Online Stock Investor
Which type of online stock investor are you? There is a lot of information online for new investors who are interested in investing in the stock market. This article discusses the different types of investors as well as the different types of trading strategies available for those interested in investing in stock.
Fundamental vs. Technical Analysis
Before an online stock investor can begin to trade stocks, he or she must determine the type of stock analysis that he or she will use. Fundamental analysis is used by long term traders and investors who use company data such as earnings and growth to determine which companies they will invest in. Technical analysis is based on the fact that the price of a security already reflects all of the fundamental factors so they look to study price movement using stock charts to determine how to invest. Technical analysts practice short term stock trading and donít typically care about the fundamentals of a security.
The type of online investor is determined by the time frame in which stock traders trade. As discussed above, a trader who looks to hold a position for several years is referred to as an investor instead of a stock trader. A trader who holds stocks for several weeks is referred to as a position trader and a trader who holds a position for several days on average is referred to as a swing trader. Day traders hold their positions within a single day and a scalper may only hold stocks for several minutes at a time and are also referred to as intraday traders (intraday trading).
When trading stocks there are many different stock trading strategies available based on the type of trading an online stock investor is looking to do. There are numerous technical indicators used by traders such as moving averages, stochastics, candlestick patterns, and Fibonacci indicators. The idea is to find one or combine a couple of technical indicators when trading stocks. Investors must be sure however that they donít use too many indicators at once as this can make trading too complex.
Additionally, the online investor must determine which type of stock market chart he or she will use. The most common are line charts, bar charts, point and figure charts and candlestick charts. All are used in technical analysis and different charts display different pieces of information. Most technical analysts prefer to use candlestick charts and study the different major Japanese candlestick patterns in order to determine price movement of securities. Many top traders consider candlestick charts to be the most informative charts and the easiest to use. They consider them to be more visually appealing and believe that the different candlestick patterns are easy to identify.
There is a lot to take into consideration for those who are new to the stock market. When determining the type of online stock investor you should be, it is important for you to explore all type of trading styles, methods, and techniques to find one that is a good fit for you. There are multiple ways to make money trading in the stock market and you must find one that fits your personality.
Market Direction: Candlestick signals provide clarity! They clearly define when a price reversal has occurred. This is true whether analyzing an individual trading entity or a major market index. The advantage, of course, is having the ability to analyze all aspects of trading markets. Accurately identifying what the market trends are doing provides better insight into which direction individual stock prices might be moving. Identifying the price trend of crude oil can help evaluate the chart action of soybean oil. The inherent benefits candlestick signals provide for an investor is a simple visual depiction of what is occurring in investor sentiment.
Last week, the Dow produced strong bullish results. It was the strongest percentage price move since the year 2002. The mood on the financial TV stations was becoming more relaxed, the fear factor was dissipating. That is usually the case for most fundamental oriented analysts. When prices get better, the future prospects seem to improve. Fortunately, the technical investor, especially the candlestick investor, can utilize indicators and signals that produce a much better insight into what the overall trend is trying to do. Last week's bullish market provided new Hope. Many scenarios were verbalized as to why the markets should be moving back up.
This morning's premarket futures allowed for preparing what might be occurring. The lower open very quickly created a Bearish Engulfing Signal. The last Bearish Engulfing signal occurred approximately a month ago. That uptrend ended before the Dow could get back to the 50 day moving average. However, the reversal occurred very close to another important moving average. Note how the 34 day moving average has been an influence in the Dow reversals.
Also, a trendline can be seen to be acting as a resistance level coming out of the Dumpling Top Pattern this past October. The more indicators that can be identified at candlestick reversal signals, the more compelling that information becomes. The markets had the opportunity to break through some previous resistance levels. Witnessing a strong bearish candlestick signal in the area of those resistance levels makes the argument for the downtrend to continue that much more stronger. Is this the news everybody wants to hear? Definitely not! But the purpose of candlestick analysis is to identify what the markets are actually doing, not what we're hoping they are doing.
Today's strong selling makes the potential of the continued downtrend stronger. This produces decision-making information. If the uptrend is going to continue, what should we anticipate in tomorrow's trading? A Bullish Harami, a Doji, an Inverted Hammer signal, signals that would indicate this pullback from the resistance levels had some doubt. After a big down day, it is not unusual to see the futures be positive due to the overselling at the end of the day. As candlestick investors, being cognizant of what type of signals could form makes trading decisions much easier. Witnessing bullish futures in the morning should make for the retention of the long positions. However, there would be very simple parameters for taking profits on those long positions. If the markets opened higher, and then eventually came back down through Monday's close, that would indicate the Bears were in control. That would be the time to start closing out some a long positions.
Bearish futures in the morning would require watching to see if any bullish movement started to occur immediately. Continued weakness would also warrant closing out long positions and adding short funds back into the portfolio. Candlestick analysis does not always reveal what is going to happen next. Candlestick analysis allows for the evaluation of what should occur or could occur based upon the next price action. Could candlestick analysis anticipate a 678 point.move to the downside today? Definitely not! Although profit-taking was expected, nothing could foresee the magnitude of today's selling. The benefit of candlestick analysis is providing a trading platform for what can be anticipated next. This provides a mechanism for extracting as much profits out of trades as the market will let you. Learn how to use candlestick analysis correctly. It is easy and it will stay with you for the rest of your life.
Members - A new long-term pick will be in the members area tomorrow. This company is very well financed, very well run, has a great upside potential well-paying over 18% in dividends. Look for a full description in the members area late tomorrow. Members' Stock Chat tonight at 8pm ET.
The Candlestick Forum Team
*Free shipping offered only for domestic orders; same shipping rate will apply for international orders.
Semi-Private Training Sessions
Live and in person with Stephen Bigalow
Now Scheduling for
January 3rd & 4th, 2009
Contact us ASAP to register via email or call 1-866-251-4015.
Group size is limited to FIVE participants
Sessions fill quickly - Pre-register early