The center of the United States economy is Wall Street where every large company in the U.S. and around the rest of the world is traded on a stock exchange. This article explains to new investors who want to learn how the stock market works what the stock market is all about.

Buying Shares of Stock

When you decide that you want to own stock in a company you must buy shares of stock in that company. Companies that go public allow people to buy shares of their company and therefore these shareholders control the corporation. You cannot buy stock in privately held corporations. Luckily most of the large corporations are publicly held so we can buy from them. The other idea is to find a newer company that is growing very fast to invest in.

Brokers

Once you learn how the stock market works, and you are ready to invest, you need to find a stock broker. A broker is the only person who can make an order to buy or sell stocks. In addition to a stock broker, who researches investments, helps makes goals, and gives investing advice, you can also use a discount broker. A discount broker does not offer advice, does not do research, but instead only makes the transactions that you request. Discount brokers are designed for more advanced traders. Once you put in your order, the brokers discussed above, relay that order to the floor brokers. The floor brokers are responsible for selling and buying stock and they hold a seat on the actual exchange. Once they complete a transaction, the floor broker then reports his trades through computers and then reports back to his firm that he either bought or sold the particular stock.

Types of Orders

Three types of stock orders that a broker can place include the market order, the limit order and the stop order. Once you learn how the stock market works, you can then work with a broker to determine the stock orders that work for you. The market order is the most basic and it happens when a customer asks his or her broker to buy or sell a particular stock at the best price available. The limit order takes more research and requires that the broker trade only when the stock is at a certain stock price or better. The stop order is when the broker is told to sell shares if the stock drops too low, and the price must be specified to the broker so they know exactly when to pull out. This order can save a lot of money for the investor when trading stock.

There is a lot of additional information available for each new investor to learn how the stock market works. It is the information age and more information than you could ever imagine is at your fingertips. Continue to read about the stock market game, and make sure that you acquire the knowledge and education needed to trade successfully in the stock market.

What is a Day Trader?

A day trader is a type of trader who buys and sells financial instruments and then closes out of the market all within one trading day. A day trader may trade financial instruments such as stocks, options, currencies, futures, etc., and the trading strategy used by each individual trader will determine how many trades are made each day. This type of trading style is referred to as day trading. There are two types of traders who practice day trading including the retail trader and the institutional trader.

he retail trader either works alone or with a few other traders and typically trades using his or her own capital. These types of traders utilize the services of a stock broker however they are typically online brokers offering direct access to stock trading software platforms. This type of trader requires the use of fast order entry on the stock exchanges and many will opt to go with an online discount broker rather than a full-service broker.

The institutional day trader works for a financial institution and typically has a lot more resources as his or her disposal. Most of the time they have a team that supports them, a large amount of capital, very expensive and high-end trading software, and more leverage than the retail trader. This obviously gives them a small edge over the market especially considering that they have more funds available to them that allows them to trade more frequently on the markets. In the past before the advent of the internet, there were obviously more institutional traders than retail traders, however now popularity of the retail trader is growing more than ever. Anyone can now decide that they want to practice day trading stock online and for a living from the comfort of their own home.

Most day traders are knowledgeable and experienced in the market place, they have a trading strategy and they have adequate capital at their disposal. They understand their risk tolerance, and are very careful that they have the necessary capital to carry out effective intraday trading. There are many different trading strategies that are utilized when day trading stocks one of which is swing trading.

Swing trading is a trading style that aims to make gains in a stock within one to four days and not necessarily within the same trading day. Swing traders rely on short term stock movements and use technical analysis in order to trade stocks quickly. Technical analysis is the study or price trends and patterns. Technical analysts don’t care about the intrinsic value of stocks, like fundamental analysts because they believe that the value is depicted in the price movements. Fundamental analysis is often used by long term investors rather than for short term stock trading.

For those investors interested in becoming a day trader, continue to do research on the various strategies used by investors. There are many techniques available and the trick is to find an investing strategy that works for you. Join online forums, find a stock trading mentor, and practice as much as possible through online paper trading before attempting to trade with real money.

