Archives for December 2019

Commodity Market

The commodity market is where raw or primary products are exchanged through the buying and selling of futures contracts. This market originally began with the buying and selling of agricultural products such as wheat, corn, cattle and pigs. Other foods such as soybeans were only added recently in most of the commodities markets whereas agricultural products were widely traded in the 19th century. In order for a specific type of commodity to establish itself in this market, there has to be a broad consensus on the different variations in the product that make it acceptable for various purposes.

Commodities trading online occurs when traders trade futures contracts for goods, but the traders don’t have to physically deliver the good to the consumer. The contract means that the investors instead will determine if the commodity price will appreciate in the future, or depreciate in the future. If the trader thinks the price will appreciate he will buy a future contract for the commodity, and conversely if the trader thinks the price will depreciate, he or she will sell the future contract to avoid losing money. The main requirement in the commodity market is that the trader must deposit enough capital though a brokerage firm to ensure that he or she is able to pay for potential losses if they are unsuccessful in their trade.

The commodities exchange is highly regulated and the trading is done in the “pit”, meaning that the transactions are handled by licensed commodity brokers. These brokers bring together buyers and sellers and aim to identify your investment shortcomings in order to help overcome those drawbacks.

Unlike in the old days, you don’t actually visit the commodity market in order to do business, but you instead go though a broker who takes your order to exchange for you. Your broker can either be a live person you speak with on the phone to place your orders, or it can be an online broker, or electronic commodity trading over the internet. The best known markets in the United States for trading commodities are located in New York, Chicago, Kansas City, and Minneapolis.

Many investors utilize Japanese candlestick signals in order to develop a highly profitable commodity trading system. Commodities are actually easier to trade than stocks when using candlestick signals because there are fewer outside influences to affect commodity prices. Continue to learn about how candlestick analysis can help you to trade commodities successfully. 

Market Direction

The inherent credibility built into candlestick’s can be readily seen in days like today. It is a very simple analysis. Candlestick patterns are recognized for the inordinate strength provided in price moves. The Japanese rice traders witnessed patterns throughout the centuries that were created with very specific parameters. Just as they were able to analyze what investor sentiment was doing in individual signals, they were also able to explain the investor sentiment that created price patterns. Patterns are produced based upon the accumulation of buying or selling pressures that result in anticipated price moves. That in itself is a very strong element for producing  large profits.

When the market trends can be identified, price patterns can produce much larger profits than a normal price trend.
Additionally, the buying forces that are building up in a bullish pattern are less likely to disappear when general market conditions suddenly turn in the other direction. As witnessed in today’s market, numerous Candlestick Forum recommendations continued to trade positive, or at least held up well, in a very hard selling market. It is not unusual to have a bullish portfolio finish a day net positive during a very bearish market day. If not net positive, at least very close to breakeven for the day. The pre-market futures today indicated some potential profit-taking. Many times, this puts an investor in a position of having to decide whether to take profits in specific positions. This always leaves the nagging question, “is this position merely pulling back due to profit-taking, or should I close the position?”

Candlestick formations often help answer that question.

A bullish trending position may open lower when pre-market futures indicate  strong selling. However, the candlestick formation  provides a much more clear picture of what is occurring after the price opens. If the price starts moving up after the open, the bullish candle is very clearly visible. What does it tell us when a price opens lower, then starts showing a bullish candle? Very simple, it reveals there is continued buying although it opened lower. This is very important information when having to make a decision as to whether to liquidate a trade based upon weakness.

Commodity Market, HK


Commodity Market, CHK


Candlestick patterns make it very simple to anticipate what should be occurring next in that pattern. The Candlestick Forums recommendation on GERN was based on a very simple pattern analysis. Yesterday the price formed a Doji/Harami after just touching the tee line. This was a set up for a possible Jay-hook pattern. After the price opened and started trading down today, a very simple entry strategy could be implemented. If the price came back up through today’s open, essentially going positive, this would be further confirmation a Jay-hook pattern was developing. This position was bought during the day as the price came back up through the open price in despite of the fact the markets were still selling off extremely hard. The pattern identification was the result of the predetermining factors for creating a Jay-hook pattern; a very strong price move. After a couple of days of pullback, supporting at the tee line and producing a potential candlestick reversal signal, it was very easy to establish an entry point based upon a high probability results if the price eventually went positive.

