Candlestick Trading Forum
keyword search

Candlestick Trading Forum

Stock Market Trading

Stock Market Trading Tools

There are many different trading tools available to investors who practice short term stock trading. In today’s article we will discuss three tools utilized by successful investors every day.

The first tool that many stock traders use is candlestick patterns. Candlestick patterns are used with candlestick charts that display data such as the open, high, low and close value for each time period the trader selects. The pattern consists of the body of the candlestick that can either be hollow or filled in, as well as long think lines above and below the body which are referred to as shadows. This stock market trading tool is based on three groups. These groups include the bearish, bullish, and neutral and are then further divided into a continuation and reversal. Candlestick signals are great tools and are often combined with other trading tools because they are flexible and because they are easier to read than bar and line charts. Candlesticks also simply provide more information in relation to what is occurring in the stock market.

Fibonacci indicators are based on Fibonacci numbers which are a sequence of numbers. When analyzing these numbers, each successive number is the sum of the two previous numbers. These indicators are used when stock market trading as reference points to predict a reversal versus a retracement. These technical indicators are used to trade commodities, stocks, and other financial instruments in order to anticipate changes in the current trend of stock prices. Some Fibonacci trading tools used when trading include retracements, extensions, arcs, and fans. These indicators provide a great visual map and when combined with Japanese Candlesticks, they can provide ways to find favorable entry and exit points.

Another great tool that all successful traders use include stop loss strategies. A stop loss order is a defined point in which a trader will exit a position if the stock price is not moving in the desirable direction that was predicted. All traders who are successful will tell you that setting simple stop loss strategies is vital to making a profit when stock trading. They can be administered by your broker when stock market trading, by telling your broker that if you stock drops below a certain target, he or she should immediately place a market order to sell on your behalf. It cannot be stressed enough the importance of setting stop loss orders whether it is via a broker or an online trading system.

Market Direction: The markets have a great tendency to be influenced by outside activities. Interest rates moving higher can put a damper on investor sentiment. Higher crude oil prices, a weaker dollar, or a large swing in gold prices can create dramatic changes of investor sentiment when it comes to buying or selling stocks. The actions of the federal government can also do the same thing. Unfortunately, where as a trend change might be identified in other market charts, the actions of the federal government, whether right or wrong, can be imposed upon the markets instantly. Is there a way to utilize candlestick signals to project when a federal action is about to occur? No, the rationale of our government agencies and representatives is completely different than what normal business thought processes would be.

The way to make use of candlestick signals is to get a quick and clear  evaluation of investor response of actions or announcements made by the government. Candlestick signals provide a much better interpretation of how information is perceived. Although an announcement about a certain policy can't be anticipated, the reaction to investor sentiment can be immediately processed by candlestick signals. Monday morning's announcements about the Fed's moving toxic loans reinvigorated the bullish trend. As a politician, knowing that you have a great influence on the reactions of the stock market, a well timed announcement campaign could produce a long and steady uptrend in the equity market indexes. Whether you agree or disagree with the principle of printing masses amounts of money to stimulate the economy, it has to be acknowledged the announcements do create bullish reactions. The long-term effect of today's actions may not be constructive but the short-term reactions can be assessed and profited by candlestick signals.


With the DOW having a huge day to the upside, the 50 day moving average was breached. The NASDAQ formed a kicker type signal today, indicating continued strength to the upside. This did not appear to be exuberant buying at the top. Anticipate some profit-taking in the morning followed by more buying in the afternoon.


The free market concept has many benefits to it. Today's government interventions implies hefty inflation in the future. There is always hope that the free market arena also expects big inflation now in the future and can correct that possibility before we get there. How did we get into this mess? Whose fault was it? What is the best solution to get out of this mess? These questions do not make us any money. Evaluate what the candlestick formations reveal as a result of these government actions. It may be bullish, it may be bearish. In either case, let the candlestick signals direct how to extract profits from the markets.

The Dow has done a simple price pattern . Thursday and Friday showed consolidation back to the tee line. Today's trading action moved up from the T-line to the 50-day moving average, our first expected target. The process we have already achieved over the past few weeks have been substantial, 20%, 40%, 80% and greater. Today's continuation of the market uptrend has added to those profits once again. Friday, CETV produced a Doji that close just above the 50-day moving average. It was getting to the breakout area of life frypan bottom. Announcements specific to that stock as well as the strong premarket futures produced an additional 42% gain in that stock position alone.


Obviously stock prices will move up when the Dow is up 500 points during the day. However, the biggest gains are achieved by the culmination of a price pattern. The purpose of investing is placing funds where they will produce the best possible gains. The risk of exposing funds to market conditions should be rewarded with the best possible profits potential. The best profits can be obtained through reoccurring patterns that have created big profit situations over and over in the past. Candlestick analysis has a clear common sense trading benefit not provided by any other investment method. It allows an investor to witness the buildup of price movement forces based upon the graphic illustration of investor sentiment. This is not rocket science. Teach yourself and your kids the simple logic built into candlestick signals. You have the capabilities of controlling your own investment future.

Chat session tonight at 8 PM ET for members - bring the kids

Good investing,

The Candlestick Forum Team

This Week's Special

Scanning Techniques to Higher Profits

Previously reserved for Steve's Private Clients - Now Available on Video Download

48-Hour Special

Trading Gaps - 30% OFF

Learn Gap Rules & Trading Techniques for Trading Gaps at the Top & Gaps at the Bottom


Website special reflects current newsletter. If you are reading an archived newsletter you will be directed to Current Website Special.


Candlestick Trading Forum