Stock market crashes – forewarned by candlestick signals.

Stock market crashes are the major fear of most investors. The “what if” scenario. What if I am fully invested and the stock market crashes. Fortunately that fear can be eliminated with candlestick signals. Most investors have the fear of stock market crashes such as we saw in 1929. There have been some substantial stock market crashes in the past 20 years. These stock market crashes had a different result. The general public were the ones trying to get in at the bottoms while the institutional investors were bailing out, trying to save their investment record.

Stock market crashes do not necessarily need to be feared. Using candlesticks signals, all stock market crashes are foretold by candlestick signals. Stock market crashes do not occur unexpectedly. The stock market crash of 1929, which had its major selling occur in October, actually started selling off in August. The stock market crashes in the past 20 years revealed definite candlestick sell signals prior to the big selling day’s. These stock market crashes should not be feared. A candlestick investor, utilizing the signals, can be prepared by not only being out of long positions, but short positions can be put in place. Having the ability to identify what the market trends are doing will eliminate an investor’s apprehension about a possible market crash.

The major advantage of candlestick signals is that they identify investor sentiment in a market trend. The stock market crashes usually occur at the end of those sustained downtrends. The big selling days do not occur as a surprise. Not only to the candlestick signals reduce the apprehension about being in the stock market, they allow an investor to be positioned in the stock market either long or short to take advantage of the current trends.

Market direction

The over all trends of the markets can be easier to evaluate when using the candlestick signals. As seen in the current Dow chart, the Dow appears to be in an uptrend. The past few weeks have revealed a pullback. The same type of pullback that appeared in late February into early March. The trend channel can easily be seen. The conditions of the stochastics are also easily recognized. Monday, the Dow formed a strong Inverted Hammer signal, with the stochastics getting close to the oversold condition. What should happen to confirm an Inverted Hammer signal with stochastics getting near the oversold condition? A bullish day the next day. This would confirm the signal as well as conforming with the uptrending movements of the Dow.

DOW

The NASDAQ is showing sell signals. A Doji, followed by a Spinning Top, followed by a Bearish Engulfing signal with stochastics starting to curl down reveals a possible pullback in that index. What formations are forming in the NASDAQ? A Fry Pan Bottom! Will the Fry Pan Bottom formation be violated with a few days of a pullback? Definitely not. Also, the stochastics do not reveal any dramatically over bought condition.

NASDAQ

The NASDAQ  pulling  back for the next few days and the Dow picking up strength over the next few days would be the exact opposite of what has occurred in these indexes over the past week or so. This would be more confirmation that the markets are in slow uptrends. As one is selling off, the other is picking up strength. This indicates that there is not any massive selling. The sectors are just rotating.

The portfolio should be predominantly long but anticipate moving from sectors that are topping out into sectors that are picking up strength.

Short term stock trading, also known as day trading, is the practice of buying and selling financial instruments within the same trading day on the stock market. Typically all positions are closed before the market close on each trading day. Short term stock trading allows the investors to buy stock and sell shock throughout the day. The goal is to make a quick profit within seconds that day traders own stock, through the rising or falling of the value of stock. Day trading can be risky business and is only intended for the educated investor. There are two techniques that day traders use to make a profit including leveraging and selling short.

Leveraging, when short term stock trading, is the process of borrowing money to make money without changing or increasing the performance of the trade. Leveraging is very risky investing strategy because if the investment goes against the investor, the loss is much greater. The profit is much greater as well! Leveraging increase both gains and losses so the investor must be prepared to pay back not only what he lost, but also what he borrowed if trade does not go as planned. Leveraging allows for more people to trade stock and requires the investor to open a margin account. Margin is leverage and a margin account is offered by brokerage firms allowing investors to borrow money and to use securities as collateral. Once the margin account is opened, when short term stock trading, the trader can borrow up to 50% of the purchase price of a stock. Margin is a great thing when investments are going up in value, but it can be devastating for new investors who are less experienced.