Market Direction

There are assumptions that can be made about market activity. These assumptions are based upon the reoccurring trading phenomenons that occur year after year. As mentioned in the last newsletter, this is the definition of seasonality. The benefit of knowing the different factors coming from seasonality is that it creates another element for being in the right positions at the right time. Do seasonality factors work consistently from one year to the next? Not always, but they occur often enough to have them as a recognized factor each year.

A simple assumption is that investor activity starts picking back up after the first of September. The kids are back in school. Everybody is back from vacation. The weather starts turning chilly. Investors are back at their desks ready to trade. There is a very simple method for recognizing whether the common price occurrences are occurring this year like they did in the past. Candlestick signals become a valuable tool for recognizing whether a seasonal pattern is about to occur again.

That philosophy can be put into the trend analysis of the markets in general. If the Labor Day weekend signals the end of the summer and many traders are coming back to their desks, they usually will have a more distinct investor bias. This is especially true if the market indexes have created some sort of pattern prior to everybody coming back to their desks. Unfortunately, the lack of direction can be further emphasized if the previous market conditions did not show any specific patterns up. The Dow has been trading sideways for the past two months. Today’s trading could have provided the message that new investor sentiment was coming into the market. That would have been illustrated by a strong bullish day, after last week’s attempt of a rally. However, the failure of the morning ‘buying’ merely signals that any new trading coming into the market was also cognizant of the previous flat trading.

DOW

The continuation of a sideways mode is still very likely based upon the lack of direction today. Crude oil prices were trading Dow below the 200 day moving average. This should have been a great stimulus for the Bulls. When all factors continue to demonstrate the lack of enthusiasm for either bullish or bearish movement in the market, it has to be assumed that what ever ‘has been’ working or not working should still continue. The past few weeks has revealed strength coming into the financial stocks. Simple logic dictates that when many stocks in the same sector are moving well, that is usually an indication that the big money likes the sector as a whole. This may seem like a very simplistic statement but it becomes much more evident through the graphic illustrations of candlestick signals.

CNB

RF

Usually the first day after the Labor Day weekend is the beginning of the more heavily traded part of the year. There will usually be a signal as to what investors are feeling coming back from their summer vacations. Today’s trading started out very bullish but faded in the afternoon. This is an indication that the pre-existing sideways mode of the market is still in process. This makes some of the trading techniques very difficult to be profitable. As illustrated earlier in the summer, specific sectors may be bought but then held during the slow grinding market. Earlier in the summer, it was the oils that produced the profits. Currently, the financial stocks are showing strength.

Investing should not be a difficult endeavor. Candlestick signals make bullish and bearish pressure very obvious. Most technical trading methods use indicators that confirm the results of a price move. Candlestick signals provide the evidence that a price move is in the process and about to change direction. This allows for much better entries than those techniques established more for the confirmation that a trend has reversed.

Seasonality Presentation

Thursday September 11, Best Choice software will be presenting the benefits of utilizing the information seasonality conveys. Seasonality, just like candlestick signals, provides information to put the probabilities in the investors favor. Combining seasonality information with candlestick signal confirmation produces a powerful trading platform. Having the knowledge of when specific Stock prices or sectors will usually act the strongest, and then being able to confirm it was candlestick signals, dramatically improves the probabilities of being in the right places at the right time. Mark your calendar! This is information that you can use year after year.

No chat session tonight.

Good investing,

The Candlestick Forum Team

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

Balancing a stock portfolio is done to increase profits and reduce risk in stock investment. A stock portfolio is the collection of stocks that a person owns. In picking stocks for a portfolio an investors seeks diversification of his investments. Diversifying a stock portfolio helps reduce investment risk and increases opportunity to hit an investment home run. Balancing a stock portfolio typically requires that investors purchase stock in several different market sectors. Buying large cap stocks, mid cap stocks, and small cap stocks is also an investment strategy used in balancing a stock portfolio. The investor goes about picking stocks as always but he purposely does not buy stocks in the same industry. It is possible to use a portfolio management service but investors or traders balancing a stock portfolio should know how to do their own fundamental and technical analysis. Scouting out stocks in crisis and buying at the bottom of the price curve is a viable strategy. Using Candlestick analysis to anticipate market trends and market reversal is integral to managing and balancing a stock portfolio.

