises in April 27^th and later falls in may 4^th

Giving us the last price crash  in the chart.

Now look at the chart, the ends of the even leg (2^nd, 4^th, 6^th) the price crashes or low are at less low value this signifies the stock is performing well in the market and there is uptrend in the price of the stock i8n the market.

This gives even becomes a harbinger for the upcoming bullish market

 for the similar, in the  chart,  price fall were at a larger value than every previous low or price crash then it would have marked a downtrend in the price of the market.

Till here we learnt about how to mark a zig-zag movement on the candlestick chart, now we’ll head to some important concepts like price action, bullish and bearish market, support level, resistance level and stop loss, and how these concepts help to exploit profit from the stock market using zig-zag movement on the candlestick chart.

4      How does the price action reflects through zig-zag on candlestick chart?

Price action is acitivity related to that occur in the market.  Price action can be rise and fall in the market, during a  price hike it reflect in the candlestick chart as a rising diagnol line, and during price fall it refect in  candlestick chart as falling diagnol line.

The reflection of price action in candlestick chart is by formation rising and falling diagnols that form a zigi-zag on candlestick chart.

5      Zig -zag and its relation with  bullish and bearish n the market?

If we observe, Zig-zag motion in the chart,  you see an upward and a downward  diagnol lines adjacent to each other, forming a ‘z’ like figure.

The downward and upward lines in the chart which form  a ‘z’ ike figure, are indicator of price moving upward and downward— when price moves doenwards it indicates a bearish market, wherein every body is eager to sell a stock to get rid of it, and when price moves upward market is bullish, wherein everyone wants to buy the stock, as everyone consider it valuable.

Thus, with every bullish trend and bearish trend in the market, you’ll see a diagnol line moving upwards, and with bearish market you’ll see a diagnol line moving downwards in the candle stick chart.

Rest about bullish and bearish market you’ll learn in upcoming topics in this chapter and upcoming chapter, for now you learn how zig-zag motio affects  price action in the a relation between uptrend and downtrend in the market affects zig-zag motion on candlestick chart.

6         How he price of stock in the market affect zig-zag motion on candlestick chart?

Price action, can also be referred to the price behavior of the stock price.

The price of the stock varies with the cycle of the market, makes turns sometimes bullish and bearish.  This bullish and bearish nature of the market occurs due to the changing sentiments of the market

Yes, market is run m=by the people and people invest based on sentiments (by sentiments we don’t mean emotions, we mean belief), a belief that stock price of particular company will rise or fall, based on the performance of the company.

A negative belief will fearfully make seller to sell their shareholding at lowest price and a positive belief in people will make them confidently buy a stock even at price.

The role of zig-zag movement is that it helps to figure of bullish or bearish nature of the market, through an uptrend and downtrend marked on the candlestick chart, which can be used to exploit profit if one can figure out support price and Resistance level in the market.

You will learn about this more as we move further in this chapters and upcoming chapters.

7      What is concept of support level, resistance level and stop loss ? How to mark them on candlestick chart?

The zig-zag motion of the stock over the chart can help traders to identify areas where the stock price has previously bounced back, and is likely to do so again, this called support level.

A level at which a price crash has taken place and is likely to take place again is the resistance level.

 Resistance level is counter opposite of the support level. The areas wherein the stock price has previously peaked to the utmost, thus marks the starting point of downfall of the stock price.

 To avoid such a situation, there traders mark a limit of the maximum profit they want to exploit from the market, thus investor needs to set up a limit or a level of maximum profit, known as Stop loss.

 Now let us see how the downtrend and uptrend occurs with the stock price:

Support and Resistance levels talks about a pause and reversal in the prevailing trend. Support is the lowest a stock has been as per the Zigzag line and is likely to start rising after touching point where buyer tend to increase in the market.

Resistance is the high a stock has been as per the Zigzag line and is likely to start falling after touching this point, due to increase in sellers in the market.

Stop-Loss order is a decision Particularly to avoid loss and sell a stock once it reaches a predetermined stock price.

In our way to the full benefit of the full concept, we have to merge all the concept withthis concept. Thus, in the point you’ll finally how we can exploit from from zig-zag movement on candlestick chart.