Short term stock trading, requires the use of stop loss strategies when trading on margin. Stop loss orders provide a measure of protection to the investor. Basically a stop loss order is an order to sell a security at the market price once it hits a predetermined level. Investors are urged to implement simple stop loss strategies to prevent from losing big on a trade. Some may not necessarily implement stop loss in their trading system, but they may choose to set a mental stop loss for themselves. This is okay to do; however, a lot of investors have a problem with actually carrying out the stop loss if it not set up in their system. Investors who do not want to implement a stop loss into their trading system must be disciplined enough to actually follow through with the stop loss they have mentally prepared for.

Another method used in short term stock trading is selling short. Day traders that sell short actually borrow a security and then sell it in attempts to pay back the loan. They pay back the loan by buying cheaper shares later on. Day trading is a very exciting way to make money investing in stock however it is also very risky business. For those interested in this type of investing, it is very important that you know exactly what you are doing before you begin to day trade.

Good investing,

The Candlestick Forum Team

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Over the past year and a half, the most volatile commodity traded has been oil. After rising to record highs at over $75 a barrel in 2006, the prices dropped below $50 and then began rising again. While such volatility can be dangerous for the investor, it also presents great opportunities for profit to the successful traders that know what to do and where to look when using signals for day trading oil.

It has been stated that 80% of all futures trades end in failure. The question behind this statistic is “why?” Commodities can be difficult to predict and there is a lot of volatility but what is the underlying reason for so much failure? Commodities trading require the proficient use of a good trading and investing system which can point out signals for day trading oil and many people simply don’t use a good system.

This is where the Japanese Candlesticks method enters the picture. Colder than normal weather….warmer than normal weather. Calm in the Middle East….war in the Middle East. These are the types of things that can drive oil prices drastically up or down. It is crucial to correctly interpret signals for day trading oil. It takes discipline to study the charts and perform technical analysis, and Japanese Candlestick signals are at the heart of the perfect search.
Technical analysis is the assumption that current prices are representative of the sum of all known information concerning the markets. The price of a stock not only reflects clinical facts, but it also represents the emotions and the “feelings” of a particular moment. Profit-taking, skepticism, greed and fear are all tangible factors when dealing with the markets because the markets can move based on emotions as well as facts. An expert in the market tries to remove the emotion factor from all decisions and base decisions on the candlestick chart formations, assuming that the prices reflect all variables.

The question at this juncture is how to use candlestick signals for day trading oil futures. A simple bar chart can follow the open and close of a particular type of oil; what it can not do is help you to see the signals for day trading oil. The main factors of candlestick chart patterns can be applied to align the elements of successful option trades; signals, stochastics, market direction, etc. A few simple processes can be employed that will exploit the same factors that make other option investors lose money to put money into your pocket.

These factors are:

Direction

As you learn candlestick signals for day trading oil, you will notice that you are more accurately able to assess the trends in the market. When all the essential indicators line up for a successful option trade, the signal showing strong commodity trading, the stochastics below the 20 line, further confirmed by a bounce off a trend line, and overall market direction, etc., the best option trading system can be executed. If you are able to successfully read the absolute bottom signals, your signals for day trading oil just got a lot more profitable!

Magnitude

Understanding the signals for day trading oil also means being able to understand the potential magnitude of the price move. The status of the stochastics should indicate how long the upside move can potentially be maintained. The analysis of the upside is going to dictate the ultimate trade strategy. And this has to incorporate the final signal?.time.

Time

Time is a misunderstood component in the signals for day trading oil. You might be saying to yourself, ?I?m going to move today?s purchases tomorrow, how could time even be a factor?? Signals for day trading oil will focus less on the time between buying and selling and focus more on where you are in a particular movement. Remember, you want to buy at the absolute bottom and sell at the top of a cycle; anything else and you?re taking money from your own pocket. Because of this, candlestick signals are still a strong ally to day trading. By understanding the patterns, signals for day trading oil can be much more profitable as you find the extremes in a movement. Candlestick option trading programs have been developed to make “high” risk trading into a very low risk procedure.

When it comes to investing in the stock market, one measurement stands out above the rest; how much did the investor earn at the bottom line. Traders use many tools to help determine their stock trading plan, but the best tool for assisting an investor is basic stock fundamental analysis. Stock fundamental analysis is the process of examining businesses at the most essential levels. This method of review evaluates key risk reward ratios of a business to attempt to determine the stability and financial health of a company and to determine the value of its stock.

