National Stock Exchange of India Limited (NSE) NEW CIRCULAR ABOUT FUTURE AND OPTION CONTRACT

NSE has announced new circular on 3 October 2025 a revision in the lot size of F&O contracts of Nifty, Bank Nifty, Fin Nifty, and Midcap Nifty.

- The lot size of Nifty has been revised from 75 to 65

- Bank Nifty: from 35 to 30

- Nifty Financial Services (FinNifty): from 65 to 60

- Nifty Mid Select (Midcap Nifty): from 140 to 120

- No changes in the lot size of Nifty Next 50

The market lot of derivative contracts on the following Index is unchanged:

The following are the other points to be noted:

• For purpose of computation of contract value, the average closing price of the underlying index

has been taken for one-month period of September 2025.

• This circular shall come into effect from October28, 2025 (EOD).

• The existing lot size will be applicable for weekly and monthly contracts till December 30,2025

expiry date. Lot size of existing quarterly and half yearly contracts will be revised on 30-Dec-

2025 EOD. For ease of understanding, a summary has been provided in Annexure.

• The day spread order book will not be available for the combination contract of November 2025

– January 2026, December 2025 – January 2026 and December 2025 – February 2026.

• Members are advised to inform their clients who have positions or take any new positions in the

quarterly and half yearly contracts, of the upcoming revision in lot size on the below-mentioned

dates.

• Members are advised to load the updated contract.gz, NSE_FO_contract_ddmmyyyy.csv.gz,

spd_contract.gz and NSE_FO_spdcontract_ddmmyyyy.csv.gz file in the trading application

before trading on respective effective date. This file can be obtained from the directory

faoftp/faocommon on the Extranet server.

National Securities Depository Ltd.

 Company Overview:

 National Securities Depository Ltd (NSDL) is a SEBI-registered market infrastructure institution and a critical enabler of India’s capital markets, offering secure and efficient depository services to investors, issuers, and intermediaries. As of March 25, NSDL serviced 99.99% of foreign portfolio investor (FPI) assets in dematerialised form, reflecting its dominance in the institutional segment. With an 86.8% share of total demat value and a presence across 99.34% of India's pin codes and 194 countries, NSDL demonstrates both depth and reach. Though it holds 33.9% share in the number of depository participants (DPs), it commands a stronger 77.6% share in DP centres, reflecting a high-quality and widely distributed participant network. NSDL remains a foundational pillar of India’s digitised securities infrastructure, benefiting from the long-term tailwinds of financial deepening, rising FPI and retail participation.

Key Highlights: 

1. First and leading depository of India:  NSDL is India’s first and largest depository in terms of number of issuers, active instruments, demat value of settlements, and value of assets under custody as of Mar’25. It has been instrumental in shaping the Indian capital market infrastructure, with its core depository platform servicing 79,773 issuers, over 3.95 crore active demat accounts, and operating via 294 DPs across 65,392 service centres, significantly ahead of its closest peer, CDSL. 

2. Technology-led product innovation:  The company has consistently driven technology-led innovation, having pioneered dematerialised securities in India. Its strong focus on platform stability, product innovation, and user experience has allowed it to stay relevant across diverse user segments. Revenue visibility remains strong, with a major share derived from stable, recurring sources such as annual custody fees from issuers and annual DP fees, rather than market-linked transaction charges. Additional revenue is earned via licensing and usage fees across other service offerings. 

 3. Strong subsidiary performance: NSDL has built complementary verticals through its subsidiaries. NSDL Database Management Ltd (NDML) operates as a tech-driven services provider, supporting ~1,728 SEBI-registered intermediaries and managing ~1.9 crore KYC records through its Central KYC Registry (CKYCR) licence. Meanwhile, NSDL Payments Bank Ltd (NPBL) delivers digital financial products, including prepaid cards, DBT-linked accounts, cash management solutions to corporate and government clients under a B2B2C model.