In balancing a stock portfolio the investor will decide first upon his investment goals. Long term investing will require a different approach from short term investing. Older investors typically pick stocks with less risk but also lower reward potential. Younger investors commonly invest in stocks with more growth potential but which often are more risky. One approach to diversifying a stock portfolio is to balance risk. One or two stocks in a portfolio may be risky growth stocks while others will be dividend stocks which offer low growth potential but long term security. Microsoft in its younger years was a growth stock. Today it offers security and a dividend but little opportunity for the exponential growth of two decades past.

Investing in stocks in several market sectors is a common approach to balancing a stock portfolio. By not putting all eggs in one basket, or market sector in this case, the investor will not be hurt by economic events the affect the whole sector. By purchasing stocks in more than one sector the investor increases his chances for picking a big winner. However, it is not the mere act of picking more than one stock that makes balancing a stock portfolio successful. Use of both fundamental analysis and technical analysis with Candlestick pattern formations allows the investor to search for stocks that have the potential for near term rapid growth as well as long term stability. In balancing a stock portfolio the investor can choose different strategies for each of his stock picks. He can invest in high tech in bio technology, banking to take advantage of a growing economy, or big oil companies if he believes that prices will rise. He should limit the number of stocks in his portfolio to the number that he can comfortably follow with Candlestick charting techniques in order not to buy a stock for which market sentiment promptly changes. Balancing a portfolio is never an excuse for not watching the performance of each and every stock that one owns.

Market Direction

Support and resistance levels are very important factor in investing. They become more important when utilizing candlestick signals. Whereas most technical trading methods require additional confirmation at a support or resistance level, candlestick analysis has the benefit of being able to immediately identify what the investor sentiment is doing at those levels. As seen in the Dow chart, it appeared as if the 50 day moving average was going to act as support. That was more confirmed by witnessing a bullish Harami at that level. As a candlestick investor, that provided additional confirmation that the downtrend had stopped at the 50 day moving average. Upon seeing bullish trading the following day was an immediate sign that moving average was considered a support level.

The uptrend is continuing while demonstrating obvious profit-taking during the trend itself, as well as intraday profit-taking. This makes for a strong and steady uptrend. The continued profit-taking reduces the probabilities of exuberant buying followed by rapid selling. This allows individual stock prices to produce high profit patterns. Whether trading stocks or commodities, support and resistance levels are very important factor for profitable trading.
As can be seen in the May feeder cattle, a long legged Doji right at the T-line showed indecision. A lower open the following day showed the direction of the market was going to move in the direction of how they open it which would also indicate the 50 day moving average might not be acting as a support level anymore. A breach of the 50 day moving average resulted in a profitable trade for the short seller.

DOW

May Feeder Cattle

Each signal and pattern represents hundreds of years of observations. Do not ignore the probabilities of candlestick signals. They are created by nothing more than the force of investor sentiment. Learning how to utilize candlestick signals is not a difficult process. Understanding the 12 major signals, six long signals, and six short signals allows a candlestick investor to evaluate a price move with much greater accuracy and depth than all other technical analysis. This does not necessarily mean other technical trading methods do not have merit. Adding candlestick analysis to those trading methods will greatly enhance their accuracy.

Members training – members, Mark your calendars – May 7 – This will be a FREE three-hour training and review of the 12 major signals. For new members, this is an excellent method for reinforcing your learning process of the major signals. Hearing what occurred in investor sentiment to form the signal at the same time of witnessing what it did as regards of the trend greatly improve your understanding of where and why a trend is doing what it is doing. This becomes extremely valuable analytical information. This information allows investors to master their own investment decisions versus hoping for mediocre results from money managers.

