Archives for October 2019

Candlestick signals present an easy and profitable visual technical analysis process. Chart formations allow an investor to evaluate when it is time to buy, time to hold, and time to sell. Most technical analysis programs provide areas of possible reversals. Candlestick chart formations produce immediate information. It allows a Candlestick investor to interpret the results of investor sentiment at crucial potential reversal levels.

The purpose of technical analysis is to provide scenarios for an investor to anticipate a high probability trade situation. The information incorporated into Candlestick signals makes evaluating chart formations a highly informational process. That information can be applied to identifying when to hold through pullbacks in a trend.
Netease Inc. is an excellent example of how to use Candlestick technical analysis effectively. The use of Candlestick chart formations produced the analysis that provided high profit trade. The Morning Star signal created the initial buy. The chart formation was additionally confirmed with the signal forming right on the 50 day moving average. The obvious resistance level, at the $60 area, becomes the next point of analysis. The analysis becomes simplified with Candlestick signals. Had the price showed a confirmed Candlestick sell signal at that resistance level, it would have been obvious that the sellers were once again at that level. It was time to take profits.

Netease

A breach of that resistance level would have indicated that a new dynamic had come into the price of the stock. If and when that occurred, technical analysis would have projected that the price would move to the past high level. The chart formations indicated that a peak had occurred in October of 2003 at the $71 area. That becomes a new target.

The fact that the price gapped up through the $71 area now requires new Candlestick technical analysis. As illustrated in the Candlestick Forum’s “Gaps at the Bottom” and “Gaps at the Top” training CDs, the information provided by the gap up in price becomes a valuable analytical tool. The gap-up demonstrates a dramatically strong element in investor sentiment. Being able to evaluate how the gap will affect future trading allows for extracting additional profits out of the markets.

Trading above a gap level, a gap level that breached one or more major technical levels, has new implications. This high profit pattern can be exploited profitably. Notice after some initial profit-taking after the gap up, the Candlestick signals, a Spinning Top and a Doji, illustrated that investor sentiment was indecisive when prices came back to the level of the price when it gapped up. This information becomes relevant for projecting whether the price is going to come back and fill part of the gap or support at the top of the gap.

The evaluation can be made correctly after the appearance of Candlestick signals. Having the knowledge of what is likely to occur after a Spinning Top and/or a Doji chart formation makes for an easy analysis for the Candlestick investor.

Without thinking about your answer, what is the best way to reduce your risk when investing in the stock market? My guess is that you got it right; the best way to reduce your risk is to refrain from investing at all! OK, now that we’ve pointed out the obvious, let’s take a more realistic view. Every investor has had at least one of those “must have”, “can’t miss” stocks. All too often, those investments end up being the big loser in a trader’s otherwise stellar career. Because of that, it is important that the beginner investing in the stock market makes a plan that includes a stop loss strategy.

It is important to understand the psychology of investing and the stop loss concept; while making those impressive deals in the market, emotions are high and a stop loss strategy is the farthest thing from anyone’s mind. But when the losses start coming, so does the feeling of falling down a well, hopelessly tumbling all the way to the bottom. Remember, that 50% loss started off as an innocent 5% loss. That moment of truth in the well has everyone wishing for a net. A strong stock trading system, such as the candlestick analysis stock market investing technique, and a stop loss strategy is just the net you need when falling down the well of a bad investment.

For this exercise, let’s work with one of several simple stop loss strategies. The technique we will discuss is called the “trailing stop loss” strategy. Simply put, calculate the cost of your investment, set a percentage that you consider a reasonable amount for the stock to turn around, and calculate a trailing stop loss based on that. For example, you bought 100 shares of Stock A at $10 per share and the fee for the transaction was 3%, with a total for the transaction being $1,030. Through candlestick analysis, you determine that 10% is a realistic turning point for this stock; therefore, your trailing stop loss would be $9.27 per share. (Notice that the cost of investing is included in this calculation. Always consider the cost of doing business in any business decision.)  If your stock dips below that, you sell and cut your losses. By setting your limit before the transaction, you avoid allowing your greed and fear to control your decision of when to sell. This little stop loss strategy is a simple hedge against big losses, and the best part is that you can protect your gains the same way. As your investment increases from profits, simple recalculate your stop loss.