Valuation: NSDL reported a strong financial performance with a Revenue/EBITDA/PAT growing at a CAGR of 17.9%/21.2%/20.9% over FY23–FY25period, reflecting robust operating leverage. The company’s revenue model is largely stable and annuity-like, with over 60% of revenue derived from recurring sources such as annual custody fees charged to issuers and fixed annual DP fees. These recurring fees are independent of market turnover or transaction volume, providing insulation from market cyclicality. NSDL also generates revenue from licensing its DPM software, RTA services, and other auxiliary offerings. As of Mar’25, it had 86.8% market share by demat value and serviced 99.99% of the demat value of FPI holdings in India. At the upper price band of Rs 800, the IPO is priced at 47x times FY25 P/E, compared to its peer CDSL which is trading at 67x. The entire issue is OFS with IDBI Bank, NSE, SBI, UTI, HDFC Bank and Union Bank are the selling shareholders.

DETAILS OF THE OFFER FOR SALE BY THE SELLING SHAREHOLDERS 

Risk Factors 

• Demand risk: Significant changes in investor preferences from investing & trading in securities to other avenues may lead to a decline in demand for services and adversely affect the business. 

• Product evolution risk: The company is dependent on its ability to develop and introduce new products & services to the securities market in India through technology-based solutions that anticipate and keep pace with rapid and continuing changes in technology, industry standards and preferences of investors. Any failure to do so may have an adverse impact on business. 

• Market risk: During FY23/FY24/FY25, the company derived 25.0%/24.3%/29.9% of its revenue from transaction fees. Any slowdown in trading activity due to external risks like geopolitical developments or adverse economic events may have an impact on the business. 

• IT Risk: The company relies on complex information technology networks and systems to operate its business. Any significant system or network disruption due to a technical glitch, breach in the security of its IT systems or otherwise, may have a negative impact on the business, including the levy of financial disincentives by SEBI. 

• Regulatory Risk: The company operates under a stringent regulatory regime, and any inability to comply with legal and regulatory obligations may expose it to regulatory proceedings and legal actions by the Securities and Exchange Board of India (SEBI). 

Growth Strategy 

• Continue to focus on growth potential and increase market penetration by leveraging strengths. 

• Invest and upgrade IT infrastructure systems for enhancement of operational efficiency, service quality and operational resilience.

• Diversify offerings and enhance database management business. 

• Increase market share of payments bank business.

Product and Service Offerings Core Depository Services: 

• Maintaining allotment and transfer of ownership records: Maintain details of allotment and transfer of ownership records of securities assets held through electronic book entries and provide a safe and secure environment for the storage of such securities. 

• Account opening and management: Opening of demat accounts for demat holders through depository participants and providing various services including updating KYC details, nomination facility and updating demographic details. 

• Settlement of market and off-market transfers: Facilitate the transfer of securities by investors by providing a mechanism for clearing members to settle trades carried out on stock exchanges. 

• Dematerialisation of securities: Provide dematerialisation services to investors, listed and unlisted issuers and registrar and transfer agents and charge onboarding and service fees to issuers for providing these services. 

• Corporate actions: Assist issuers with carrying out corporate actions relating to the disbursement of monetary benefits, such as dividends and non-monetary benefits such as bonus payments to investors. 

• Pledge: Offer the flexibility for securities held in a depository account to be pledged or hypothecated, enabling clients to avail themselves of loan or credit facilities. 

• Margin Pledge: Introduced a transaction in the depository system that allows clients to utilise their securities as margin with their trading members. 

• Non-disposal undertakings: Specialised service that allows Demat Account holders to record NDUs in the depository system. 

• Consolidated account statements: A Unique offering from NSDL that provides information on all securities held in dematerialised form in a client’s portfolio in a single statement. 

• Providing a comprehensive suite of APIs: Provide a comprehensive suite of APIs for seamless processing of data between the depository participants and NSDL. 