Commodity Market, GERN


Other positions in the portfolio have the same potential on a big bearish day in the indexes if they were established based upon a pattern set up. Learn how and why candlestick patterns are created. Having this knowledge allows for positioning a portfolio to continue to do reasonably well even with the markets moving unexpectedly  in the opposite direction. This is not difficult information. The Japanese rice traders merely incorporated commonsense investment perspectives in easy-to-visualize graphic formations. Applying that knowledge to fundamental research or strictly technical trading allows an investor to understand why  prices move as they do.

Chat session tonight 8 PM ET — Everybody is welcome, bring your friends. Invite those people you think would be a good investment associates as you are trading during the day or week. Tonight session will concentrate on recognizing which patterns are setting up for the best potential trades.

Good investing,

The Candlestick Forum Team


Candlestick Precision

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This market is an auction market in which participants buy and sell commodities and/or futures contracts. They buy and sell on a specified upcoming date. In other words this market requires a financial contract that obligates a buyer to purchase an asset and a seller to sell an asset at as a financial instrument or physical commodity at a predetermined upcoming date and price. Some contacts may call for the physical delivery of the asset, while other contracts are settled in cash. In fact, the likelihood of physical delivery of a commodity is extremely low.

In this market an investor can hedge or speculate on the price movement of the underlying asset. For instance, hedging is to make an investment to reduce the risk of adverse price movements in an asset. An example is to own stock and then sell a contract stating that you will sell your stock at a set price. You then are able to avoid market fluctuations.

This type of contract is standardized and the upcoming date of delivery is called the delivery date or the final settlement date. The official price of the contract at the end of the day’s trading session on the exchange is called the settlement price for that day of business.

This type of contract gives the holder the obligation to make or take delivery under the terms of the contract, whereas options trading, grants the buyer the right, but not the obligation to establish a position previously held by the seller of the option.  For example, if you were long in a contract, you could go short the same type of contract to offset your position. This would serve as your exit position just like selling a stock in the equity markets would close a trade.

The owner of an options contract may exercise the contract, but both parties of a futures contract must fulfill the contract on the settlement date. As stated above, the seller delivers the underlying asset to the buyer, or if it is a cash-settled contract, the cash is transferred from the future trader who sustained a loss to the one who made the profit. In order to exit the commitment prior to the settlement date, the holder of the position must offset their position by either selling a long position or buying back (covering) a short position, thus effectively closing out the position and contract obligations.

There is a lot more to this market and every investor should do their homework before trading commodities. Continue to research and find a trading strategy that works for you.

Market Direction

The holidays usually do not provide a major direction for the markets. Most traders are gone. The simple techniques provided by candlestick signals reveal the same information in lethargic markets as they do in active markets. The market is currently moving sideways. There does not seem to be any urgency to buy, yet no urgency to sell. This has been the market conditions for most of 2008. There has been many weeks/months for the market did not have any tradable trend. However, 2008 was a relatively profitable year. Although there were times when the markets were not moving, when the markets did move, some huge profits were made. This is why it is important to let the markets tell you what the markets are doing.

Futures DOW 2008

DOW  2008

There were numerous periods where the Dow just went sideways, making it difficult to make money either long or short. Unlike the trends we saw in late 2006 going into 2007. Being able to analyze the market trends allowed for exploiting profits by being positioned correctly
Futures DOW 2009

DOW 2009

One of the main functions of candlestick analysis is to discover what patterns are occurring. This becomes extremely important in how to trade the market. The power of candlestick signals is incorporated in the ability to analyze what investor sentiment is producing. There will be some big profits to be made in 2009. Where are they going to be? That we do not know! But taking advantage of the information that is built into candlestick signals will allow us to place funds in the markets at the right places at the right times.

Chat session tonight for members only 8 PM ET

Good investing,

The Candlestick Forum Team


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Traders in Commodities

Traders who trade commodities so do for many reasons. One reason is that commodities provide the opportunity for investors to make huge profits in a relatively short period of time. Also, futures trading as it relates to commodities, is not as complicated as trading stocks. There are only about forty markets to speculate on when trading futures compared to trading stocks where there are literally thousands of stocks to choose from. Additionally, futures are very easy for investors to buy and sell and there is the potential for profit whether or not prices go up or down. Not to mention the fact that commission fees are much lower than the commission fees when trading stock.

