Scanning For Trades That Produce Higher Profits
Traders can spend too much time scanning for trades. It almost sounds paradoxical; an investor needs good trades to be profitable, but spending hours in vain searching for the “needle in the haystack” typically produces nothing but another bad trade. It is actually quite easy to pick stocks. Who hasn’t looked back and said something like, “I knew to buy Microsoft when it was $2.00 a share.”? The pick is easy; for most, taking a position is the hardest part. While it is easy to sit back and hope for stock market tips, a proactive investor will combine a stock trading plan with a proven stock trading software to form a channel for locating and buying good stocks.
A stock trading system is fundamental to every trade and something that the investor establishes prior to moving in the stock market. A stock trading system, such as candlestick analysis stock market investing is the method of interpreting movements in the stock market. Scanning for trades using stock scanning software is the final critical piece needed to help the investor to make his or her own trading tips.
There are many software programs available for scanning for trades. It is important to find one that offers the desired features and results without excessive processing time or confusing programming requirements. Simple online searches or the best investment advice from satisfied friends can be the most successful ways to locate a software package. The important thing to remember with any stock market investing software is that the purpose isn’t to locate the perfect trade. Scanning for trades with software only provides the data needed to perform stock technical analysis. This will allow the investor to use his or her stock investing system to provide the tips needed to make a trade. The best trading tip available is for the investor to use his or her own eyes. A good formula is to use while scanning for trades is to identify a crude group of prospects, then for the trader to review the list for prospects. After this is complete, an analysis of the chart formations becomes much easier to complete since the data is inclusive.
An excellent trading tip is to make the stock scanning software become part of the process for identifying potential trades, not the final authority. When using candlestick trading tactics, a trader can then evaluate the candlestick chart formations and determine a course of action. Chart formations indicate the direction a stock is moving and any unusual directions it might encounter in the process.
The "needle in the haystack" is the thing that every investor wants to find. With a stock trading plan, a stock investing system and stock trading software, scanning for trades becomes easier than ever to find that needle. The three pieces needed to identify successful trades are in place. And when the opportunity rolls around next time, the investor can stand up proudly at the Rolls Royce dealership and proclaim, ?I knew to buy stock in ABC Corp when it was only $1.00 per share!? right before driving away in that $125,000 Rolls he earned by scanning for trades the right way and putting in the effort to give himself a winning edge.
Market Direction: Candlestick signals provide a much clearer picture of what the overall market trend will be doing. The candlestick formations provide an immense amount of information. That information becomes very easy to analyze because of its visual nature. This past week, the markets showed a strong possibility that the sellers could be taking control. The big down day in both the Dow and the NASDAQ was confirmation. Was this a full scale reversal or was it profit taking? Analyzing the candle formations at important technical levels make trend analysis very easy to comprehend.
After the severe pullback in the markets, which could have led to more downside, the markets supported in an important level, the 20 day moving average. Why was this an important level? Because the uptrend of the past few months has been supporting on the 20 day moving average. The Morning Star signal over the past three days of trading in the Dow, right at the 20 day moving average, was a good indication that the Bulls were still participating in this trend.
The small bullish candle in the NASDAQ, right on the 20 day moving average, provided easy analytical criteria for how the trend should continue. With the stochastics heading in a downward direction, the small bullish candle in the NASDAQ on Wednesday would have been considered merely a bounce after a big down day had prices continued lower the following day. The lack of support at the 20 day moving average would have simply revealed that the 20 day moving average was not acting as a support level anymore.
The fact that there was a gap up following a bullish candle the next day produced significant information. The buyers were stepping back in with enthusiasm. This provided reasonably good information that the sellers had not yet taken control of the trend. This is not sophisticated analysis. This is merely interpreting what the candlestick signals are telling us. If the Bulls were stepping in again, maintaining the uptrend, that should provide a good number of trade opportunities.
There are thousands of stock trade opportunities. How does an investor analyze which trades are going to have the best potential and how can that be done in a reasonable amount of time? Candlestick signals are very beneficial for cultivating down to the best possible trades. Knowing what is incorporated into each signal provides scanning formulas that make finding the strongest trades very easy.
The application of common sense scanning criteria provided by candlestick analysis creates a very simple trade process. What criteria can be added to the scanning analysis that continually puts the probabilities in the investors favor? What direction is the overall trend of the market? That can be easily analyzed using candlestick signals. What direction is a specific sector moving? That can also be easily analyzed using candlestick signals. What chart patterns or signals produce the highest potential of a strong price move? When all these criteria are put into simple scanning processes, a small number of high potential trades can be identified in a matter of a few minutes each day.
Will the scanning results put you into big profit trades? Not necessarily, but what the results from a candlestick scanning technique does provide is trade setups that have the potential for being big profit trades. The Dynavax Tech chart illustrates the simple logic involved with being able to identify candlestick reversal signals and applying that information with other technical parameters.
The Hammer type signal forming right on the 50 day moving average, a major potential support level, with stochastics in the oversold condition, followed by a gap up in price, makes for an extremely high potential/high profit trade situation. This position was recommended in our Candlestick Forum members' area based upon the identification of a strong buy signal. Again, will the scanning results put you into big profit trades? The scanning results produce situations for participating in high potential trades.
Understanding the psychology in price trends becomes very important for participating in big profit trades. That psychology can be better interpreted when identifying and evaluating what the individual candlestick formations represent. Being able to evaluate what 'might' be occurring during a price trend, based upon the previous candle formations, such as inordinate strength, has a different potential result than a previous moderate uptrend. Learning how to properly use candlestick analysis is very easy. It is the common sense evaluation of what has occurred in investor sentiment during a price move millions of times in the past.
NEW RELEASE - Scanning Techniques to Higher Profits is now available on the website. This training CD provides an easy step-by-step process for creating effective scanning techniques. Additionally, the analytical process is incorporated into the evaluation of the highest potential trades for the next trading day. This powerful combination allows an investor to be participating in the potential big profit moves. Click here to receive the Introductory Price Special on - Scanning Techniques to Higher Profits
Chat session tonight open to everybody 8 p.m. ET - Stock Chat Instructions Here
The Candlestick Forum Staff