• Cash benefit services: Process interest payments on government bonds and sovereign gold bonds to investors holding these securities in demat accounts with depository participants registered with us. 

Ancillary Products and Services: 

• Digital Loans Against Security (Digital LAS): Through this facility, clients can avail loans by instantly pledging securities held in dematerialised form. 

• FPI Monitor: 

    o Common Application Form (CAF): A single common application form for foreign portfolio                     investors to register with SEBI, apply for allotment of PAN, complete KYC procedures, and open         bank and demat accounts in India. 

    o Foreign Investment Limit Monitoring (FILM): Through this service, listed issuers can appoint a                 designated depository for monitoring foreign investment in listed Indian entities. 

    o FPI Investments Data: Provide a source of information for public dissemination on FPI investment         and divestment in the Indian markets across various assets and through various investment routes             over a period of time.

 • Depository Account Validation: Secured internet-based facility which provides an online interface enabling subscribers to validate DP ID, Client ID and PAN of investors through a file upload. 

• Mutual Fund Redemption API: Mutual fund redemption API provides clients with the convenience of placing redemption requests for mutual fund units held in their demat account. 

• Issuer Service Portal: An issuer service portal which gives access to the issuer-related services and information. 

 

Swing Trading

Swing trading focuses on short- to medium-term price movements, using technical analysis to capitalise on stock trends. It requires risk management and strategic entry/exit points for profit.

Stock prices typically follow a pattern of peaks and valleys, and swing trading capitalises on these movements. This strategy focuses on pinpointing the direction of the momentum and identifying potential points where this momentum might move.

While day trading is a well-known concept involving quick gains in a short period, swing trading remains less familiar to many. It’s a strategy not as widely discussed or understood, yet it serves a distinct purpose in the stock market, offering a different approach to trading than the rapid, high-stakes nature of day trading.

In this article, we’ll delve into the dynamics of swing trading. We’ll also discuss various advantages, disadvantages and different swing trading strategies. 

What is Swing Trading?

Swing trading is a strategy that focuses on capturing gains in a stock or other financial instruments over a short to medium term, typically from a few days to several weeks. This method involves identifying and exploiting price swings and momentum in the market, using technical analysis to guide entry and exit decisions. Unlike day trading, swing trading positions are held longer but not as long as typical buy-and-hold investments.

Swing trading is a popular form of trading in which the traders hold their position for more than a day. By definition, it is the direct opposite of day trading – doesn’t require traders to square off their position in a day. Swing traders usually target a larger market share and wait for a deal to emerge for the underlying – when it happens, they trade in the direction of the trend. Swing trading is one of the fundamental forms of trading.

Why is Swing Trading Important?

A swing trade lasts more than a day but less than trend trades, which can emerge over weeks or months. Swing trading sits at the midpoint of the two extremes, looking at profiting from short-duration price movement arising from changes in corporate fundamentals. The key to profit from swing trading lies in picking up the right stocks (stocks that tend to grow in short duration). 

While waiting for a larger profit to emerge, swing traders make several small wins to add to their ultimate profit. This helps them secure a more substantial profit volume. But to do that, swing traders keep their stop loss level low at 2-3% and manage to keep the profit-to-loss ratio at 3:1. It is done to avoid risking too much. A big loss can wipe away all the small gains made from smaller swings. To avoid making mistakes, swing traders carefully choose the stocks.

How does Swing Trading Work?

Swing trading is a strategy that involves capitalising on the short-term price movements of stocks or other securities, focusing particularly on those with high activity and significant price fluctuations. This approach can be broken down into a few key steps:

1. Selecting a Suitable Stock

Picking up the right stocks is the first and crucial step in a successful swing. You need to confirm that the stocks you select are in an uptrend. Secondly, the stock you select must also have volume and liquidity in the market. Large-cap stocks are deemed right for swing trading. In an active market, these stocks fluctuate by a wide range of high and low extremes. Swing traders will ride the wave and trade in the direction of the trend before switching positions when the trend changes in the opposite direction.