Futures trading involves the speculation of whether or not the price of a commodity will rise or fall. It is not like buying stocks and bonds in which you physically own something. Investors will, for example, speculate on the price of soybeans. If the trader thought that the prices of soybeans was going to rise, then he or she would purchase a soybeans futures contract. On the contrary if the investor thought the price of soybeans was going to fall, then he or she would sell their soybean futures contract.

Another plus to trading commodities is that you can begin trading with very small purchases. Of course the smaller the trade, the smaller the profit, but there is also a lower risk with smaller trades. This is an advantage because it allows traders to get up to speed in the futures markets before they begin to place larger trades. Additionally, may investors will implement a stop loss order in order to minimize risk. This stop loss will automatically happen when the set price is reached. Then the commodities previously purchased are sold automatically to prevent from a larger loss.

For those investors interested in this type of investing there are certain fundamentals that must be understood. Growth and inflation are the most important factors to take into consideration. The prices of the futures markets are based on the predictions of what the futures market will do. Therefore future predictions of growth and inflation are crucial to commodities trading so that investors can accurately predict what is likely to happen. Inflation and growth are far more important than historical data when commodity investing.

In addition to the fundamentals, traders must also understand the technical indicators used to spot trends before prices become unprofitable. They should also become familiar with concepts such as market value, supply and demand, and trading behavior. Market value is important to understand because it has to deal with price fluctuations and trend reversals. Supply and demand is a familiar concept to many however commodity trading requires that investors research all factors that come into play with supply and demand. Trading behavior is also very important no matter the type of trading whether it is stocks, bonds, stock options, or commodities. It deals with the psychology of trading and how self-awareness or lack there of in regards to individual trading behavior affects every day trading decisions made by investors.

Continue to research the futures market and decide if it is the market for you. Be sure that you fully understand the concepts discussed above, that you implement a trading plan, and that you develop and maintain the discipline to stick with your plan.

Market Direction

Candlestick signals reveal the truth! No matter what the rhetoric is being reported on specific topics/stocks, candlestick signals reveal the true sentiment that is conveyed by investors. When you see record-breaking earnings reported by a company and a candlestick sell signal appears, that reveals the true sentiment of what investors were expecting or anticipating. When you see politicians reporting one thing, and the market responding in a different manner, that reveals investor sentiment is reacting to what is really occurring. When the Dow was trading down 200 to 300 points on a day when the signing of the mortgage bailout bill was supposed to occur, that was an immediate indication that something was not right. Did the markets already know that there were not enough votes to pass the bill? If you are controlling billions of dollars of investment funds, you probably have the research capabilities to know the true prognosis of how many votes are going to be voting for and against the Bill. When money is on the line, the smart money will know what the truth is well before the average investor on the street. The benefit the candlestick investor has is being able to see what is occurring with people that actually buy or sell based upon the information they have.

Candlestick signals provide a huge advantage. It allows for a visual confirmation of what buyers and sellers are actually doing. Candlestick patterns provide a broader road map to indicate what is occurring in investor sentiment as time moves on. A pattern can be the accumulation of individual candlestick signals. It is very important to remember that each signal is the result of investor reaction that occurs over and over. That information can be extrapolated into accurately projecting what is occurring during a price trend or a pattern. Because each signal incorporates common sense analysis, that common sense can be applied to bigger price moves. As discussed in the previous newsletter, the Dow is in the process of forming a Dumpling Top. The ‘result’ of the Dumpling Top is in progress currently. A large price decline is usually the result after a Dumpling Top has been identified.

Traders in Commodities, Dow


Large profits can be made with confidence when the results of investor actions can be identified. The Candlestick Forum Online Training seminar concentrates on ‘what’ produces excessive profits in the markets. This boils down to knowing what signals and patterns to recognize and understanding the ramifications. The most powerful element of investing is committing funds where the probabilities are greatly in your favor. Fortunately, candlestick analysis is the implementation of visual common sense graphic depictions. You do not have to be a great fundamental analyst. You do not have to understand the results of political involvement in the equity markets. All that information is provided by candlestick charts. Wouldn’t you like to be able to visually evaluate price movements with a high degree of accuracy? That is what you will get from two days of candlestick training.

