When buying stocks on margin you can think of it as acquiring a loan from your brokerage firm. This type of trading allows the investors to buy more stock than they normally would be allowed to if he or she didn’t have a margin account.

Margin trading is all about leveraging. Leverage is the use of financial instruments or borrowed capital, to increase the potential return on investment. If you pick a good investment margin can drastically increase your profit, however it can also have the opposite effect if you don’t pick the right investment. Leveraging is great for helping investors and firms to invest and to operate even though it comes with great risk. It is just important to remember however, that leverage magnifies both gains and losses when investing in the stock market.

In order to buy stock on margin, you first must set up a margin account with a firm which is different from a cash account. There is a minimum deposit required that depends on the firm but is typically at least $2,000 if not more when margin trading. Once you have the margin account ready to go, then you can borrow up to 50% of the purchase price of the stock, but you don’t have to. You can borrow as little as 10% if you would like to when trading stock on margin. The requirement when margin trading is that your profits go to your stock broker against the prepayment of the loan first, and then you receive the rest. If after you pay back your broker your margin account goes below its minimum then a margin call occurs. You would then have to deposit more funds into your margin account to meet the minimum or sell stock to pay down the loan.

In addition to understanding margin calls and opening a margin account, you must understand the interest payments due. When margin trading, the securities in the account are collateral and you have to pay interest on your loan. This is why most traders buy stocks on margin when they are short term trading. The longer you hold the investment the more interest charges you will accrue. If when stock trading using a margin account you hold the investment for long amount of time, then the least likely you are to actually make a profit. As time passes and your debt level increases, the interest charges accrue and you lose money.

Margin trading is a great way to make money investing in stock, commodities, etc, however it requires a great amount of knowledge, focus, discipline and dedication. You must trade smart and you cannot let your emotions take over when trading on margin.

Market Direction

Most investors have a difficult time making money in the markets because they do not have a viable trading program. The first essential element of a successful trading program requires the identification of a price move. The reason most investors jump from one trading program to the next is due to the lack of confidence of the success of that trading program. The lack of success is usually created by two simple functions. The first is the credibility of a trading program. An investor needs to be convinced that trading program works profitably. There are hundreds of trading programs on the market that tell that they have found the “secret” for making big profits in the market. Obviously, an extremely high percentage have not found the secret because they have come and gone. Even successful trading programs require another important element. They have to be utilized correctly. Unfortunately, this creates a Catch-22. How many days, months, years does an investor spent on learning a trading system correctly? The gamble becomes how much time and effort will I put into learning how to use a trading program successfully when I’m not totally confident the trading program is a truly profitable program.

Candlestick analysis provides that initial key element! It does work successfully! Why is that true? Because if it didn’t, it would not be in existence today. It would have come and gone just like the many thousands of supposedly foolproof trading systems that have been marketed to the public for decades. Candlestick analysis works! The only aspect for making profits from the market is learning how to use candlestick analysis correctly. Imagine how you could improve your returns dramatically if you could place the proper trading strategy to the positions in your trading program. Having the confidence that the candlestick trading system works with a high percentage of profitable trades allows for concentrating on the best trading strategy to exploit profits. That can include margin strategies as well as option strategies. If a trading program has proven itself through hundreds of years of profitable results, an investor can then devise the best trading strategy or leverage to extract large profits from the markets.

Having the confidence to implement the proper trading strategy, without an underlying fear the basic trading program may or may not work, is extremely important for executing the correct trades. Knowing which direction a stock price should be moving allows for the assessment of the correct strategy. WRI is a recommended position for the longer-term investor. It is a REIT that is managed in a very conservative manner. It pays a $2.10 dividend. The price has been devastated just like all the REITs over this past year. The candlestick signals recently revealed  good bottoming action. The price could move back up to the 200 day moving average, the $22 area. What would be the best trading strategy for this position? An option trade would create the best leverage. However, an option trade would not be able to take advantage of the current 17% dividend payout.

A margin trade may make much more sense. Buying the stock at $12.36 would produce close to an 90% return if the price move back up to the 200 a moving average. Buying two times the amount of stock using margin will make a very compelling trade. If the margin rate is 5%, the additional stock that can be bought on margin would produce a net 12% gain based upon the 17% dividend yield minus the 5% margin cost. Now the position yields 29% on its dividends while waiting for the possible 90% move to the upside. The worst-case scenario might be the stock trades relatively flat if  the market was going flat. If the price does not move, a 29% dividend yield is still very worthwhile.