2. Performing Technical Analysis

After pinpointing a potential stock, the next step is thoroughly analysing its price movements and patterns. This is typically done using technical analysis tools such as the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), volume indicators, and trend lines. Additionally, staying informed about relevant news and developments in the company and its industry can provide insights into potential future performance.

3. Establishing Entry and Exit Points

With the analysis in hand, the next step is determining the optimal points for entering and exiting the trade. A common strategy is to set a stop-loss order, usually around 5% below the entry price, to minimise potential losses. Concurrently, setting a target price—often about 20% above the entry price—helps lock in profits. The idea is to buy near the stock’s support level and sell near its resistance level, capitalising on the ‘swing’ or the expected price movement between these two points.

4. Understanding the Movement

The essence of swing trading lies in understanding and predicting the ‘swing’ or the oscillation of stock prices between their support and resistance levels. By identifying these levels and the stock’s tendency to rebound from support and move towards resistance, swing traders aim to buy low and sell high within a relatively short time frame.

Indicators of Swing Trading 

Moving Averages: Moving averages help smooth out price changes to show the overall trend. If the stock price is above the moving average, it signals an uptrend, while being below it indicates a downtrend.

Bollinger Bands: Bollinger Bands help identify when a stock might be overbought or oversold by showing high and low points based on the stock’s average price over a period (like 20 days). If the price touches the upper band, the stock could be overbought, while hitting the lower band might suggest it’s oversold.

Relative Strength Index (RSI): RSI measures momentum to see if a stock is overbought or oversold. The index ranges from 0 to 100—anything over 70 means overbought (likely to fall), while below 30 means oversold (likely to rise).

MACD: MACD helps spot trend changes and shifts in momentum. It compares two moving averages (like 12-day and 26-day). When the faster line crosses above the slower one, it’s a sign the stock might be gaining momentum. When it crosses below, it suggests the stock could be losing steam.

Swing Trading Advantages and Disadvantages

Advantages 

Potential for significant profit: Swing trading allows traders to capitalise on short-term price movement. By timing the entry and exit at strategic points, swing traders can earn a significant profit in a short time.

Reduced market exposure: Swing trading involves holding a position for several days or weeks. It doesn’t require constantly monitoring the market. It can result in less stress or emotional decision-making as traders have more time to analyse the market. 

Utilisation of technical analysis: Swing traders rely heavily on technical analysis, studying price charts, patterns, and indicators to identify entry and exit. This approach allows for more discipline, providing consistency and objectivity to decision-making.

Flexibility of part-time: Swing trading doesn’t require constant market monitoring and is more suitable for traders with other commitments, such as jobs or studies. 

Disadvantages 

Increased transaction costs: Swing traders are involved in multiple trades, which can increase the total cost of trading. The cost can cut into your profit, lowering overall gains.

Market volatility risks: Swing trading is of short-to-medium-term duration and exposes traders to sudden market volatilities and reversals. Unexpected news events or economic developments can result in significant market fluctuations.

False signals and market noise: Market noise often influences Short-term price movements, making it difficult to recognise genuine trends from momentary fluctuations. 

Emotional challenges: Frequent trading can increase emotional stress. Market volatility and the need to make quick decisions can lead to fear and greed. 

Swing Trading Strategy

Swing trading got its name because it tries to gain from price oscillation or upward or downward swings. Swing traders use an array of technical trading tools, like day traders, only for a period that is close to position trading.

Swing traders use popular trading tools like Bollinger Bands, Fibonacci Retracement, and moving oscillators to form strategies. Besides, traders also keep a close watch on emerging patterns in multi-day charts like

1. Head and shoulders pattern

2. Flag pattern

3. Cup and handle pattern

4. Triangle pattern

5. Moving Average Crossover

Let’s take a look at simple swing trading strategies.