It seems more difficult than it really is. As with all good stock market strategies, emotions should always be left out of investment decisions. Being able to see the need for stop loss strategies is a good indication that an investor realizes that not all investments will be profitable. It is crucial to use stop loss strategies & techniques developed by others who have experienced the same downfalls, add them to your stock technical analysis, and bring it all together with a strong system. This will improve the success of any investor and “fallen down the well”.

The New York Stock Exchange (NYSE) is the largest and the oldest stock exchange in the United States. Located on Wall Street this exchange can be traced all the way back to 1792.  This exchange trades approximately 1.46 billion shares each day including stocks for some 2,800 companies as reported in the Wall Street News. To trade stock on this exchange means that your stock ranges from blue chip stocks to new high-growth companies. Each company traded on this exchange has to meet very strict requirements. This exchange is responsible for setting policy, listing securities, supervising member activities, overseeing the transfer of member seats, and evaluating applicants. The major players on the floor are stock brokers and specialists.

The NYSE uses an agency auction market system designed to allow the public to meet the public as much as possible. In fact, the majority of volume occurs with no intervention from the dealer. In the stock market game, the specialists mentioned above are responsible for ensuring that any imbalances of supply and demand are eliminated and are subject to fines and censures if they fail to perform their obligation. The brokers are employed either by investment firms (trading on behalf of the firm) or they trade on behalf of their clients. The brokers move around the floor of the NYSE and they bring “buy and sell” orders to the specialist. The stock brokers and the specialist work together to create and effective system that to provide those investing in the stock market, with competitive prices based on supply and demand in the open market.

In order to have the right to directly participate in stock trading on the NYSE means that you have to have a “seat” on the exchange. In 1868 the number of seat available was 533, but it has increased numerous times over the years. In 1953, the exchange stopped growing at 1366 seats available for directly trading stocks. Prices for these seats have varied over the years with prices ranging from 625,000 in 1929 to 4 million in the late 1990’s. This exchange now sells one-year licenses to trade directly on the exchange.

The NYSE is also known and is referred to as the “Big Board.” It is the largest stock exchange in the work by dollar volume and competes with the London Stock Exchange and the Tokyo Stock Exchange. The main building was made a National Historic landmark in 1978, located at 18 Broad Street between the corners of Wall Street and Exchange Place. It was established in 1792 as a result of the Buttonwood Agreement that was signed by 24 stock brokers outside of Wall Street. Unlike some of the newer exchanges, it still uses a larges trading floor to conduct its transactions. Other stock exchanges in the U.S. include the American Stock Exchange and the NASDAQ.

When trading futures and options it is important to know the basics. Both deal with trading contracts and both rarely result in the actual delivery of a product. In today’s article we will discuss the futures market, the options market, as well as define options contracts and futures contracts.

The futures market is a market in which participants will buy and sell commodities and/or futures contracts. Futures trading requires a financial contract to obligate the buyer to purchase a particular asset and the seller to sell a particular asset at a predetermined date and price. Most of the time, there is no actual delivery of a physical product and the contracts are settled in cash. When studying futures and options it is important to understand what a futures contract is.

Futures contracts are contracts on stock market indexes, commodities or currencies. The purpose of the contracts is to attempt to predict the actual value of these financial securities at a date in the future. For example, when trading commodities, these futures contracts include a commitment by the seller to deliver a specific amount of the commodity during a specific month at a price that is determined by the futures market. Also when trading futures, the buyer has also agreed to buy that commodity during that month as well at the price determined by the future market.  Most contracts are actually closed out before the delivery date and the trade never ends in actual delivery of the asset.

The options market is similar to the futures market in that an options contract is also an agreement between two parties to buy/sell an asset at a fixed price at a fixed date in the future. The difference however is that when options trading, as time passes, the buyer can let the options contract expire or opt not to fulfill it if the trade becomes unfavorable. When studying futures and options it is important that the investor understands that when someone buys an option, they pay the amount known as the premium to the seller. The premium is the actual cost of the option. The options trader in the United States trades options with a contract multiplier of 100. This is the number of shares per option traded and this contract multiplier allows even small investors to trade a large exposure, or leverage on a small amount of capital.