Many investors go through a lifetime of following the practices of Wall Street. Most people learn too late that Wall Street does not instruct people how to make money. Wall Street is established for making money through the mechanics of investing your funds. Wouldn’t you like to know why prices move as they do? It is very simple once you understand the information conveyed in candlestick analysis. This coming weekend, October 4 and 5, you have the opportunity of gaining extensive insights into the movements of investment prices. It is not based upon “secret” trading methods that are just now being revealed. You will learn the simple common sense techniques that the Japanese rice traders proved to be extremely profitable over the past four centuries. Take time to learn what the most proven trading method has to reveal. Whether you are a day trader, swing trader, or long-term investor, candlestick analysis allows you to understand where the high probability profitable investment situations are developing. This is not rocket science. These methods were developed by simple rice traders. The result was that the simple rice traders became legendarily wealthy. Investor sentiment has not changed over the past four centuries and will not change over the next four centuries. The human mind works with reoccurring habits. Fear creates panic. Greed creates exuberance. When you can identify those factors with simple graphics signals, you now control your own investment destiny. Join us this weekend. It’s well worth your while. Click here to sign up.

Chat session tonight at 8 PM ET for members. – We will discuss what created the dumpling top and what could result immediately from actions or non-actions of Congress that could produce extremely large profits.

Good investing,

The Candlestick Forum Team


Candlestick Precision

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Candlestick Trading Tactics

Candlestick trading tactics make investing a much simpler process than most investment advisors care to admit. The basis of candlestick trading tactics stem from the fact that signals have been identified for hundreds of years to work successfully. Most investment programs are variations of indicators that work reasonably well. Candlestick signals have one specific element. They are the results of all investors buying and selling a trading entity during a specific time frame. This makes candlestick trading tactics an easy process to implement. Computers concurrently generate statistical analysis in the matter of seconds. That same statistical analysis for candlestick signals was derived through hundreds of years of actual use.

What makes the signals compelling investment tools is the fact that Japanese Rice traders not only used the signals for successful investing, their success made them legendarily wealthy. The trading tactics incorporated with the use of candlestick signals are ready has the aspect of successful probabilities. The Candlestick Forum has put many of these signals and patterns into a portfolio trading tactic program. The signals allow investors to successfully utilize the reversal signals for online stock investing. The strategies utilized for successful investing from candlestick analysis dramatically improves an investor’s stock market education.

Successful trading tactics require a clear evaluation of price trends. The most successful stock trading system involves the implementation of the consistent and successfully use of a trading program that puts the probabilities in the investors favor. Candlestick signals provide that format. The result of stock trend analysis can also be easily integrated with option trading with candlesticks. Putting the probabilities dramatically in the investors favor should be the basis of any investment program. Candlestick signals are in important part of trend analysis. The Candlestick Forum provides a multitude of informational techniques that permits an investor to create successful candlestick trading tactics.

Candlestick Signals, The Ultimate Technical Analysis Tools

What is the main purpose of technical analysis? It is the visual evaluation of chart patterns that reveal high profit situations. Candlestick signals provide the ultimate technical analysis tools for identifying price reversals.

Understanding how to use the Candlestick signals effectively allows an investor to master the markets. Technical analysis tools should be easy to use and have a high-probability expected result.

Using Candlestick signals with other technical analysis tools dramatically enhances trend analysis capabilities. Where other technical analysis tools provide a format for anticipating what ‘might’ be a price reversal area, the Candlestick signals provide the information that demonstrates exactly what is going on at those levels. The results of hundreds of years of actual use make Candlestick signals one of the most effective technical analysis tools.

The news media can be your first source of where to apply technical analysis tools. The Candlestick signals identify the result of investor sentiment. As has been seen for the past two months, Crude Oil prices were the main concern. Of course, high gasoline prices were going to be a big damper on the American economy. The media was reminding us of that fact over and over. Now there is a new fear! Natural Gas prices! Heating our homes through a cold winter is going to deplete the American family’s budget.

The media has now targeted the next fear factor. However, having the ability to analyze the price trends of other factors that may cause positive or negative sentiment in the equities market becomes a valuable technical analysis tool. The Candlestick signals can be utilized for analyzing any trading entity that involves fear and greed.

Candlestick Signals, Technical Analysis, Natural Gas

Natural Gas

Market Direction

The immense advantage that Candlestick signals provide is the capability to visually witness what a trend might be doing at important technical levels.