Many investors use stock fundamental analysis alone for their determination of future stock purchases. While stock fundamental analysis is a powerful practice, it should be an important part of an investor’s overall stock trading plan. This plan should include stop loss strategies, as well as a stock trading system such as Japanese Candlesticks. Such a trading system, coupled with basic fundamental analysis can provide the trader with a valuable insight into the murky waters of the stock market.

Basic fundamental analysis helps an investor to know how much money a company earns. This is the ultimate measurement of its success, both currently and in the future. Earnings can be difficult to calculate, but that is to be expected when dealing with the stock market. When a company is growing and profitable, its stock generally increases; earnings create higher stock prices and in some cases, regular dividends and successful trading. Lower stock value can have the opposite effect, making the market bearish on the stock. By evaluating a stock with stock fundamental analysis, it is possible to look for basic candlestick chart formations and determine the direction of a stock. When the direction is known, an investor can implement stock market strategies which reflect either a bullish or bearish approach.

In addition to understanding a company’s earnings, there are a number of ratios involved in basic fundamental analysis that help the investors to evaluate the worth of a company’s stock. These ratios focus on earnings, growth and value in the market. Evaluating these dynamics together can provide unique reflections on the value of the company. When a company can be identified by basic fundamental analysis, its stock can be tracked using candlestick chart analysis. With this information, an investor can move confidently to make a trade. 
Stock fundamental analysis is a key component in any trading plan. Investors can find patterns and trends in the stock price history and use this information to help make decisions about a company’s value and the value of its stock. Incorporating a stock trading system such as Japanese Candlesticks teams up with stock fundamental analysis to form a powerful team in evaluating stock.

The bottom line is the ultimate measure of the success of an investor. Using basic fundamental and technical analysis, a stock trading plan and a stock investing system, an investor increases the possibility of moving from the hope of being a good trader to the reality of becoming a highly successful trader.

The legal way of scalping commodity profits is to look for many small gains during the trading day. In scalping commodity profits traders can make money in either a moving or a quiet commodity market. Simply using the bid/ask spread the trader can make money always buying at the bid price and selling at the ask price in a quiet market. This is also known as spread trading. When the market moves the trader will buy and sell taking small profits throughout the day. Because the market will fluctuate as it moves the scalper will also take losses. Because there is a cost of trading, commissions and fees, it is important for the trader to keep close track of his or her trades to make sure that the overhead of scalping commodity profits does not eat up all profits. A good way to understand scalping in the commodities markets or elsewhere is to take commodity and futures training. The ability to predict market movement with technical analysis tools such as Candlestick chart analysis and Candlestick trading tactics will help the trader in scalping for profits.

The three basic tenets of scalping commodity profits or scalping in any market are these. The shorter the time you are in the market the less your risk. Small moves in the market are more common than larger ones. The nature of the market is that smaller moves are tied to trading whereas larger moves require a change in market fundamentals. Whether the trader is essentially doing arbitrage on small gaps created by the bid ask spread or taking advantage of the irregularity of a market advance, he or she will rely upon technical analysis to make profits. This is not a world of fundamental analysis of commodity futures or commodity options. It is the very attentive watching of the commodities market and the taking of small profits when they are available. This is a very business like approach to trading that can make money every day.

Something important to remember is that the other meaning of scalping is illegal market manipulation. This kind of scalping is when an broker or other insider purchases a security for his or her own account and then promptly recommends it for long term investment. When the equity price goes up the scalper immediately sells and pockets the profit. This is illegal and, when found out, is prosecuted by the SEC. On the contrary scalping by taking advantage of changes in market liquidity, market direction, and progressively widening bid ask prices as the market will allow is perfectly legal and potentially very profitable. The use of Candlestick basics to help determine the direction of individual commodities is essential in the process of scalping commodity profits.

A nice aspect in trading commodities by scalping is that the trader does not have to wait for a major movement in the market as might be the case with trading options in the commodity market or stock market. As it is just a possible to scalp for profits in a quiet market as a moving market the trader can take a lunch break without fearing that he or she will miss a great commodity market opportunity. A degree of market inefficiency is embedded in the bid ask spread. For many traders with the patience and diligence required, this is enough to profit nicely in scalping commodity profits. Trading mini waves in the market that last less than a minute the commodity trader can take advantage of brief commodity prices changes before they disappear. By staying in the market ever so briefly this sort of trading, of course, requires a familiarity with commodity trading software to keep up the minute if not the second.