Fibonacci Retracement: Traders involved in swing trading know that stocks tend to retrace sometimes at different levels before reversing again. Fibonacci retracement lines help traders identify support and resistance levels. Traders draw horizontal lines at different % levels, like 23.6%, 38.2%, and 61.8%, to identify potential reversal levels. For instance, when the trend is downward, a trader can plan a short trade at the 61.8 Fibonacci line, functioning as a resistance level, where the price retraces before bouncing off and exits when the price touches the 23.6 Fibonacci line or the support level.

Support and Resistance: Support and resistance lines are the two most important indicators for traders who follow the trend. Support identifies the bottom level of a trading range, and resistance represents the ceiling. Asset price moves within the range, but it indicates a reversal when it crosses the support or resistance level. Price above the resistance level is identified as an overbought situation, and it may indicate the buying pressure will recede and selling forces will take over. Similarly, the area below the support line is where overselling occurs. A swing trader will enter a selling position when the price bounces off at the resistance, placing the stop-loss level just above the line.

Bollinger Bands Method: Bollinger Bands (BB) are price bands on both sides of a moving average trend line. It creates a range between which asset prices move. Swing traders use Bollinger Bands to plan entry and exit points in the market.

Channel Trading: Channel trading is a simple method involving trading assets showing a strong trend line and trading within a channel. For example, you’ll plan a sale when the trend line is downward and touches the upper limit of the channel before bouncing off down. Traders using channel trading as the tool always trade with the trend signals.

Using SMA: Another popular swing trading method is the simple moving average (SMA) line. The SMA is a continuously updating line where each data point represents the average price of an asset. 10 and 20-day SMAs smooth out the noise.

The trader will place the two SMA lines against each other on a trading chart. When the shorter SMA (10 days) crosses over the longer SMA (20 days), trades plan entry signals an uptrend. Conversely, when a longer SMA crosses the shorter SMA, it triggers a sell signal.

MACD Crossover: The MACD consists of two average lines – the signal line and the MACD. It generates trading signals – buy or sell – when the two lines cross. In a bullish trend, the MACD will switch over the signal line, triggering off a buy signal. 

The trend will reverse to bearish when the MACD line falls below the signal line, indicating selling opportunities. MACD crossover is a popular swing trading technique.

So far, we have discussed the standard swing trading methods that will give you a heads-up. But there is more to it. The second thing is how to manage your trade. There are two established methods for that,

Passive trade management

Active trade management

A passive trader will wait until the market hits stop loss or the profit target and ignore any movement in between. As the name suggests, an active trader will monitor the market movement to decide their next move.

The Bottom Line

Swing trading means trading methodically with the trend. Swing traders don’t try to make a big profit in one shot. They wait for the stock to hit the profit level so they can sell. It is considered a good technique for beginner traders, but if you are an intermediate or advanced trader, you can swing trade, too.

Swing trading doesn’t demand much of your time like scalping or day trading but allows you to see the profit mature over time. However, to swing trade, you would need discipline and technical understanding to make the winning deals. To start with swing trading, open your Demat account and Trading account with Angel One today. Go to the Angel One website or download the Angel One app to complete the process in a few easy steps.

NTPC Green Energy Ltd IPO

Company Overview:

NTPC Green Energy Ltd (NGEL), a wholly owned subsidiary of NTPC Ltd is the 

largest renewable energy public sector enterprise (excluding hydro energy) in 

term of operating capacity as of Sep’24 and power generation as of Mar’24. The 

company’s renewable energy portfolio includes both solar and wind power 

assets with presence across multiple locations in more than 6 states which helps 

in mitigating risk of location specific generation variability. As of Sep’24, NTPC 

Green’s operational capacity stood at 3,220 MW of solar projects and 100 MW 

of wind projects across 6 states with average Power Purchasing Agreement 

(PPA) period of 25 years. Further, it has 13,576 MW of contracted & awarded 

projects and capacity under pipeline of 9,175 MW as of Sep’24. 