The evaluation of what the Dow might be doing becomes much easier to visualize when applying Candlestick signals to other technical analysis tools. As seen, the Bullish Harami stopped the downtrend right at the previous lows of late August. Stochastics were in the oversold area starting to curl back up. What would have been the logical target? The 10,700 level that seems to be the resistance area, creating a trend channel.

Candlestick Signals, Technical Analysis, Dow

The Dow

However, the moving averages were the first target. Prior to reaching the level of the moving averages, they may have been evaluated as being a possible congestion area. Viewing the moving averages back through mid-August, they revealed some congestion at those levels but the trend eventually moved through them. The Candlestick signals allow the investor to actually see what is occurring when the moving averages are tested. In the case of the Dow, a small Hanging Man signal was followed by a Bearish Engulfing signal. These were reversal signals. This is stated to point out that there could have been some selling or congestion on the moving averages where the formations were not actual signals. The fact that Candlestick “sell” signals formed at these levels provides a completely different analysis. The expectation of a reversal at the moving averages becomes that much more anticipated than if non-signal selling days had occurred at the moving averages.

The same could be seen in the NASDAQ chart. As the NASDAQ came back up to the 50 day moving average, it formed a Shooting Star. Not only was this a potential sell signal, but the fact that it gapped up slightly and then formed a Candlestick ‘sell’ signal was that much more of a forewarning that the 50 day moving average was going to act as resistance. This becomes further confirmed the

Understanding Commodities Markets

With a rich history and an exciting future, trading in the commodities markets will continue to be very popular. For those who are already involved in commodity trading, it can be an exciting adventure. For those who are thinking about getting in, now is a great time to learn how to invest. For both the newcomer and the experienced trader, a little understanding about commodities markets is always helpful.

Commodities Markets In The US

Today’s commodities markets in the United States trace their origins to futures trading in Chicago, IL in the early 1800s. Because of its location at the base of the Great Lakes and its close proximity to the farms of the Midwest, Chicago was a natural center for transportation, distribution and trading commodities. Overages and shortages of agricultural products caused extreme changes in price. An exchange was needed that would bring together a market to find potential buyers and sellers of a commodity instead of making people bear the burden of finding their own. In 1848, the Chicago Board of Trade (CBOT), the world’s first futures market was formed. Trading was originally in futures and the first contract was written on March 13, 1851.

General Futures Exchange Information

Unlike in the past, you will not actually go to the commodities markets to do business with the futures exchanges. You will invest through your broker who will take your commodity orders to the exchange floor for you. Your contact with a broker can either come from telephone contact to relay orders or electronic commodities trading in the Internet. While there are futures exchanges throughout the world, the best known markets in the US are in Minneapolis, Kansas City, New York and Chicago.

Regardless of which method is used, the basic concept is the same; the investor submits his or her futures options market order and based on the information contained in the futures contract, a purchase or a sale is made on behalf of the investor by a commodity broker. As you probably remember, this legally binding agreement gives the purchaser the right, not the obligation, to buy or sell the underlying asset. While the commodities themselves might be different, the commodities markets are the same.

Commodities Markets

While the world of the Internet has eliminated some of the magic of the commodities markets, the actually floor trading is still fascinating. Most commodities markets are divided into pits where the brokers stand facing the center. Each is dedicated to commodities trading that are specific for that pit. For example, the Chicago Board of Trade has large pits for soybeans, T-bonds and corn futures in addition to many others. The COMEX in New York is home to more that one futures exchange. There you will likely find pits for such commodities as heating oil, gold, cotton, coffee and orange juice.

Another consistent feature of commodities markets is that like trading in the stock market, the people that are on the floor must be members of that particular exchange.  By paying dues and assessments, these members help to support the exchange.  For non-members, it is necessary to find a member broker to do your commodity investing.
The commodity market provides the place to trade and has all of the related support facilities, such as phones and price-reporting and dissemination systems.  The commodity market does not set prices or buy and sell for itself.  It does, however, have an extensive operation for monitoring the actions of those involved to ensure to the US government that strict trading rules exist and are being followed.


From their humble beginnings in Chicago in the 1800s, commodities markets have become sophisticated places for successful traders to invest in futures and options. Combined with online futures trading, commodities markets are prepared to take investors from the past into the future.

