Exchange traded funds offer a very wide range of investment opportunities and they represent the shares of ownership in either unit investment trusts or in depository receipts. Depository receipts hold the portfolios of common stocks that track the performance and the dividend yields of specific market indexes. Exchange traded funds, also known as ETFs, are like closed-end and open-end index mutual funds and they trade like stocks.  They provide the investor with the opportunity to buy and sell a selection of stocks in a single security, just like when selling or buying stocks per share. Exchange traded funds are actually traded on an exchange, such as the NYSE, instead of being directly purchased from the issuing company, like mutual funds.   Exchange traded funds offer a very easy way to diversify a small investment and they have many benefits over mutual fund investing.

Benefits of Exchange Traded Funds vs. Mutual Funds

1)  There is no minimum investment other than the market price of one share for ETFs.  Mutual funds often have a minimum of investment of $2,500 making portfolio diversification difficult for new investors.

2)  Exchange traded funds typically have lower fees than traditional mutual funds. There is no redemption fee required at liquidation and the commission charged to buy or sell stock is similar to that of a stock trade.  Index funds are also no-load and are commission free.

3)  Tax efficient.  The structure of exchange traded funds gives the investor a tax advantage over mutual funds.  Since they are traded on an exchange, the ETF investor sells to other investors and there is no underlying security that is sold. There are also no capital gains that are distributed.  Mutual funds however, must sell underlying securities upon redemption, and the capital gains are distributed to the owners of the funds.  This can result in taxable gains and losses that are passed on to the investor when investing in mutual funds.

4)  Faster liquidation of a position for exchange traded funds.  They also allow the ability to set a limit order allowing for flexibly trading that a mutual fund could not offer. They can also be more liquid that the individual shares that they hold and more specifically for an ETF that holds small cap stocks that are thinly traded, or bonds other than U.S. Treasuries. 

5)  Pricing. The purchase and selling of exchange traded funds happen at market prices instead of end-of-day net asset value, used by mutual funds. They can be continuously priced throughout the day allowing the investor to react to open market conditions on an intraday basis. As result an ETF can be purchased at a premium or at a discount to the value of the underlying assets

Exchange traded funds provide small investors with more choices and they also force the investor to conduct more research on markets that they previously had no experience in. They also enable those individuals who are working to build a strong portfolio through diversification, to invest smaller amounts of money at first.  If you are interested in exchange traded funds, continue to do research and learn about the ins and outs of investing in these types of funds.

Market Direction: Until the markets show a definite reversal signal, the downtrend could still be considered in progress. The Dow is approaching the lows of January. The stochastics are just moving into the oversold conditions. The January lows should be an area to watch for a possible support level. However, the NASDAQ and the Russell 2000 are now trading below the January lows. Until we witness a candlestick buy signal AND a close above the T-Line, this downtrend will persist. Holding short positions or remaining in cash remains the best trading strategy. 

DOW

Have you ever noticed how the red light green light systems show you where you 'should' have bought and where you 'should' have sold? But they never give a reason why! And it is always easy to go back and look at a chart and say "I should have sold here". Candlestick signals clearly illustrate "why" you should have bought or sold at specific levels. The signals allow an investor to work off of some very simple rules. A Doji, in the overbought condition, will indicate it is time to sell if prices open lower the next day. Knowing the general direction of the market improves the probabilities of knowing when it is time to buy or sell.

COIN is example of when the sell. The market in general was in a downtrend. COIN was in the overbought conditions, starting to form some spinning tops. Using the Doji rule that prices will usually move in the direction of how they open the next day made taking profits very simple. A lower open after a spinning top in an overbought condition when the market trend is heading down becomes a high probability format for taking profits.

COIN

You do not need a market guru to tell you what to do. The signals tell you what general market consensus is doing. Do what the signals tell you to do and you will improve your trading returns dramatically. This is not rocket science. This is utilizing the results that have been identified by Japanese Rice traders over the past 400 years. Put the probabilities in your favor.

Commodities corner - World Cup advisors returns -21% gross

Good, bad, and ugly! The Candlestick Forum strives to teach investors what to do and what not to do for successful investing. Do candlestick signals work? Yes, most of the time. It is one of the most successful trading programs you will find. One of the first paragraphs in the "Candlestick Signals and Commodities Trading" e-book describes the important aspects required for successful commodity trading. It explains how you need a trading program that works successfully. That is what candlestick signals provide. You also need the correct mental perspective for trading program successfully. This is as important an element for successful trading as having a successful trading program. The bulk of the e-book is oriented toward maintaining a successful mental perspective.

The third element was considered as something necessary but not necessarily as important as the trading format and the successful mental perspective. That is now going to be revised. The third element is making sure your mechanics are set up correctly. This aspect of the trading is an area that does not require very much time to get set up correctly. It involved making sure your charts systems and your execution systems were working properly. Today the electronic trading makes for excellent real time executions. However, this also allows for instant potential losses if the wrong trade is made.

This occurred on Friday in the commodity trading accounts. Soybeans were down the limit and going to be stuck there going into the next trading day. Our execution trading system was set on a default back to soybeans, since that was the trading entity that was being traded the most. Unfortunately, while trading wheat, contracts of soybeans were bought at down the limit. This is exactly the position you don't want to be in. However, this clearly illustrates that all aspects of commodity trading need to be in order.

How to resolve these types of situations will be fully detailed in the e-book. Learning how to invest involves knowing what to do in all facets of investing. The trading format, the mental attitude, and the mechanics of executions. That is the playing field. If you just learn what to be prepared for, you can save yourself thousands and thousands of dollars. You do not have to make the mistakes to get to successful trading. Learn from Mr. Bigalow's experience, both good and bad and ugly.

Candlestick Forum Online training session - Scheduled for April 19 and 20th. This two-day session will involve learning how to use the candlestick signals correctly. Steve Bigalow will show how to use the signals and correctly interpret what they are telling you. This also includes using the signals affectively for identifying when to get into high profit patterns. Rick Saddler will show how to use candlestick signals with other trading indicators for successfully and consistently pulling money out of the markets. Join now, seating will be limited. Click here for details.

Good investing,

The Candlestick Forum Team

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