Key Highlights:

1. Strong parentage: The company is a wholly owned subsidiary of NTPC Ltd, a 

‘Maharatna’ central public service enterprise, which contributes ~17% to India’s 

total installed capacity and ~24% to the total power generated in India as of 

Sep’24. NGEL benefits from the support, vision, resources and experience of the 

NTPC group which is currently looking to expand its non-fossil-based capacity to 

45-50% of its portfolio which will include 60 GW renewable energy capacity by 

CY32. The company believes it can use the brand recall and long-term 

experience of dealing with state DISCOMs of NTPC Ltd to grow its portfolio and 

business in India. 

2. Robust product portfolio with diversification across geographies and off-

takers: NGEL has a large portfolio of utility-scale solar and wind energy projects 

coupled with projects for PSUs and Indian corporates. As of Sep’24, the company 

had 17 off-takers across 41 solar and 1 wind projects. The total portfolio as of 

Sep’24, consists of 26,071 MW including 3,320 MW of operating projects; 13,576 

MW of contracted & awarded projects and 9,175 MW of capacity under pipeline. 

NGEL’s portfolio is spread out across Rajasthan, Gujarat, Tamil Nadu, Andhra 

Pradesh, Madhya Pradesh and Uttar Pradesh which helps in mitigating risk of 

location specific generation variability.

3. Experience in renewable energy project execution: The company along with 

the NTPC Group have a strong track record of developing, constructing and 

operating renewable power projects, driven by experienced in-house 

management and procurement teams. NGEL’s in-house team works with third-

party aggregators, developers and EPC contractors to manage the land 

acquisition process. As of Sep’24, the company owns ~8,900 acres of freehold 

land and ~45,700 acres of leasehold land. Further, the company aimsto leverage 

NTPC Group’s economies of scale to negotiate and reduce the cost of 

components, equipment and materials for its solar and wind projects from 

domestic and foreign original equipment manufacturers and suppliers.

4. Access to low cost of capital: The company’s focus on maintaining high-

capacity utilization, operational efficiencies, low operating costs along with the 

strong parentage and diversified portfolio helps it to maintain healthy coverage 

ratios. Further, leveraging NTPC group’s high credit rating and strong balance 

sheet provides access to low cost of capital.

Important Charting Patterns

11 Important Charting Patterns

Head and shoulder formation

It is a typical formation that combines one large peak in the middle and two smaller peaks on either side of it. Traders look at the pattern to guess bullish-to-bearish trend reversal.

The first and the third peaks are typically smaller than the second peak, and all three eventually fall back to the support line, also known as the neckline. Once the third peak falls back to the support line, traders assume it to break out into a bearish downtrend.

Double top and bottom patterns

Double top and bottom shapes appear before a trend reversal. During these phases, asset price rises or falls twice before crossing over to the other side of the trend line. In double top price rise and then fall back to the support line, then rise again before bearish downtrend takes over.

Double bottom is the opposite of the double top. In a double bottom, the graph indicates strong selling to cause the asset price to fall below the support line. After the initial fall, the price rises back up again to the support line and then drops for the second time. Finally, the price rises above the support line to break into a bullish trend reversal.

Rounding bottom pattern

Rounding bottom is one of the many stock chart patterns that denote continuation or a reversal. The most common rounding bottom pattern is a bullish reversal. It looks like a ‘U’ and forms at the end of an extended downtrend.

It is a long-term price movement that forms over several weeks or several months. The initial downward slope is indicative of excess supply or selling, which eventually converts into an uptrend when buyers enter the market at a low price. Once the formation of the rounded bottom is complete, prices break out and continue on the uptrend.

The cup and handle

The cup and handle pattern is quite similar to the rounded bottom, except a short downtrend that looks like the handle of a cup that forms after the rounded bottom is complete. The short bearish phase indicates a brief moment of retracement resembling a handle of a cup. Hence, the name.