Chat session tonight at 8 PM ET for members.

Good Investing,

The Candlestick Forum Team

Current Website Special 

Trading Breakout Patterns

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

Don’t know anything about stocks, is that what you said? Well, you may be a beginner investing in the stock market, but you probably know a lot more about stocks and the companies behind them than you think. Do you own a computer? You probably know something about the company that makes it based on your experience. Drive a car? Buy your pizzas from a particular chain? Do you use soap? If not, we don’t want to know, but the point of this is clear; the things that you use as a consumer gives you a list of potential companies for investments. A significant part of picking a winning stock is knowing the company and its products where you will be investing.

Picking a winning stock is neither science, brain surgery nor voodoo; picking winning stocks is the result of having a solid stock investing system, sticking to it and using research to identify good investment opportunities. Picking winning stocks simply means that if consumers use and like something, its value will increase and the stock price will rise. The more well-received the product is, the more value it has in the stock market.

On the Alert

Once you realize that picking a winning stock isn’t so intimidating, you can start looking at companies differently. What do I use, what do my kids like, what about my friends? Not everything is a good investment just because everybody uses it, but let’s look at a couple of examples of investment options based on this theory.

Ever heard of Microsoft? This “little” company came out of nowhere to revolutionize the personal computer. Now 95% of PC’s have Microsoft software and the company’s stock is considered a large cap stock and a very good investment. What about Dell Computer? This company was started in a college dorm room and is now the largest manufacturer of personal computers.

Companies such as these didn’t reinvent the wheel; they just got very good at marketing it successfully. There are people that think Windows isn’t the best operating software on the market; there are others that don’t like Dell computers. The key with these companies is their end-user focus and their ability to build an overall brand image that is superior to that of their competitors. These winning stocks became stock sector leaders by correctly focusing their efforts on reaching the customers.

What’s the Secret for the Investor?

The good news is, there is no secret to finding and selecting winning stocks; the bad news is that you need to invest a little effort. Whether you locate a prospect through observation, watching the news, or using a stock screener, you’ve only taken the first step. After this you need to do some research: fundamental analysis of the company, technical analysis of its earnings, and candlestick chart analysis of its stocks. By doing this you should be able to eliminate the companies that appear desirable but don’t have the actual strength to be included in your portfolio.

Conclusion

Many times you will find that you do have a good eye for investments; you will be able to look at a company and have an idea if you will want to include them in your stock portfolio. It is important to remember there is no substitute for doing your homework. Technical and fundamental analysis are the ultimate keys to locating winning stocks. Companies that have winning stocks usually have excellent customer focus. So what products did you use today that you can convert into winning stocks?

One of the most important decisions that an investor will make does not include purchasing an option or future; this decision is choosing a commodity broker. Understanding the dynamics involved in choosing a commodity broker is as much about understanding yourself as it is getting to know the commodity broker. Since commodity trading can be more involved than trading stocks, it is more important to select the right commodity broker than it is to select the right stock broker.

About Commodity Futures and Commodity Brokers

By definition, a commodity market is the location where sellers and buyers are about to conduct business in futures trading. A commodities trading contract is a legally binding agreement that defines an asset, the quantity of that asset to be delivered and the month when it will be delivered. A margin is invested to purchase the contract and the full balance of the contract is only required if the buyer takes delivery. If a commodity contract is purchased, the correct term is to “take delivery” and if a futures contract is sold, it is referred to as “making delivery.”

Commodity future contracts can be written for any type of commodity such as gold, lumber, livestock, currency, and many others. There are several different futures markets that handle specific types of commodities, such as the CME (Chicago Mercantile Exchange), NYBOT (New York Board of Trade), CBOT (Chicago Board of Trade) and others.

Futures exchanges are regulated by strict guidelines, both imposed by the government and internally, and they are require that trading is done “in the pit”, which means that transactions are handled by commodity brokers that are licensed and have paid to be in that position. These commodity brokers serve as the connection between buyers and sellers. Such an important link requires that you select someone that is not only an excellent commodity broker but someone that can identify your investment shortcomings and help to overcome those flaws.

