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Investment Knowledge

What is your Stock Investment Knowledge?

Every investor must think long and hard and do everything they can to prepare for trading on the stock market. It is true that there is money to be made, but investors can quickly lose everything they have if they don’t have the investment knowledge required for trading stocks. In today’s article we will discuss the type of stock investment knowledge required for successful investing.

You must have a trading plan. This is the most important part of investing in stocks. Without a trading plan you are merely gambling away your money, not investing. Not only do you need to know what trading platform you will use to trade stock, but you will need to understand the techniques you will use. Will you practice fundamental analysis or technical analysis? If you plan to use technical analysis, what trading strategies will you use? What are your entry points and exit points? What are your stop loss strategies? There are numerous things to take into consideration and to plan for in order to obtain the investment knowledge you need to succeed. It cannot be stressed enough the importance of developing, implementing, and actually following your trading plan.

Decide your risk tolerance. How much are you willing to lose? You need to start somewhere and there is always going to be an investment risk, but you must be sure that you do not negatively affect your financial status. You will lose money, but only start out with as little as you can afford to lose. You may chose to only start off with as little as you can “mentally” afford to lose. Maybe you have more to invest, but it is wise to only use what you need to learn until you are consistently making money investing in the stock market. Part of your investment knowledge should include paper trading. Paper trading online allows you to practice real investing without losing real money. This tool has proved to be extremely helpful with getting new investors up-and-running. Just be sure that you understand that when you begin to trade with real money, you will experience emotions and potentially trading anxiety that you didn’t have when online paper trading. You must also learn about how to handle and control these trading emotions so that you do not make irrational trades based purely on emotion. You can have the technique down to a tee, but if you cannot control your emotions while trading, you will prevent yourself from reaching your true potential.

Continue to educate yourself and increase your investment knowledge through online training and tutorials. It is also wise to have a mentor and to join a network of traders that you can work with as you are learning and once you begin to trade.

Market Direction: What is investor sentiment telling us? The Dow has dropped 10% after the result of the elections. The concerns over higher taxes on capital gains as well as other potential taxes may be expressing itself. As the Japanese rice traders say, " Let the market tell us what the market is doing." With the second solid day of selling, the retracement has exceeded the potential support levels such as the 20 day moving average. The NASDAQ closed today well below any possible support levels. Yesterday selling was done after a Hanging Man signal. The only potential for the current uptrend to continue, both the Dow and the NASDAQ needed to close near the high end of their trading range today. That obviously did not happen.


The short funds become a very viable trade for the near-term. Stochastics have rolled over, making the recent lows a viable target again. When the market overall has a negative bias to it, finding a specific sector that is weaker than the others makes for the best possible profit opportunities. This can easily be done with a simple scanning techniques developed utilizing candlestick signals. We will discuss the sector  possibilities in tonights chat session. After yesterday's Bearish Engulfing signal in the Dow, even though it was not quite to the overbought condition, it was a clear reflection of investor sentiment. A Bearish Engulfing signal indicates a change of investor sentiment. The magnitude in which the selling occurred was additional evidence that investor sentiment had reversed. The bigger the candlestick signal, the more convincing the signal will be. Increase your positioning of short funds in the portfolio. Simple scanning techniques will reveal which sectors showed the most enthusiastic selling yesterday.

What will the new political environment do to sectors?

What outside influences could make some sectors much weaker than others? Obviously the political stance of the new White House occupants. Are there specific sectors that do well or do not do well under a Democratic regime? Are there sectors that have historically not done well when the White House moves from Republican to Democrat? These questions are part of what is called seasonality. What has historically happened in the past under these conditions? Seasonality produces another major advantage for investors. It allows an investor to narrow in on stocks that do well during certain political and economical conditions. It allows investor to zero in on stocks that do well during particular times of the year. Seasonality also addresses which sectors do well or poorly after another sector has done well or poorly. How is this a benefit? If an investor has preconceived price movement potentials for specific stocks or sectors, knowing that those prices should move with a higher degree of probability, candlestick signals can be a great enhancement for producing profits..

Knowing that a particular sector has a high probability of showing gains after recurring circumstances, an investor can anticipate the development of candlestick signals. For example, if it is a known seasonality factor that a few months after the airline delivery companies have had good activity, strong price moves, specific sectors should be the next ones to move positively, on a historical basis? If it is known that the trucking companies have a good probability of showing strength based upon those circumstances, those stocks can now be watched more diligently. Will they move positive every time after the airline delivery companies have moved well? Probably not every time, but a high percentage of the time they will, otherwise it would not be established in the seasonality data. The benefit produced by candlestick signals is allowing an investor to be ready to take advantage of the trucking stock price move when the first convincing candlestick buy signals appear. There is nothing sophisticated about this approach. It is taking advantage of known information.

Best Choice Software is the leading seasonality software company in the nation. Peter Hoyt has become extremely wealthy based upon his formulation of his seasonality software program. Like any other trading program, it can be extremely effective if used properly. The combination of seasonality and candlestick analysis puts extremely profitable information at your fingertips with a very clear format on how to use it. Peter will be giving a presentation on the successful elements of his seasonality software this coming  Wednesday, November 12. If you are serious about staying on top of the markets, wanting to know  where the best movements will occur, do not miss this presentation. The effects of seasonality, applied with candlestick analysis, can produce well above average returns. Click here to register for a free presentation by Peter Hoyt.

Public Stock Chat Tonight at 8PM ET. Click here for instructions. If you already have HotComm installed, click here to connect.

Good investing,

The Candlestick Forum Team

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