The cup and the handle is a bullish reversal pattern, barring the short bearish phase, after which the market continues to rise.

Wedges

Wedges are a chart pattern where two sloping trend lines converge at the end. It can be either rising or falling. In a rising wedge, the price line gets caught between support and resistance lines, both slanting upward. In this case, the support line has a steeper rise than the resistance line. When the rising wedge pattern appears, investors expect the asset price to fall and eventually break out below the support line.

Conversely, for a downward wedge, the price line lies between two downward-sloping trendlines. The resistance is steeper than the support, indicating that the price of an asset is rising and will probably break through the resistance level.

The rising wedge belongs to the bearish market, and a falling wedge is typical of a bullish market.

Pennants and Flags

Pennants or flags are compact triangular patterns where two lines converge at a set point. It can form after a strong uptrend or downtrend movement, indicating that traders might have paused to consolidate before the trend continues. Wedges and pennant may look similar, but they are not the same. Wedges are narrower than pennants and are trend reversal signals. Wedges are usually upward or downward patterns, while pennant is always horizontal.

Some traders recognise flag pattern separately from pennants. In a flag pattern, both the support and resistance lines run parallelly before the breakout, often in the opposite direction of the existing trendline. Unlike pennant, flag shape indicates a trend reversal.

Triangle Shapes – Ascending And Descending

An ascending triangle denotes the continuation of a bullish trend. It can be drawn by placing a horizontal swing line across the resistance level and then placing an upward-moving swing line or support line at the bottom.

Conversely, a downward triangle forms when the resistance line slopes downwards towards the horizontal support line. Eventually, a descending triangle breaks through the support line, and traders might enter a short position.

Symmetrical triangle

The symmetrical triangle is a continuation of a trend pattern. It appears when the market goes through frequent fluctuations, creating a series of peaks and troughs to converge to a point. Unlike ascending or descending triangles, the symmetrical triangle is a horizontal pattern.

It best describes market volatility, where there is opposite price movement during an ongoing trend without clarity over trend reversal. The market can break into either direction after the symmetrical triangle pattern is formed.

Deciphering Chart Patterns

There are different schools of analysts and traders who will read different patterns differently. But trendlines are useful is studying price movement in the market. An upwardly inclined trendline indicates that there are more significant price fluctuations between highs and lows. Similarly, a downward sloping trendline appears when the price is moving between lower highs and lows.

There are also arguments pertaining to which data points to use in drawing the pattern. Pattern and position for the formation are also suggestive of market sentiment. A section of analysts suggests that the body of the candle bar, not the shadows, should be used for drawing the price line. Some charters also prefer to use only the closing price for drawing patterns since it is preferably the position investors want to maintain at the end of the trading day.

Three Most Important Chart Types

Like patterns, there are different types of chart types too recognised by technical analysts. The three most widely used chart types are,

Line charts:

These are simple financial charts that are drawn between closing prices to show general price movement. However, these charts don’t give granular information like bar or candlestick chart patterns. Hence, they must be tallied with more revealing charts for confirmation.

Bar charts:

Bar trading chart patterns are also called OCHL charts, meaning opening, closing, high and low. Unlike, line charts these are more detailed, giving more insight to traders and investors about asset price movement.

Candlestick charts:

Candlestick charts are popular trading charts that look like bar charts but also clearly show day’s high and low. Each cylindrical body captures day’s opening and closing price, while upper and lower shadows respectively represent day’s high and low for the asset.

Candlestick charts have different chart patterns that need separate discussions.

Conclusion

Chart patterns are useful technical tools to understand why an asset price has behaved in a certain way. These are indicative of market support and resistance level, helping traders to open a long or short position.

Stock chart patterns are used to study market movement and manage risk-reward situations. Traders use charts to identify profitable entry into the market or plan an exit when there is a downtrend. Based on these, they set their stop-loss level.