Two Types of Commodity Brokers

There are two types, or levels, of commodity brokers and the level of service they provide is based on the needs of the investor: full service and discount. Each type of commodity broker has advantages and disadvantages that should be considered when making a decision.

Full Service Brokers

This type of commodity broker is usually recommended for new or inexperienced investors, or for those investors who invest in numerous markets. Full service commodity brokers usually provide more information, advice and help to their clients; they often work with investors to create personalized investment strategies. The fees charged by these commodity brokers are generally higher because of the extra level of service they provide. Full service brokers that specialize in trading commodities are also known as Introducing Brokers.

Discount Brokers

This type of commodity broker typically works better for more successful traders. Discount brokers can charge less for the services that they provide since they provide a smaller range of services.

How Do You Find the Right Commodity Broker?

Finding the best commodity broker for you is more a product of knowing your tendencies than anything else. Remember that your ultimate investment philosophy is to make money and your commodity broker’s job is to help you do that. Some of the traits that you should seek in your commodity broker are:

Experience

Chances are if your commodity broker doesn’t have much experience, the results you receive will be spotty at best. You don’t want your commodity broker to learn how to invest at your expense. Not only is experience in general important, but experience in the commodities where you want to trade.

Support

While a commodity broker may tell you about world-class support, what you get after you sign on is what’s important. If you are considering a particular commodity broker, call and ask for an explanation of the difference between bull call spread and a bear put spread; the level of response you get may be a good indication of the support you will receive after you open your commodity account.

Trial Period

Many commodity brokers will give you a free trial to “test drive” their service. Take advantage of this offer and see what happens. Remember that part of sampling something is trying to find out if it is good, no just trying to find out if it’s bad.

Conclusion

Choosing your commodity broker is one of the most important decisions you will make during your investing career. Successful trading can be the result or the victim of a commodity broker decision. Find a reputable broker that meets your needs and compensates for your shortcomings and you are on the road to investment success.

What does it mean if the market is considered to be bearish? In today’s article we explore what a bear market is as opposed to a bull market, as well as what a bear raid and a bear tack are as it relates to the stock market.
A bear market is a market condition in which the prices of stock or other securities are falling. It is also marked by widespread pessimism that causes negative market and investor sentiment that does not change for a while. Stock investors will anticipate more losses in this market as selling of stocks and other securities continues and causes pessimism in the stock market to continue. Analysts consider an entry into a bear market when there is a downturn of 20% or more in multiple market indexes over at least two months.

Bear markets should not be confused with a correction. Corrections are short term trends that occur for less than two months. While the correction may appear bearish in nature, you have not entered a true bear market unless the conditions described above have been met. The market indexes that a bear market can occur in are indexes such as the S&P 500 and the DIJA.

When investing in the stock market it is important to understand what signifies a bullish market. A bull market is characterized by optimism and investor confidence. The expectation of market players is that the strong results will continue.

Where were the terms bear and bull derived from?

The use of the terms bull and bear market where derived from the way animals attack. A bear swipes its paws down whereas a bull thrusts its horns up into the air. These actions act as metaphors for the movement of the markets. These terms can refer not only to the stock market, but also to commodities, forex, bonds and other financial instruments and their markets.

A bear raid is the illegal practice of attempting to push the stock price lower by taking short positions and spreading unfavorable rumors about the target firms, which was a popular practice back in the early 1900’s. A bear tack is a decline in the price of a stock, market sector, market, or investor sentiment that assumes a fall will occur soon. It is a buzz word that refers to bearish movements in the short to medium term.

Continue to expand your knowledge and learn more stock market terminology. There is a lot to learn and the proper education in absolutely necessary to successfully invest in the stock market.