Analyzing Stock Market Indexes Using Major Candlestick Signals

The Japanese traders say “let the market tell you what the market is going to do.” The utilization of Candlestick signals makes analyzing the direction of the stock market indexes and trends relatively easy. It becomes difficult at times to sort out what the stock market indexes intentions are when listening to the many scenarios from the so-called “market experts.” Watching the financial news stations will always provide a multitude of opinions of where the market is going. Using Japanese Candlestick signals will circumvent all that noise.

The one basic factor built into Japanese Candlestick signals is that they are formed by the cumulative knowledge of all the investor input, the buying and selling, of a trading entity or trading entities, during a certain time period. No matter what you hear elsewhere, the Candlestick signals tell you exactly what investor sentiment is doing.

Candlestick analysis allows investors to project trend reversals of the stock market indexes with a relatively high degree of accuracy. One misconception about Candlestick signals is that there are too many of them to learn. Of the 50 or 60 Candlestick signals, there are only about 12 signals that will occur a vast majority of the time: The Doji, the Bullish and Bearish Engulfing signal, the Hanging Man, Shooting Star, Hammer, the Inverted Hammer, the Bullish and Bearish Harami, the Dark Cloud, the Piercing Pattern, and the Kicker signal. Knowing these signals alone will dramatically improve your analysis of trend reversals and make learning Candlestick analysis much easier. Having this analysis capability in one’s mental arsenal allows the Candlestick investor to have their portfolio positioned in the correct direction when a move occurs. Understanding the psychology of how the signals are formed provides investors with better foresight into where to have positions placed.

Candlestick analysis is not rocket science. It is simple investment philosophies put into a visual graphic. The 400 years of actual investment results from Japanese rice traders have provided high probability signal results. The Candlestick signals illustrate the investor sentiment mostly defined as fear and greed. Human emotion, when it comes to investing funds, will always have the same ingredients. The Candlestick signals are simply the graphic depiction of investor sentiment. Candlestick signals were not discovered and tested by computer back testing simulations. Candlestick signals are the result of centuries of analyzing how human emotions affect a price trend. The signals, occurring over and over at specific points in a trend reversal, provide a statistically proven trading platform. If you understand how they are formed, you’ll understand what makes prices move.

The Morning Star signal is one of the most clear, symmetrical Candlestick reversal patterns. Not to overstate the obvious, but if Candlestick signals didn’t work, we would not be looking at them today. The Japanese rice traders that used Candlestick signals became enormously wealthy.

The major benefit of Candlestick signals is that they are very easy to learn and identify. You do not need to learn formulas. You do not have to do extensive fundamental analysis. The visual aspect of Candlestick signals identify when a reversal is about to occur. Somebody else has already made decisions that it is time to buy or sell. The Morning Star signal, when fully analyzed, reveals very simple common sense features that identify the change in investor sentiment.

Morning Star

The Morning Star

The Japanese rice traders described it as the planet Mercury, the Morning Star. It foretells that brighter things, sunrise, is about to occur, meaning that prices are going to go higher. It is formed after an obvious downtrend. The first three-day signal consists of a long black body, usually one produced from the fear induced at the bottom of a long decline. The following day gaps down. However, the magnitude of the trading range remains small for the day. This produces an indecision-type day. The third day is a white candle day. The white candle represents the fact that the bulls have now stepped in and seized control. The optimal Morning Star signal would have a gap before and after the star day.

The make-up of the star, an indecision formation, can consist of a number of candle formations. However, a Doji or a Spinning Top is usually the predominant formation in a Morning Star signal. The important factor is to witness the confirmation of the bulls taking control the next day. That candle should consist of a closing more than halfway up the black candle of two days prior.

Identifying the Morning Star signal is relatively easy. It is visually apparent to the eye. There are some very simple parameters that can enhance the Morning Star signal’s probabilities of creating a reversal.

  1. The longer the black candle and the white candle, the more forceful the reversal. This demonstrates a more severe change in investor sentiment.
  2. The more indecision that the star day illustrates, the better probabilities that a reversal will occur, such as a Doji signal.
  3. A gap between the first day and the second day adds to the probability that a reversal is occurring. A gap before and after the star day is even more desirable.
  4. The higher the close of the third day, coming up past the middle point of the black candle of the first day, reveals more potential in the strength of the reversal.

The probability of a Morning Star signal reversing a trend becomes extremely high when found in oversold conditions. Using a simple indicator such as stochastics, in the 20 area or below, represents an oversold condition. The most important element of the signal is the magnitude of the white candle’s close during the third day.

