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Bar Pattern Analysis

 

Bar Pattern Analysis is a basic but often overlooked concept in trading and can be used by all traders. It makes no difference whether you are a long-term trader or a daytrader, understanding bar pattern analysis and incorporating it into your trading will give you a better understanding of the relationship between current price, price history and the most probable future price movement.

The Alchemy Bar Pattern Analysis indicator automatically determines the various bar patterns, then labels and color codes the bars for easy identification. You may use the Expert Commentary Tool provided in your TradeStation software to obtain a quick reference and definition of each bar pattern.

Keep in mind that bar pattern analysis is considered by traders to be more reliable on longer time–frame charts such as weekly, daily and 90 or 60 minute intra-day charts. Shorter time-frame charts give less reliable indications.

The Alchemy Bar Pattern indicator will identify the following price bar patterns:

Green Marks at the Close of the Bar

Bullish Bar:

The Bullish Bar occurs when the closing price of the bar is above the opening price of that bar and closes in it’s upper range . A bullish bar indicates that there was upward price momentum when the bar closed and further increases in price are likely.

Strong Bullish Bar:

A Strong Bullish Bar is the same as the Bullish Bar except that the close price of the bar is very near the high of the price bar. The closer the close of the bar is to the high of the bar, the more likely the market will continue to rise.

Outside Bullish Bar:

An Outside Bullish Bar occurs when the high and low of the bar exceeds the high and low of the previous bar and price closes near the upper area of the bar. The low of the Outside Bullish Bar is commonly used by traders as an important area of support in an uptrending market.

Bullish Reversal Bar:

A Bullish Reversal Bar occurs when price makes a lower low and a lower high than the previous bar and closes above the open of the current bar and in the upper quarter of the current bar. A Bullish Reversal Bar indicates a possible reversal to the upside, at least for the short-term.

Double Bottom Bar:

A double bottom bar is formed when the low of the current bar is equal to the low of the previous bar and the current bar closes near its high. A double bottom can be an uptrend reversal signal or can confirm the end of the retracement countertrend down move in an uptrending market.

Red Marks at the Close of the Bar Bearish Bar:

The Bearish Bar occurs when the closing price of the bar is below the opening price of that bar and closes in it’s lower range. A Bearish Bar indicates that there was downward price momentum when the bar closed and further decreases in price are likely.

Strong Bearish Bar:

A Strong Bearish Bar is the same as the Bearish Bar except that the close of the bar is very near the low of the price bar. The closer the close of the bar is to the low of the bar, the more likely the market will continue to decline.

Outside Bearish Bar:

An Outside Bearish Bar occurs when the high and low of the bar exceeds the high and low of the previous bar and price closes near the lower area of the bar. The high of the Outside Bearish Bar is commonly used by traders as an important area of resistance in a downtrending market.

Bearish Reversal Bar:

A Bearish Reversal Bar occurs when price makes a higher high and a higher low than the previous bar and closes below the open of the current bar and in the lower quarter of the current bar. A Bearish Reversal Bar indicates a possible reversal to the downside, at least for the short-term.

Double Top Bar:

A double top bar is formed when the high of the current bar is equal to the high of the previous bar and the current bar closes near its low. A double top can be a downtrend reversal signal or can confirm the end of the retracement countertrend up move in a downtrending market.

White Marks at the High and Low of the

Bar Inside Bar:

An Inside Bar occurs when the high and low are both inside the high and low of the previous bar. An Inside Bar indicates a possible reversal in the market when near a previous high or low, or can indicate a continuation of trend if the market is trending. Volatility can increase after an Inside Bar. The high and low of the Inside Bar are commonly used as breakout points by traders.

Cyan Marks at the High and the Low of the Bar

Largest Range Bar:

A Largest Range Bar occurs when the high to low range of the bar is much greater than the average range of the most recent bars. Many times this bar becomes an Outside Bar. The high and low of a Largest Range Bar can act as resistance or support for the market.

View Charts : Bar Pattern Analysis
 

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Read More About

Bar Pattern Analysis

Breakout

Divergence

Engulfment & Reversal

Fibonacci Retracements

Floor Traders Mid Points

Floor Traders Pivot Points

Gap

High Low Mid Points

Intraday Time Zones

MACD Signal Line-%Ds Hook

Multiple Moving Averages Crossover

Open/High/Low/Close

Overbought/Oversold

Rolling Floor Traders Pivot Points

Strong Trend

Support & Resistance Pivot Points

Trailing Stop

Trend Catcher

 

     
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