WRI

Candlestick analysis is merely a recognition of what investor sentiment has done in the past. The use of the candlesticks in different patterns and formations dramatically improves the participation potential of high profit price moves. As illustrated in the RIMM chart, simple candlestick analytical assessments help produce a very profitable option trading strategy. A test of the 50 day moving average, followed by a pullback to the T-line, followed by another test and breach of the 50 day moving average is usually an indication the Bulls will participate heavily with the formation of a Jayhook pattern breaching a major resistance level, the 50 day moving average. The results are simple. If the 50 day moving average is breached, obviously it is not acting as a resistance level anymore and the results of the Jayhook pattern should be in progress. These are not difficult setups to identify. They do represent new bullish investor sentiment potential.

RIMM

Recognizing the same pattern set up allows for powerful option strategies to be put into place. Candlestick analysis is merely the visual recognition of high profit trade setups. How an investor uses that information correctly dictates how strong returns will be. Take advantage of the information that has worked successfully for centuries. Then learn the trading strategies that can best exploit that information for big profits. You can control your own investment future by learning how to apply trade strategies that fit your comfort level.
Chat session tonight at 8 PM ET for members.

Good investing,
The Candlestick Forum Team

When you start out, it is always nice to get some help. No matter what you are doing, it takes some time to learn your way and people that have been there before always have a better vantage. The same is true when getting stock tips from someone who has already been investing in the stock market. Talking with someone who has already established their investment philosophy can help you to avoid some common problems. Here are 10 stock tips for you to follow:

Stock Tip #1 – Know How Much You Can Afford To Invest

The term for this is called risk premium and it’s called that for a reason. Investing is a risk and you should only put in an amount that you can comfortably afford to lose and not affect your quality of life. Hopefully you won’t lose any but you can’t look at it that way.

Stock Tip #2 – Know Your Limitations

This is different from how much you can invest. Can you stick with an investment strategy? Do you make rash decisions when you are nervous? Do you pay attention to details? The honest answers to these kinds of questions will help you prepare for the next tip.

Stock Tip #3 – Create A Trading Plan

A stock trading plan is the first tangible thing you will do. This is where you will outline your strategy, your long-term goals, and your techniques for managing profits and losses. You cannot put too much in your trading plan; this is your contract with yourself for how you will trade.

Stock Tip #4 – Choose A Stock Broker

For this one you need to do some research and refer back to #2. What are your tendencies? If you manage yourself very well, you can choose a broker who charges and offers less. If you are willing and able to do your own research, get stock quotes and the like you will need less support than someone less disciplined.

Stock Tip #5 – Test Your Plan

Who says you can’t get something for nothing? It’s called paper trading and it is a way of playing the stock market for free. Your broker will probably have a demo trading account where you can do all of the normal things but your money is virtual. This will allow you to test your trading plan before you spend your hard-earned money.

Stock Tip #6 – Develop A Trading System

This goes hand-in-hand with the next one. A stock trading system is a method of charting and analyzing stock movements in order to determine when to buy and sell. The best trading system available is Japanese Candlesticks and the Candlestick Forum is the best place to learn it.

Stock Tip #7 – Do Your Homework

Trading relies heavily on understanding the financial condition of a company and its standing in the market. Fundamental and technical analysis are the tools to help you….make sure you take advantage of them!

Stock Tip #8 – Win Gracefully And Be A Poor Loser

What does that mean? A poker player once told me that it is better to win small than to lose big….that might actually be the best investment advice. Winning gracefully means to take what the market gives but get out just a little too early. Likewise, no investor should be satisfied with losing money. It is important to always have and follow a stop loss strategy.

Stock tip #9 – Remember the ultimate goal.

Stock trading is about making money. This isn’t an ego trip or some way to out-do your buddies at work for bragging rights at the water cooler. If you stick to the plan you will do just fine in the long run.

Stock tip #10 – Never stop learning.

Who has been teaching you?  Have your read anything by Warren Buffett?  Did you find out what Benjamin Graham thinks about defensive investing?  How about letting me teach you what I know about Japanese Candlesticks?  If you learn from the people that went there first you don’t have to make the same mistakes.

Conclusion

There is a tried-and-true set of steps to learning about the stock market. Follow the stock tips that others give you can be the first step in becoming a successful trader.

Stock market investing strategy using candlestick signals

What is the best stock market investing strategy? The strategy that consistently puts the probabilities in the investor’s favor. Candlestick signals can be applied to produce the best stock market investing strategy for the day trader as well as the long-term investor. Candlestick signals contain investor sentiment that is simply common-sense investment analysis in a graphic form. What are the elements of a stock market investing strategy that most investors lack? A platform for demonstrating when it is time to buy and when it is time to sell. Fundamental research tries to find the companies that have a long-term positive prospect. Good management, good earnings growth, and an industry that has growth potential. Unfortunately, most fundamental recommendations do not have any timing element. Candlestick signals can dramatically improve the returns for a fundamental stock market investing strategy. Buying a good long term position at the wrong time can diminish overall returns dramatically.