Candlestick analysis can be used with all trading entities. Whether doing a long-term evaluation on a monthly Dow chart or a one-minute chart trading the e-minis, the signals working just as effectively for revealing change in investor sentiment during that time frame. As seen in the daily Dow chart, the Morning Star signals revealed when the Dow established a bottom. Being able to analyze the direction of the DOW increases the probabilities of being in a correct trade when analyzing individual stock charts.

In July and August 2004, the Dow index reversed after Morning Star signals. Note point A, when the stochastics were on an oversold condition, a three-day Morning Star signal appeared. Then, two Morning Star signals appeared a week later, point B, to start the next rally again in the Dow Jones Averages. In both cases, it became very clear to start buying stocks that have produced good Candlestick “buy” signals when the markets are showing buying strength.

Analyzing Stock Market Indexes, Dow

Candlestick signals occur in the markets every single day. Scanning software makes finding the signals very easy. They can find the best Candlestick trades in less than 10 minutes every day. This is not rocket science. This is simply using the same successful analysis that has been used for centuries. When you see a Morning Star occurring in an oversold condition, the probabilities of being in a successful trade are very high.

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Morning Star & Evening Star Signals

Candlestick Charts Provide a Huge Advantage to Technical Analysis

Candlestick charts provide huge amounts of information.

Candlestick charts allow an investor to develop trading strategies that maximize profit potential. Unlike bar chart that illustrate what price movements did during a specific time frame, candlestick charts reveal ‘how’ that price moved. Candlestick charts demonstrate what investor sentiment was doing during the time frame and how it did it. This additional information creates a huge advantage for the candlestick investor. Although a price may have been up on the day, the candlestick chart will reveal whether a specific candlestick signal had been formed.

This information becomes valuable for projecting a reversal or a continuation of a trend.  The simple logic that is built into candlestick charts makes the evaluation for trade entry and exit strategies much easier to execute.  For example, a candlestick chart that reveals a price that closed higher on the day in an overbought condition may not have any relevance to somebody that does not  recognize a candlestick signal. However, if that price, during that day, had been much higher but closed near the lower end of the trading range, it may still appear as a positive day to somebody using bar charts or just reading the results of the day from the Wall Street Journal. Utilizing a  candlestick chart would reveal a different story.  A Shooting Star signal would have formed, providing a completely different scenario.

When the major signals appear  on candlestick charts, an investor can prepare for when they get in and out of trades with a much more clear analysis.  Being able to execute trades at an early stage of a reversal keeps an  investor from having to  execute less favorable trades when a trend is already in motion, trying to sell when the buyers are stepping away.  Candlestick charts produce the evaluation graphics that allow an investor to make decisions instantly.

Market Direction

What are the markets telling us? Both the Dow and the NASDAQ have been in the overbought conditions for the past few weeks.  The Dow has now reached the obvious resistance level at the 10,700 level.  The past three days of trading have demonstrated spinning tops.  This indicates indecision occurring at an important technical level.

Stochastics are now in the process of turning down.  As of yet, the selling has been indecisive.  Two scenarios can be put forth upon seeing this type of market condition.  The spinning tops could be illustrating the prelude to a pullback.  That will be confirmed by a long bearish candle in the next day or so. This would give a clear indication that the spinning tops were a reversal action. If the next few days show more spinning tops, doji, or other indecisive trading formations, without confirming signals, hold off on your trade.

Stock Trading Plan – Big Profits With Candlestick Signals

Every investor should have a stock trading plan, especially going into a new year of investing. The development of the next year’s stock trading plan should include the evaluation of the previous year. Specific sectors moved very well during 2005. The energy stocks for example. Analyzing what sectors or industries could have strong moves in the coming year is like shooting in the dark. However, simple sectors scans utilizing candlestick signals reveal which sectors/industries appear to be bottoming out and starting an upward trend. Assuming that some sectors will perform well after other sectors have performed well provides a smaller universe for watching for candlestick buy signals. It can be easily assumed that if mail order catalog companies or online companies are seeing dramatic increases in sales, then the transportation/delivery industry could be expected to perform better.The candlestick charts reveal when new dynamics enter a sector.

When developing a successful stock trading plan, some mild preplanning should be put in place. Although the candlestick signals will identify specific sectors that are starting to perform well, having some anticipation of what those sectors might be helps confirm establishing positions in those sectors when the signals do appear. Always keep in mind that prices move based upon the perception of changes in fundamentals. Currently, confidence is coming back into the electronics industries. This may fall in line with the concept that technology is starting to advance at a very rapid pace.

