Invest Online with Japanese Candlesticks
Those who trade online using Japanese Candlesticks are most likely day traders or swing traders, however there are some long term investors who also identify and use Japanese candlestick patterns to trade the markets. Candlestick patterns are one of the most popular forms of trading due to the ability to adapt to all financial markets. They can be used when trading stocks, bonds, indexes, commodities, and also on the foreign exchange. Additionally, they do not conflict with other western indicators such as stochastics, Bollinger bands, moving averages, or RSI. In fact most traders combine candlestick analysis with other technical analysis tools.
Technical analysis is basically the study of prices that are reflected on price charts. Technical analysis is not concerned with researching the intrinsic factors affecting securities because it assumes that the current prices already represent this information. Prices represent human emotion of the markets, such as greed and fear, but also represent facts such as supply and demand. Whatever the reason is for changing prices, technical analysts assume that the prices reflect these factors and therefore they disregard the emotional components. They simply read the stock charts and analyze chart formations.
Trading Time Intervals
Japanese Candlesticks charts can be drawn for any time period. The most common time interval is one day, and these short terms traders may decide to plot time intervals measured in minutes. The information that is plotted consists of the open, close, high and low prices. As discussed previously those that choose to invest over the long term can also use candlestick charts. They choose to use Monday’s opening price and Friday’s closing price.
Reversal Patterns and Trends
Candlestick reversal patterns must be viewed with the context of the prior activity in the markets. In fact, the same candlesticks can have different meanings based on where they occur within the context of prior formations and trends. Just be aware that a reversal does not always mean that the current trend will reverse direction. It can indicate that the current direction is ending and then the market can decide to go sideways. Keep this in mind when looking at and identifying up trends and down trends in the stock market.
Those looking to invest online using Japanese Candlesticks are choosing to utilize a trading tool that is widely accepted and preferred by many stock traders. In fact, more traders prefer candlestick charts instead of the regular bar charts. The main consensus is that candlestick charts are easier to read, they are more visually appealing, and they give the trader an edge in timing in comparison to other types of stockcharts.
Market Direction: There is still evidence of bullish participation in this market. With approximately 30 minutes left to go in the trading day, the Dow was down 150 points. In the time that it took to write the afternoon members comments, approximately 8 minutes, the Dow had come back up to even. That amount of buying dramatically changed the prognosis of a market trend. The Dow, forming another Spinning Top type signal today, made the potential of coming back up through the 50 day moving average that much greater. Had the Dow closed down 150 points, trading well below the tee line, the downward pullback would have been considered still in progress. With the Dow closing down 65 points, forming an indecisive trading day, makes the potential of the uptrend in channel still a viable prognosis.
The change of investor sentiment can be with see in more subtle areas. Previously, when the market was moving up or down, everything was moving in the same direction. The past few weeks have indicated a difference. When the market is pulling back, specific sectors have still been acting strong. Using simple candlestick scans allowed us to identify very strong sector plays. They are still acting well. Not only being profitable in these stocks, but their strength also reveals that when major weakness occurs in the market indexes, money is still coming into specific sectors. This indicates investment funds are not coming out of the market on a massive scale.
There are many subtle nuances that can be applied to trend analysis when utilizing candlestick signals. The information incorporated into candlestick analysis is based upon common sense. The same common sense evaluation can be applied for fine- tuning an investment portfolio. The strength of a trend can be evaluated based upon the individual candlestick formations each day. The assessment can be further confirmed when analyzing individual components of a market trend. The benefit derived from candlestick analysis is the quick and easy recognition of what individual sectors or outside market influences are doing. Interest rates, crude oil prices, or the US dollar are all trading entities that can affect investor sentiment related to the equity markets. Witnessing a number of sectors moving positive in a bearish market trend also provides valuable information.
The advantage created by knowing what the candlestick signals are revealing is immense. It takes the research and decision-making results of all the investment decisions being applied to buy and sell decisions around the world. Although each of us, as individual investors, do not have the capability of financing large research departments, we can take advantage of what everybody else's research is demonstrating. Once you understand how to interpret each signal and pattern, you now have control of your own financial future. Steve Bigalow demonstrates how to be able to accurately analyze any price trend. His private training sessions allows two to four people to get a personalized view of how to use candlestick analysis successfully. Do not miss this opportunity to have all the commonsense elements of investing explained as you are utilizing candlestick signals, a very visual informational tool. Click here for more details on the January 3 or 4 private training sessions.
What are some of the facets being built into the current market trend? There is a trend general developing. The Dow hit the first major resistance level last week, the 50 day moving average. The pullback from that level has not been decisive. A number of spinning tops indicates a lack of force in the pullback. This becomes important information for whether to maintain long positions in specific sectors.
A few weeks ago, it was identified, by simple candlesticks signals, which sectors had the potential of showing the best strength. The mining stocks, the shipping stocks, and the oil stocks all started uptrends with some powerful signals. What is the difference between a reversal signal and a powerful reversal signal? Some very simple observations. The magnitude of the reversal signals and gaps following a buy signal are a couple simple analytical tools. Many stocks/sectors will move positive in a bullish trend. The question for the aggressive investor should be, "Which stocks/sectors are going to move with the greatest strength?" There are two reasons for wanting to know that information. Obviously, the first reason is the potential to make the greatest profits. Secondly, if it can be discovered which trends are starting with the greatest force, that adds protection if the market turns bearish again. The sectors/stocks that demonstrate an inordinate amount of bullish participation will probably not have the prospects of fizzling out immediately upon a market reversal. This allows more time to come out of positions with either a profit or a break even.
Once an investor learns how to apply all the information associated with candlestick signals, their view of price trends become dramatically different. They will grasp how the professional investors view a market trend. Candlestick analysis allows this to occur without having to go through many years of hard knocks. Utilize what the candlestick signals tell you! The point of investing is to take advantage of information that gives you the probabilities of being in the right trades at the right time.
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