Market Direction

The forces of a trend are not dictated by one candlestick signal. It is an accumulation of information provided by the charts that make for  the accurate analysis of a price trend. Will there be sell signals in an uptrend? Definitely yes. Will there be buy signals in a downtrend? Definitely yes. The importance of analyzing a chart is to recognize the signals and its correlation to the surrounding indicators. Those indicators are made up of other candlestick signals as well as the locations of the moving averages and stochastics.

Will there be selling in an uptrend? Will a stock open lower the next day after a very bullish candlestick signal? The answer is yes and the frequency of these situations is relatively common. As illustrated in the AVII chart, after the price created a Jay hook/cradle type pattern on Friday, it opened much lower on Monday. Should this cause concern? Yes, but only to the point of keeping a closer eye on it during the trading day. Does the lower open mean the sellers are in control? That concern becomes diminished when observing the potential of a Jay hook pattern, the support that seem to sustain itself on the tee line and the stochastics appear to confirm a Jay hook pattern probability.

AVII

Many investors lose a portion of their income to panic selling when the price appears to go against the current trend. Analyze the whole chart picture, not one specific trading day. The probabilities work greatly in your favor when you allow the chart pattern to work itself out. As witnessed in today’s trading, AVII opened lower, used the tee line as support, then experienced more bullish participation. Before bailing out of a position early in the day, ask yourself whether the chart pattern is in a bullish trend, a bearish trend, or in the reversal stages. Making that simple assessment will often keep you in a position, allowing the full trend to work itself out.
That same analysis process can be used when analyzing the markets in general. ‘Selling’ days in an uptrend do not necessarily indicate a change of trend direction. Indecisive candlestick formations forming in a pullback,after an uptrend, has much different connotation than decisive selling days in a pullback. The more you understand and become knowledgeable on what each individual and signal depicts, the more accurately you will be able to assess a price move.

DOW

NASDAQ

This becomes extremely important for the more leveraged a trading program becomes. The option trader needs to have a very clear and concise understanding of price trend movements. Candlestick signals benefit in this area dramatically. Option trading requires very fast and accurate decision-making processes. Candlestick analysis makes trading options a much more viable and disciplined trading program. Entry and exit strategies will become much more fined tuned with the graphic portrayal of investor sentiment. Take advantage of the information provided by each individual signal. Applying that information to the current chart pattern allows an investor to make educated assessments of what the next price move should do.

Chat session tonight at 8 p.m. ET

Good investing,

The Candlestick Forum Team

Commodity volatility can be significantly more than volatility in interest rates, and foreign currency exchange rates. Measured commodity volatility as reported in standard deviations in price variability historically does not settle below 15 percent and often rises to more than fifty percent. As a rule supply and demand are the main factors in commodity volatility. Commodity suppliers and commodities buyers often stockpile in order to maintain price stability but when shortages occur either due to production failure or rising demand commodity prices can go up dramatically. It is commodity volatility that makes trading commodities profitable for traders. Using both fundamental and technical analysis, traders can profit by accurately predicting commodity price changes. Commodity and futures training can help someone beginning commodity futures trading to understand the use of technical analysis tools such as Candlestick chart formations in trading commodities.

It is the volatility of commodities markets that leads producers and buyers to hedging to protect their investment risk. By hedging, an agricultural cooperative, for example, will sell corn futures in order to guarantee a stable price for part of their production. Oil refiners will buy oil futures to guarantee a set price a year or more hence. Hedging commodities is used throughout the commodities markets and supplies the majority of trading volume. Traders who speculate on commodity volatility can thank the major players in the commodities markets for the volume and liquidity that routinely make profitable commodity trading possible. The volatility of some commodities becomes a social issue when the prosperity of a third world country depends upon high prices for commodities such as coffee, bananas, and cocoa. Unfortunately commodity market history shows us that commodity volatility has always been with us and, probably, always will. Only with an effective hedging strategy can producers protect themselves from devastating market fluctuations. However, such strategies often require the kind of political and economic stability that emerging nations sadly lack.