8      How to use zig-zag motion on candlestick chart to exploit massive profit?

If we combine, that we learnt in lasat three points, then we understand an uptrend and downtrend in the market is represented by upward diagnol and downward diagnol line respectively—these lines indicate bullish and bearish market respectively, which occurs due to fall and rise in the market price of the stock.

Also, the rise and fall of price in the stock increase increase of buyer and increase of seller respectively; now, keeping all the fundamentals in our mind we are now ready to exploit profit from the zig-zag motion on the candlestick chart.

Lets begin by again zooming the concept:

Zig-zag motion creates an uptrend and a downtrend in the market, which help to creates a buying and selling opportunities in the market, thus creating a bullish and bearish trend in the market due to market turning bullish and bearish respectively,Therefore, in such  opportunity  we witness rise and fall of price.

We need to mark such event and notice the pattern of its occurrence, to exploit the profit from the market.

Repition of lowest price fall point over which no other price fall occurs, or bounce backs is called support price and, point at which, repition of maximum price occur i.e. point at which no other price rise occur is called resistance level.

You can easily remember if you think support level is a level where stock get price support and reasistance level is a level at which price resists to increase; so now, It’s easy e to identify potential support and resistance level in the candlestick chart.

Now, you first mark a starting point, notice wo uptrends in the market which gives you surety of quality performance of the stock and help you mark a support level of the stock.

 Then  wait for a downtrend to occur and notice two to three downtrends to mark a resistance level of the stock; when done figuring out the resistance level of the stock, purchase the stock..Now, you have a stock a knocked-down rate.

 Wait for next uptrend to occur and keep track of the stop loss point, as your stock hits stop loss point sell the stock, because people will be ready to buy it at a high price, giving you a good profit on a stock that you bought at lower price during a downtrend i.e. a duration time when price of stock was falling in the market.

You now have the secret to make a profit like a trader, using uptrend and downtrend of the zig-zag movement on the candlestick chart.

Now, you’re beginning to be trader, you have learnt a lot in this chapter, there are more concept waiting for you in the next chapters, but bere you jump to next chapter, recall everything with the giving conclusion below.

conclusion

we have reached to the end of the chapter, so let us remember some important points in the chapter and halt the concept here with a conclusion.

We read Zig-zag motion of the stock is, rise and fall of price of a stock reflected on the candlestick chart in form a wave which is in upward or downward momentum; with every rise and fall in the stock we get upward and downward moment create  upward And downward movement in the chart, which when marked form upward diagnol and doenward diagnol, which further jointly form a zig-zag line on a candlestick chart.

These lines ar4e important because it reflects the price action of the stock i.e rise and fall of price in the market, which further is manipulated by belief of the market in the performance of the stock.

In the chart, a uptrend represent rise faith in a stock which further rises the price of the stock in the market.

A rise in price and rise in faith attracts more people to purchase it, thus a increment ofd buyers occur which creates a bullish trend, opposite of it is bearish trend or bearish market, wherein people lose faith in the stock performance and price of following stock falls.

So, as we go through the uptrend and downtrend in a candlestick chart, we get a bullish and brearish trend in market, respectively.

A bearish trend can be predicted by recognizing resistance level , and bullish trend can predicted by recognizing support level in a candlestick chart— when done predicting the both using both the level,  we get an ucarative opportunity to exploit profit from the market, but ONE IS suppose to halt at point called stop loss, as the market is volatile.

So, if  in short. we conclude, we need to follow a pathway to make profit using uptrend and downtrend in the market.

The pathway as follow:

·       From the zig-zag one need to observe chart until some price activity happens thrice, may it be upward or the downward moment.

·       Once observed one must try to figure out the pattern of its occurrence – this pattern would help one in recognizing support and resistance level in the chart.

·       Now one must purchase the stock before price hits the support level ( at the time market is bearish).

·        Then,  wait till 2 or 3 price falls on the chart till one becomes  confident about the resistance level of the stock i.e.  the point wherein price again rise (market turns bullish)

·        Exploit  one ‘s profit price hits  the set stop loss point and sell the stock at a high price. Thus, one avails an   opportunity to  exploit a desired profit in the stock market. 

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