So, which is the most profitable chart pattern? The ideal answer is there is none. Investors align their trading strategies along with the ongoing market trend to optimise profitability under a particular situation.

Trading Chart Patterns

Trading Chart Patterns

We always talk about how trading charts are crucial for decision-making for traders and investors. Today several trading charts have emerged, each catering to multiple needs, which makes it difficult, especially for new investors, to understand which charts are better for them. To trade successfully, traders must build the skills to quickly identify the commonly formed and indicative chart patterns to take a position in the market.

In this article, we will discuss different chart patterns and how investors and traders can optimise their risk-reward situation following those.

Chart patterns are a critical component of technical trading. They are multifunctional and useful to

Read market trend so you know if you may buy or sell

Discover new entry and exit points and avoid being at the wrong side of the trend

Find highly profitable trading opportunities

Price patterns can give crucial trading insights, but the key is to know how to read them and eliminate noise while forming a workable trading strategy. To help you navigate through the maze of trading chart patterns, we have compiled a list of commonly emerged patterns that you must take note of.

Candlestick Patterns

Candlestick Patterns

A candlestick pattern is formed as a result of the rising and falling price of an asset. While the technical charts may show random patterns, some specific patterns are used by traders as a buy or sell signal. It must be mentioned that these patterns are indications and not guarantees.

The patterns can be broadly divided into bullish and bearish. Bullish patterns are an indication that the price is likely to move up while bearish patterns might precede a fall in price.

Candlestick Components

Similar to a bar chart, a candlestick shows if the markets are open, close, high or low during the trading session. A candlestick has a wide portion, known as the “ real body”. It is described as the price range between the open and close of the trading session.

When the real body is black in colour, it means that the closing price is less than the opening price quoted by the security. The opposite of it is the empty body, which means that the closing price was higher than the opening price.

Traders have the option to alter the colour in their respective trading platforms. For instance, a down candle is usually shaded red (instead of black as described earlier). The up candle can be given a green colour (instead of white).

How to read candlestick patterns

There are several basic forms of candlestick patterns such as bearish engulfing pattern, bearish engulfing pattern, bullish engulfing pattern, bearish engulfing pattern. Let us now see how to interpret candlesticks.

Bearish Engulfing Pattern:

This pattern is formed when sellers of a security are more than that of buyers. You may ascertain this pattern when you witness a long red real body engulfing a small green real body. The bearish engulfing pattern is an indication that the bears are in control and the price of the security is likely to drop lower.

Bullish Engulfing Pattern:

As opposed to the bearish engulfing pattern, this pattern is formed when buyers outnumber sellers. This pattern looks like a long green real body engulfing a small red real body. Traders interpret this pattern as a buy indication. The prices are expected to move up when a bullish engulfing pattern is formed.

Bearish Evening Star:

An evening star is a pattern formed when the price of a security has topped. When the last candle in the pattern opens below the previous day’s small real body, the pattern formed is called a bearish evening star. The appearance of this pattern means that the security might witness a selling pressure in the future.

Bearish Harami:

This pattern signals that the traders are indecisive. A small red body fully inside the previous day’s real body is called a bearish harami. If the price momentum continues to be upward after such a pattern is formed, the up move may continue. But if the price begins to slide, it is likely to slide further.

Bullish Harami:

When a small real body, green in colour, forms inside the large real body of the previous day, the pattern is called bullish harami. The pattern is an indication that a trend is pausing and an upside movement may follow soon.

Bearish Harami Cross:

This pattern forms during an uptrend. When a doji follows an up candle — where the candlestick is nearly an equal open and close — the pattern is called bearish harami cross. Besides, the doji is within the real body of the previous session. Traders interpret such a pattern the same as a bearish harami.

Bullish Harami Cross: This candlestick pattern is formed during a downtrend. The formation happens when a doji follows a down candle. The doji is within the real body of the previous session.The pattern, similar to bullish harami, is indicative of a trend pausing, followed by an upside movement

candelstick pattern