For commodities traders it is the volatility of the commodities markets that makes trading commodities financially attractive. Going back centuries rice traders in the Japan of the Samurai developed a set of tools to take advantage of the ways in which the commodity prices, driven by commodity volatility, repeat themselves. The development of Candlestick chart analysis allowed traders to let the market tell them what the market would do. This is still true today as traders use Candlestick chart patterns to predict price movement and determine where to most profitably trade. Candlestick pattern formations are not only useful in making sense of commodity volatility futures trading but also in helping to make decisions in options trading of commodities futures. The combination of volatility with high volume and high liquidity allows traders to enter and exit trading positions at relatively low cost. A fluid market allows for more accurate technical analysis. However, the trader needs to pay attention to the market as commodity volatility can change a profitable day into a loss when the trader does not stay tuned to his or her trading signals.

Market Direction

Targets! Candlestick analysis allows an investor to dramatically improve profits by analyzing where there is a potential target. More importantly, candlestick signals convey the correct information of what to do once a target is reached. Note in the Dow chart, the trend reversed based upon a simple analysis of candlestick reversal signals occurring in the oversold condition. What becomes a potential target from that level? It could be seen at the 50 day moving average had acted as resistance during mid-June. It could also be seen that the 200 day moving average at acted as resistance at the end of May and the beginning of June. Putting on long positions during the first week of July was done with the idea the Dow could move back to the 50 or the 200 day moving average. That analysis at least provided enough room to make some profits.

DOW

Most investors have a hard time taking profits. They either get out too early, in fear of giving back their profits, or they get out too late because they were afraid that if they sold, the prices would continue higher without them. Candlestick analysis  eliminates those fears. As can be seen in the Dow chart, the 50 day moving average did not act as resistance. The 200 day moving average is showing resistance. What should be done from this level? Without the use of candlestick rules, that becomes a hit or miss decision by most investors. The candlestick investor has the advantage of knowing what each signal is representing. Wednesday’s trading showed a Doji right at the 200 day moving average. Weaker trading on Thursday would indicate profit-taking. The profit-taking occurred but the Bulls took the price right back up to the top of the trading range. Thursday’s trading bounced up off the 50 day moving average. This would be an indication the 50 may now be acting as support. The late afternoon buying formed a Dragonfly Doji/Hanging Man signal. Stochastics are in the overbought condition.

Does knowing this information help project where the market is going to move from here? No, but it does allow the investor to take action based upon what it does do from here. Weaker premarket futures tomorrow would make the Hanging Man signal, forming at the 200 day moving average, the predominant signal. That would indicate that after three days of trying to push through the 200 day moving average, the Bears were starting to take control again. On the other hand, if they open the market positive tomorrow, after Thursday’s profit-taking day, they would be opening positive after a Doji day. This indicates they will be moving the trend in the direction of how they open it after a Doji. This is not rocket science analysis. This is merely common sense interpretation of what is provided by the signals. The Japanese Rice traders did not make this analysis difficult. They made it very easy to understand and profitable.
It is painful to miss a strong price move. Fortunately, being able to analyze what a price pattern should do allows for grabbing some of the profits during that price move. Note how the September wheat chart showed a very strong price move after a Bullish Engulfing signal. Most investors would whine and complain that they did not partake in that price move. However, knowing that a strong price move has the potential of forming a J-hook pattern allows an investor to still make profits.

Wheat Sept

Note how the price move above the 200 a moving average, formed a Bearish Harami, followed by a Doji on the 200 day moving average. This was a setup for a potential J. hook pattern. Knowing that, an investor could take advantage of the next leg up. Profitable trading is not getting every big price move. Profitable trading involves knowing what to do at the appropriate times of a price trend.

Take the opportunity to learn candlestick analysis from A-Z. The methodical teaching method produced by Stephen Bigalow allows an investor to gain valuable insights into their own nature. This year, the Candlestick Forum private training session is being conducted on Keuka Lake in upstate New York. You will gain valuable knowledge on how to trade/invest successfully. At the same time, you will have the opportunity to enjoy the lake surroundings of one of the nicest lakes in the Northeast. Please take the time to investigate the information about this private training session. It may save you thousands upon thousands of dollars of needless market trading mistakes. You will gain a new perspective on how to take profits consistently out of the market.