The most successful stock trading program for 2006 may be a two faceted approach. Candlestick signals can be utilized for identifying the sectors that will make the biggest moves this coming year. Also, they will identify the individual stocks that announce product advances which may not only dramatically change their own fundamental capabilities, but may also alter the dynamics of a whole industry.

Market Direction

The bullish signal that made itself evident on the first day of trading this year has produced very strong profits in the portfolio. Having the ability to visually witness what investor intentions were from the first day of trading created an opportunity to be investing aggressively, the portfolio positioned all to the long side. Knowing the truisms found in candlestick analysis has produced some very large gains in positions. The longer a trend continues, the more confident the average investor will exhibit. Where do most investors buy? They get more confident at the top. Does this imply that the top is getting close? Not necessarily, but the effects of continued confidence can be seen from candlestick chart patterns that revealed the buyers coming in early and continuing their buying. That can be clearly witnessed in a couple of our recommendations.

DTPI has been in a slow and steady uptrend for over a month before it was finally discovered by an analyst to recommend it. Candlestick signals alerted investors to start buying, if they did not get in at the $6.50 level, at the $7.50 level or the $8.00 level. CRYP was identified as a buy in mid-December and created another buy signal at the first of January. IIJI is another chart pattern that is revealing strong potential to the upside, a fry pan bottom forming off the 50 day moving average.

Stock Trading Plan, DTPI


Stock Trading Plan, CRYP


Stock Trading Plan, IIJI


Will candlestick signals always find the best trade situation? They will greatly improve your chances of gaining big profits when you learn them and always apply them with your stock trading plan!

Stock Investing Concepts

All stock investors face one primary challenge; a challenge so formidable that it can undermine even the most successful stock investing concepts. This challenge is simply called “emotion”.

Emotions are the impetus behind every stock market trend. Frankly, if they didn’t exist in the machinations of the stock market, investors could make money based entirely on the expanding or receding economy, as opposed to solid, time-tested stock investing concepts. Additionally, the more successful investors wouldn’t have the ability to profit from the emotional mistakes of the “amateurs”.

As an example, let’s say that you have studied numerous techniques, read “Stock Market for Dummies”, as well as all the rest of the recommended trading and investing books, dabbled in paper-trading, and read all of the stock market newsletters. Now you’re ready to take the plunge and make some real money with your own stock investing concepts.

You wisely approach your new venture with the expectation of a certain amount of losses, although you want to keep them as minimal as possible. You are aware that losses are a part of the game and you’ve experienced your share of them but, up to this point, your wins have outnumbered your losses. Your reasoning for this is that you have not deviated from your chosen stock investing concepts. You are excited to get started.

One day, after fighting traffic for hours, you eagerly log in to your stock market online investing account and find that there have been changes in the market. Although you would normally follow your usual plan of action, pressure and greed take over. You alter your normal stock investing concepts regarding buying and selling but convince yourself that it will be OK just on this one occasion.

Stock prices start dropping and now, not only do you have to deal with pressure and greed, but also with fear. Fear wrecks every investor’s self-confidence with tenacity. Fear will whisper in your ear – “you don’t know what you’re doing.”

Greed and fear are now in control and are telling you what to do. Self-confidence, reason, and caution have all been thrown to the wind.

By now you have totally forgotten the golden rule of investing – “buy low and sell high” because you’ve lost too much money and you feel you have to get it back. Greed tells you “it will work,” and fear tells you it has to work!”
Your spouse, partner, or trading buddy has now become aware of your plight and is complaining about the lost money, adding even more pressure to the mix. Your funds are now all but gone. You made critical errors and invested money that you need right now. Now you’re playing the margins and are totally out of control.

Don’t let the above scenario happen to you. Although the specifics of the experience will change, the underlying cause of this situation is your own emotions. You’ll get through it, but the memory of that terrible defeat will stay with you forever. Fear will affect every future investment decision and significantly limit your ability to return to your previous successful stock market investing strategy. You are afraid that the same scenario will happen again. However, it doesn’t have to be that way.

Developing a line of attack to deal with your emotions can put you back on the road to success.

Here is a solid stock investing concept:

Don’t go into the stock market simply to feed your ego.