Continue to study options and futures to see if these markets are a good fit for you. There is a lot to learn and it can be tricky but if you take the time to learn, practice, and implement a strong options trading plan and trading strategies there is no reason why you cannot achieve success in the these markets. Good luck!

Market Direction

What do you expect from a professional money management advisor? Most people expect too much! It is anticipated that money managers will direct funds based upon some attention paid to market direction. Most money managers are very good at advising what should go into someone’s portfolio. Unfortunately most money managers do not know WHEN funds should be allocated. Do you have funds being managed? Are your parents funds being professionally managed? Your children’s funds? And are those portfolios down 35%, 45%, 55%, or greater over the past year? How often we are hearing about people’s retirement funds being cut in half.

The old philosophy of buying a well-run company and holding it long term is not a prudent strategy. It may have been 40 years ago, but the dynamics of the marketplace has changed dramatically. The world markets are now taking effect. Staid and conservative companies such as GM and Ford now have severe worldwide competition. One year ago, US steel Corp. was acclaimed as being a well-run, well positioned company, fundamentally very sound. If this stock had been put in your parents portfolio one year ago, it would have moved from approximately $190 per share to the current $18 a share. GE Corporation from $42 a share down to $7.00 a share. There are many examples of this type, this is not a surprise to anybody after watching the markets over the past 12 months. Tthe surprise should be   realizing the number of money managers that thought it prudent to continue to hold positions through this severe market pullback.

If you are reading this commentary, it is assumed you have been looking to take more control of your own financial destiny. The Candlestick Forum provided recommendations for the past year that produced decent profits. Decent profits in the sense that a good percentage of the portfolio was allocated to short positions or the short funds. Did we short when the Dow was at 14,000 and continue to hold shorts all the way down? Definitely not, 2020 hindsight is always great. There were many zigzags as the market declined. The important fact remains that profits were made because short positions produced good profits, offsetting some of the long positions small lossesduring potential market turns. Overall, the accounts were profitable. This is a much different result than many investors witnessing their retirement accounts being decimated.

Dow Weekly Chart

Dow

Professional money managers usually do not know how to time the markets. The serious investor should be learning how to use candlestick analysis effectively. It is not a difficult process to learn. Most important, with the information built into candlestick signals, a candlestick investor would have been able to exploit profits from the downward move of the market, not be caught with a portfolio that would have lost more than 50% of its value. How do you make money in a declining market? Join us tonight in the chat room 8 PM ET. We will  discuss the signals and patterns that made good profits in the down trending market.

MDT, a recent short recommendation, has characteristics that make it a high probability high profit short trade. Candlestick analysis involves very simple visual analytical information conveyed by the formations. This allows the candlestick investor to know what investor sentiment is doing at critical support and resistance levels. This is merely common sense being enhanced by a powerful candlestick trading technique.

MDT

What is frustrating for most investors? Losing money in the markets and not being able to do anything about it. When you take control of your own investment education, you will now be able to command profits from the markets in uptrends as well as downtrends. You have to feel sorry for those people that have worked most of their lives and lost half of their retirement funds in the past 12 months. Don’t put yourself in that position.

Chat session tonight at 8 PM ET — everybody is welcome. Click here for instructions.

Good investing,

The Candlestick Forum Team

This Week’s Special

Trading Gaps

Big Profits Using Candlestick Signals and Gaps

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

Stock market training seminars usually involve information that most investors cannot comprehend all at one time. Stock market training seminars usually inundate an investor with new information and concepts that most investors cannot put into use immediately. Utilizing and understanding candlestick signals allow an investor to get more information out of stock market training seminars. Using candlestick signals allows the investor to evaluate price trends much faster. The signals demonstrate immediately what is occurring in investor sentiment at important technical levels.