Click here for private training session information.

Chat session tonight 8 PM ET

Good Investing,

The Candlestick Forum Team

Current Website Specials

Commodity Training

Profitable Candlestick Trading

Options Training Webinar 

Click here for details

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

Day trading futures is a great way to make money however you must ensure that you are thoroughly educated about day trading before you begin. There are advantages and disadvantages to day trading futures which are explained in this article. Read this article carefully and decide if day trading this market is for you.

There are advantages to day trading in the futures market. Since there are no positions held overnight, traders can sleep better. There are no open positions to worry about so there will not be any unexpected major losses to wake up to. This is worth noting because very often futures will open at very different prices than they closed at the day before.

Another advantage to day trading in this market is that you will learn a lot quicker. If you practice futures trading once a week, you are making fewer trades. So theoretically, the more trades you place, the more you learn, and the more experience you gain trading futures.

There are also disadvantages to trading futures daily. For instance, commissions can quickly add up per transaction fees. Traders have to be sure that they pay more out in commission than they are making. If this is the case, then they must take another look at their futures trading plan, as well as their trading strategies and make the necessary changes. Additionally, day traders must be extremely disciplined in their approach. They must not only create a trading plan, but they must stick to it. This means they must follow their entry and exit strategies and they must have their emotions in check. Greed and fear are emotions that many day traders come across at some point, if not every day in their trading career, so it is imperative that they know how to deal with these emotions. The most successful traders have a clear understanding of the psychology of trading and those concepts associated with it.

A lot of the time new futures traders enter the market unprepared and too casually. These traders either quickly lose their money to the markets, or they quickly realize that they need to further their trading education before they continue.

There is a lot more to day trading in the futures markets. Continue to read about futures and determine if the market suits you. There is a lot of information available online, as well as online courses that you can take to help.

Market Direction

Candlestick signals have powerful implications. Having somebody else tell you this may not provide the ‘convincing’ many people require. Fortunately, the visual aspects of candlestick signals allows investors to quickly prove to themselves that the signals and patterns have compelling results. Try it yourself. Analyze whether there was signals at the reversals of a trend, both the top and the bottom on past chart activity. Visual analysis will not take very long. Did a bottom occur when the stochastics were in the oversold condition? Were there candlestick  buy signals at the bottom? The same analysis can be done at each peak.

Note how the Dow shows clear evidence of candlestick reversal signals at the tops and bottoms. In this case, the 50 day moving average and a trend channel add additional confirmation at the bottoms. Sell signals, when stochastics are in the overbought conditions, hitting the top of a trend channel, produce good visual evidence the uptrend is over in a downtrend will start.

DOW

Notice the candlestick signals that have occurred in the past few trading days. A Bullish Harami at the end of a large bearish candle when stochastics were just geting into the oversold condition. This was the first piece of evidence that the  selling may have stopped. The Bullish Harami was followed by a Hammer signal. More evidence the bears could not push the market down through the 50 day moving average. Yesterday’s trade confirmed the Bulls had stepped in. However, by the end of the day, the Dow had given back most of its gains, producing an Inverted Hammer signal. This made today’s trading strategy very easy. Bullish confirmation of an Inverted Hammer signal is a positive open. Failure of an up trend would have been witnessing bearish sentiment on the open.
Upon seeing the premarket futures showing strength, confirming the Inverted Hammer signal, allowed for the immediate purchase of stock positions. Knowing what should occur after a candlestick signal permits an investor to act immediately, without hesitation. This is the advantage of understanding the psychology behind the formation of each signal and pattern.

BCRX

Chat session tonight at 8 p.m. ET – We will discuss how to utilize the information built into inverted hammer signals, the confirmation and the stop loss aspects. Also, we will identify which stocks might have the best potential for the next trend move.

Good investing,

The Candlestick Forum Team

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