A stock market investing strategy for most technical trading methods utilizes indicators that illustrate what investor patterns/perceptions have produced as far as price patterns in the past. These trading techniques usually rely upon ‘assuming’ reversals may occur at specific levels. Candlestick signals greatly enhance a stock market investing strategy by eliminating the “assumption.” If a price is expected to reverse at a major technical indicator such as Fibonacci numbers, trend lines, or moving averages, candlestick signals can provide a huge benefit. The best stock market investing strategy results from not just expecting a reversal to occur at a certain technical level, but being able to actually interpret correctly what investor sentiment is doing at those levels. Candlestick signals produce a powerful insight into a change of investor sentiment. Being able to evaluate what is actually happening at a technical level, versus needing a few days to confirm that a reversal has occurred, creates a very profitable advantage.

A perfect stock market investing strategy is having immediate confirmation at important technical levels. The candlestick signals create a double benefit. It provides immediate recognition that a reversal is occurring, allowing investors to get in to a trend at its earliest stages. It also provides lower risk stop-loss strategies. One of the biggest problems most investors encounter is their own ego. If they have made a decision to buy a position, because of their mental prowess, it becomes very hard to close a position that does not work. Candlestick signals create an excellent format for stop-loss procedures. Simple logic dictates the closer the entry point after a candlestick buy signal, the smaller the price move against the position for executing the stop-loss. Stop-loss procedures, using candlestick signals, are very simple. It takes all the emotion out of coming back out of a trade. If the candlestick buy signal was the indication that the buyers were now in control, prices coming back down through that signal would immediately tell us that the bears were still in control.

All investment professionals advise us to cut our losses short and let our profits run. But did you ever notice that they never tell you how to do that? The candlestick signals make that very simple to implement. The Candlestick Forum provides a highly informational e-book on how to use candlestick signal stop-loss procedures correctly. Of course, all investors want to be in winning trades. But reality shows us that not all trade

When considering the basics of stock market investing, there are generally three different investment options. Stocks, bonds, and cash. Does this sound simple? Well, unfortunately it gets very complicated from there. You see, each of these investment options has numerous types of investments that fall under it.

There is much to learn about each different investment option. Investing and trading can be intimidating for the beginner investing in the stock market for the first time. On the bright side, the amount of information that you need to learn has a direct relation to your investment style. There are basically three types of investors: aggressive, conservative, and moderate. The different types of investment options also cater to the two levels of risk tolerance: low risk and high risk.

Aggressive investors use a stock market investing strategy that involves greater stock volatility, which is higher risk. They also tend to invest in higher risk real estate and business ventures. For example, if an aggressive investor puts his or her money into an older apartment building then invests more money renovating the property, they are running a risk. They expect to be able to rent the apartments out for more money than the apartments are currently worth or to sell the entire property for a profit on their initial investments. In some cases, this works out just fine and in other cases, it does not. It is a risk.

Conservative investors often invest in cash. Conservative investment options may include mutual funds, interest bearing savings accounts, money market accounts, CDs and US Treasury bills. These long term investing options are relatively safe, low risk investments that grow over an extended period of time.

Moderate investors often invest in bonds and cash and may occasionally participate in the stock market. Moderate stock market strategies include low or moderate risks. Also, moderate investors often invest in low risk real estate.

Before you start investing, it is very important that you learn about the different investment options and what those investments can do for you. Pay attention to past trends and understand the risks involved. History actually does repeat itself and investors know this first hand. Find a convenient Internet investment service that provides real time market information and gives you round-the-clock access to your account for secure and easy stock market online investing. Access trusted sources of research and investment information to keep you informed and up to date about mutual funds, equities, and fixed income investments. Be sure that you can obtain current company news and invest from any personal computer with Internet access and the appropriate Internet browser.

Help with Investing with Candlestick Signals

Where do most people get help with investing? When they start their investment activity, it is usually by getting information from where ever they can. That involves depending on a stockbroker or other investors. Getting help with investing from those sources is usually the blind leading the blind. Candlestick signals create a huge benefit for those that need help with investing. The signals were developed while incorporating common sense and logical investment practices into a graphic depiction. An investor, whether just beginning or with many years of experience, will obtain an education on what the correct procedures are for investing when using candlestick signals. Buy low, sell high. That is the true concept for investing. However, where most investors need help with investing is getting through the emotions. Reality demonstrates that most investors panic sell at the bottom and buy exuberantly at the top.

