It can be hard to know where to start when you want to begin investing money. Investing money is different from actually saving money. To save money means to put it aside on reserve, while investing money means that it is committed for a period of time with some level of risk for the purpose of earning a return on investment. Lot’s of people are afraid to invest their money because they don’t know where to start, or they don’t want to do the research needed to build an investment portfolio.  There are many investment options to choose from including stocks and bonds, mutual fund investing, commodities trading, options trading, and many, many more.

Many times, when someone decides to begin investing money, they don’t know how much of their income should actually be invested. Really only a percentage of the monthly income should go to investments. In order to figure this out, you must first set aside the daily and monthly expenditure. Then, you should set aside the necessary amount needed to pay for all bills at the end of the month. Basically, you want to be sure that the amount that you set aside for investing, does not affect your daily liquidity and also your lifestyle. You also want to determine the investment risk level that you are willing to take when investing money. If you are just starting to invest, obviously the risk level should be low until you are more comfortable. You will also need to be sure that you build a strong portfolio through ensuring portfolio diversification. Having a diversified portfolio means that you should have varying investment risk levels, (low and high), and also have different types of investments in your portfolio. You don’t want to put all of your eggs into one basket!

Hot tips!  If you are new to investing in the stock market, beware of the hot stocks!  If you hear of hot stock market picks, please do your own research before investing in the stock.  Sometimes you may get an email, get information from someone on the street, but it may not be reliable. Even if it is a close relative or friend, be sure to look into it yourself. When investing money, you must do your homework to avoid making investing mistakes. You can blame whoever you want if a trade goes wrong, but in the end you are only losing your money.

When should you start investing money?  As soon as possible, or as soon as you have laid the strong financial groundwork for yourself.  Long term investing should be done as soon as possible, with short-term investing, something that you can begin after you have accumulated some wealth. The best investment advice is that it is wise to get rid of any credit card debt, loans of any type, car payments, etc as well, before you begin investing money. This is part of laying the groundwork that is a must before begin investing in the stock market, buying bonds, or any other types of investing that you decide to participate in.

Again, just be sure that you are in a good place, financially and that you have done your homework, before you begin investing money.

Three weeks ago Subprime lending was the only major problem. Last week, after the market has steadily declined, the whole world economy was going to hell in a hand basket. There was nothing being said that would create any indication there was any reason to be investing in the stock market.

Do you think the fundamentals of the world had changed dramatically from the last week of December to the third week of January? Absolutely not! The only thing that changed was the rhetoric/perception of what the world economy was doing. Candlestick signals produce the opportunity to make huge profits at bottoms and tops. Without them, most investors do not have any technical alerts that a major shift of investor sentiment is occurring. Candlesticks are those alerts. Do you buy when everything is terrible? Most investors don't. Even the most savvy of investors have to break the mode of fear and greed at extreme market conditions. When do we buy? Is this a bounce? Is this a sucker rally? These are all questions that even the toughest investors have in the back of their minds when buying at the bottom.

Fortunately for the candlestick investor, there are some very simple rules that make entering trades at the bottom much easier to handle mentally. Those rules stem from that most simple trading facet, investors panic sell at the bottom. What constitutes panic selling in oversold conditions? Huge dark candles! Gap down in oversold conditions! Large volume coming into a trading entity at the bottom. Each of these indicators allows the candlestick investor to be mentally prepared to buy when everybody else is panic selling.

As illustrated in our last newsletter, there was in a multitude of trading stocks that produced 20%, 30%, 40% returns in the matter of two or three days. What would have compelled the candlestick investor to enter trades when everybody else was liquidating? Having the simple knowledge of what the charts are telling us. Although guest after guest on the financial news talk shows gave plenty of reasons why the markets should be heading lower, the candlestick signals were giving a different story. Let the market tell you what the market is doing.

DOW

Having the ability to analyze the market trend in general adds to the probabilities of being in the correct individual stock positions at the right time. Increase the probabilities by identifying the strong reversal signals and the strong price patterns. When you can identify as many indicators as possible that work a high percentage of the time, you are merely creating a trading format that reduces downside risk and gains the upside potential.

OMG was a recent recommendation based upon a bottoming signals occurring at an important support level, the 200 day moving average. A Doji followed by a Hammer/Doji, with stochastics in the oversold condition was good evidence there was massive indecision occurring at a major support level. Add this factor to seeing the markets in general, showing the huge reversal signals, allows for the exploitation of a high probability move.

OMG

Belthold signals, as seen in the EGLE chart a few days ago, reveal significant common sense information. When the bottom was coming out of the markets in the oversold area, prices gapping down in the oversold area were the first alert to start watching for candlestick buy signals. It did not take very long to start seeing buying occurring in the gap downs. What should this have indicated to the candlestick investor? The possibility of a candlestick reversal signal being formed. A belthold signal, a Piercing signal, a Bullish Engulfing signal, or a combination of the signals. Entering these type of trades now were based upon the mechanics of a candlestick reversal signal forming versus sitting there trying to overcome grave bearish emotional thought processes.

EGLE

Learning candlestick signals is a very simple visual process. Learning and understanding the common sense psychology that created the signals provides an investor with a solid investment strategy that can't be influenced by the so-called experts' opinions. Each one of us can rationally formulate a logical investment strategy. Putting it into practice, unfortunately, is a completely different story. If you are a beginning investor, let candlestick analysis give you a clear and concise, commonsense approach to investing. If you consider yourself a sophisticated investor, let the candlestick analysis improve your trading technique by enhancing the information you are visually evaluating on a chart.

Good investing,

The Candlestick Forum Team

Two-for-One Monthly Membership Special

Sign-up as a new member and invite a friend to join for free 30-Day Guest Membership! Click here for more info.