Most stock market training seminars involve technical methods that anticipate price reversals occurring at specific levels. However,  interpretation of these technical levels usually requires much more time and study than what the instructors convey will be required. Using candlestick signals and applying them to any technical investing method that an investor is learning will greatly enhance the speed of understanding the new technical method. What other technical methods will anticipate at specific levels, the candlestick signals show exactly what is happening at those levels. Whether learning how to use Fibonacci numbers or newly discovered momentum trading techniques, having the knowledge of what candlestick signals illustrate before learning a new technique will make the utilization of that new technique much easier to understand.

The Candlestick Forum, Stephen W. Bigalow, is a very strong advocate of teaching investors how to use candlestick signals correctly. His private training sessions, involving two to five students at a time, is not restricted to the information taught just during the weekend training session. True stock market training seminars should include a follow what education process that make sure that investors fully understand the trading technique that they have learned. This is included with Mr. Bigalow’s private training sessions. Candlestick signals are very easy to learn and understand. Once that knowledge is in the investor’s mind, evaluating price trends and reversals becomes a visually easy process. Investor sentiment does not change. Investors do certain things when markets are oversold and they do certain things when markets are overbought.

Two full days of candlestick training with Mr. Bigalow produces a visual recognition of the major candlestick signals. Knowing how to interpret those signals becomes relatively easy once the investor psychology that formed those signals is understood. This is not a difficult process. The Japanese Rice traders have evaluated investor sentiment for over four centuries. Seeing that investor sentiment in a graphic depiction allows an investor to evaluate the direction of a price trend with relatively good accuracy. As part of the Candlestick Forum operation, students taking the private session trainings have an added benefit. Where most stock market training seminars give you the information and then you’re on your own, the Candlestick Forum provides a full spectrum of continued training. All the candlestick forum’s training CDs and e-books are available. Access to Mr. Bigalow is continuously available also. If an investor is going to spend money to become educated on how to invest successfully, they should learn an investment technique that will benefit them for the rest of their life no matter what the market conditions will be.

There are two methods of analysis that can be used to forecast the behavior in the forex markets. The first method used to perform a forex forecast is technical analysis and the second is fundamental analysis. In today’s article we will provide information on both methods as well as the tools associated with each method.

Fundamental and technical analysis both operate with the same goal. That goal is to predict price movements when trading forex. Fundamental analysis is used to conduct a forex forecast by analyzing the economic and political status of a country’s currency as well as understanding the attitudes of the traders who participate in and conduct forex trading. Fundamentalists will evaluate a country’s economy by looking at the rate of inflation, interest rates, taxes, and unemployment rate, among other things. They also evaluate a country’s political stability as it relates to any potential causes of market movement. Fundamental analysis is considered to be a macro or strategic assessment of where a country’s currency should be trading based only on the above criteria and not on the movement of the forex currency price itself.

Technical analysis is also used to determine a forex forecast and is a much more statistical and mathematical method. The price is analyzed when using this method in order to predict future price movements of currencies. This method is built on three principles discussed below.

1. Market action discounts everything. This means that the price of a foreign currency is an indication of anything that could possibly affect the market. Reasons could include criteria looked at using fundamental analysis, but with technical analysis traders don’t look at “why” but instead only focus on the actual price movements to obtain their forecast.
2. Currency prices move in trends. Technical analysts conduct trend analysis through identifying patterns. The patterns have consistently produced the same results in the past and therefore must be indicative of the same results in the future. Again, they don’t look at “why” but instead only follow the trends expected to achieve the same results.
3. History repeats itself. This means that trends will repeat themselves as well. The human psyche while continuously evolving, changes little over time. With this in mind, trends will change little over the period of 100 years and have been studied to show this. Stock price factors as well as foreign currencies factors will change little over time, only reaffirming the need to follow the trends.

When performing a forex forecast there are technical analysis tools available. The use of forex charts is one tool and there are five categories using the forex technical analysis theory.

1. Indicators (Relative Strength Index (RSI) is one example)
2. Number Theory (Fibonacci indicators)
3. Wave (Elliott wave theory)
4. Gaps (open-closing and high-low)
5. Trends (following moving average)

For those interested in learning more about the forex markets, take a deeper look at the most important technical analysis tools described above and find some technical analysis courses that you can take online. The ability to make market predictions and obtain a forex forecast is a skill that requires extensive knowledge and a lot of practice by the forex investor.