The information provided in a candlestick signal reflects pure common sense. High profit trades can be identified by simply evaluating what the candlestick signals/patterns reveal. One of the highest profit trades is a breakout. What do the candlestick formations reveal in a breakout? The normal process of what most investors do after a big price move! A breakout is usually the result of news that will dramatically change the perspective of the price potential. That news could be company specific or world events. More than likely, whatever created the breakout will be influencing the price of the stock for the next few weeks. Being able to analyze what the candlestick formations are revealing will help with the investing of a breakout situation.

What are the most effective breakouts? Ones that have had a relatively flat trading range, a range that has illustrated no investor interest one way or the other. All of a sudden, the price gaps up dramatically; usually with an inordinate percentage gain. The problem is not finding a breakout; the problem is how to trade a fast-moving price situation. This is where many investors need help with investing. This is also where candlestick signals can make the entry level much easier to execute. The Candlestick Forum provides a highly informational training CD on how to use candlesticks and breakouts effectively.

As illustrated in the IFO chart, the breakout was clearly obvious. The previous trading range had been very dull. Whatever news made a price break out was strong enough to influence the price for the next few months. In the case of InfoSonics Corp. IFO, no severe profit taking occurred until the price had already tripled, moving from the $5 area up toward the $15 area. The day after the gap up breakout illustrated quick profit taking but by the end of the day it closed at the top end of the trading range. This clearly demonstrated that although the price of the stock was up 50%, the buyers were still coming in.

IFO

Blue Dolphin Energy Company, BDCO, revealed some profit taking after the price moved up 250% in the first two days. The profit taking never came back into the gap up bullish candle that illustrated the breakout. Positive trading after two days of pullback, followed by a gap up in price, again clearly illustrated that the Bulls were trying to get into this position as quickly as possible. What made the breakout so compelling? Notice the Fry Pan Bottom type pattern that occurred prior to the breakout. This indecisive trading pattern will usually be followed by a very decisive rally.

With all of the technical analysis and research that goes into commodities investing, it is possible that the most important decision you will make doesn’t concern oil futures or the NASDAQ 100. Every trade you will make has one thing in common; while you might not always buy or sell, you will always be in contact with your futures broker. Your futures broker will be a part of everything you do and this fact makes your decision crucial.

The choice of futures brokers for commodity trading is not simply selecting to start a business relationship with a person, but it includes understanding the investment philosophy and available service of the futures brokerage firm. When choosing commodity futures brokers, there are several concepts to consider:

• Type of brokerage or the clearing arrangement
• A history of ethical business practices
• Amount of time doing business
• Level of commissions
• Level of service

Type of Brokerage Firm

Primarily there are two types of clearing arrangements for futures brokers, namely Futures Commission Merchants (FCM) and Introducing Brokers (IB). An FCM is a group of futures brokers that accepts orders to buy or sell options or futures contracts and accepts money or other assets from customers in connection with such orders. An IB, on the other hand, is a commodity broker who delegates the work of the trade execution, floor operation and back office operations to a FCM and acts primarily as an intermediary for your investment options.

History of Ethical Business Practices

Think about it this way; you will trust your commodity broker with a lot of money. Shouldn’t he or she have a history of doing things the right way? In addition, the brokerage firm should always have your best interests in mind and resolve any problems in a fair way. A good way to check this is to contact the National Futures Association and find out if the broker has any disciplinary actions against him or her; a few minutes worth of checking might be your best investment advice.

Amount of Time Doing Business

80% of all businesses go under within the first five years. A beginner investing makes enough of his or her own mistakes; a futures broker is even more vulnerable. Because of this, it is wise to choose someone who has five or more years in the business, giving them time to establish their investment abilities.

Level of Commissions

One of the most common investing mistakes is not knowing the cost of doing business. Commodity trading creates a lot of trades, so the cost can accumulate quickly. It is a wise investment basic to know how much the commissions run for your trades; you can easily find this out before deciding on your futures broker.

Level of Service

You need to ask yourself; how much help do I need? If you are learning to invest, you will likely need more involvement from your futures broker; if you have a lot of experience, you might need less. It is important to decide this because the level of support varies whether you are using a discount futures broker or a full service brokerage firm. Either way, it is important to honestly evaluate your current abilities and choose based on your needs.

Conclusion

Selecting a futures broker and a brokerage firm are very important decisions; no brokerage firm can guarantee that you will make money but it is a very important part of the process. You will find that choosing a futures broker for your commodities trading that will handle your account with the highest degree of integrity and professionalism will enhance your trading experience.