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Market Direction

Why were we able to make big profits this past week on the short side? Having the knowledge of how price patterns perform! The Dow has formed a Blue Ice Failure pattern. This pattern was named by Dave Elliott of Wall Street teachers. ( We will try to get him back on a Thursday night chat very soon ) a blue ice failure pattern has very simple parameters. Once a price comes down through a potential support level, the price will try to come back up through that support level. If it fails, it will go down to the next support level. This was evident when we saw a Bearish Harami in the Dow, forming at the 50 day moving average. That became an indicator to start shorting with confidence.

Many investors have problems with when to enter a trade as well as when to take profits. If the analysis of a pattern can easily project the next viable target, that should be a place to take profits. That does not necessarily mean completely closing out a portfolio but at least taking part of the positions off at those levels. Why is that? If a pattern has a projected target, such as witnessed in the Blue Ice Failure of the Dow, that means the target has been hit enough times in the past to make it a very high probability level to be watched. If that is the case, once that target is reached, there will be the probabilities of people taking profits. Take some profits yourself. However, be aware of what type of signal is forming at that support level. As demonstrated in today’s trading, the Dow did not slow down at the 200 day moving average, it went right through. This makes the remaining portfolio still short but now looking for the next potential reversal area.

DOW

If there is not a another identifiable support level, what becomes the next criteria for when to close out short positions? The next candlestick reversal signal. Obviously the price trend will be in the oversold condition. Learning candlestick reversal signal appears, that is an indication the Bulls are starting to step in. This could be a good distance below the previous support level. That now makes that support level, in this case the 200 day moving average, the next upward target. Cover the short positions, go long but then watch to see what happens when everything comes back up to test that most recent support level.

When to take profits and when to honor your stop loss levels. That is a very difficult procedure for most investors. Emotions get intertwined very quickly. Take profits when the probabilities indicate it is time to take profits. We were short July wheat. There were a couple of days of indecisive trading. Today, wheat traded lower in sympathy with the equity markets. It was a good time to take profits when the price got back to the same levels it bottomed out previously.

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July Wheat

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July Wheat 5 min. Chart

It is the ability to visually recognize what is occurring at previous price points that greatly eliminates the emotions out of trading. This is especially true when trading commodities. Once you have learned how to master your emotions trading commodities, you can trade any market after that. Candlestick signals and patterns have simple trading rules. Those rules were established to take advantage of high probability situations. Once you can utilize the information built into candlestick signals, you would then be able to trade without fear and panic.

Commodity traders – do not miss this weekend’s Candlestick Forum Commodity Trading training – you will discover how to take the fear of volatile trading entities out of your thought process. Understanding how commodities move not only becomes an asset for trading them successfully, you also gain valuable evaluation information when trading commodity-based stocks. This is not rocket science! This is commonsense investment practices applied to trading entities that move with much more profitability with the same human emotions pushing the prices around. Please take time to look at trading commodities. It is knowledge that you will utilize for all aspects of investing successfully. Click here for more information.

Chat session tonight at 8 PM ET

The Candlestick Forum Team

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2-Day-Commodity Training

Webinar May 22-23, 2010

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Oftentimes the best stock advice is very simple. The best stock advice should lead to the most stock portfolio profits, the best stock trading profits, and the best containment of investment risk . Best stock advice should not be confused with stock tips . The best stock advice has to do with learning how to trade stocks , how to pick stocks, and how to manage investments. The old saying is that if I give you a fish you will eat for the day and if I teach you how to fish you will eat for lifetime. Therefore the best stock advice is to learn to search for and analyze stocks for both long term investing and for day trading . It is to learn how to manage investment capital and it is to learn how to spot investment opportunity in the continual fluctuation of stock prices . Learning the use of Candlestick analysis gives long term investors and traders an effective tool for anticipating changes in market sentiment and subsequent stock price changes.

Although dividend stocks can provide an investor with a steady return on investment it is stock appreciation that provides the lionfs share of stock profits. The best stock advice is, thus, to learn how to anticipate stock price appreciation. Long term investors look for two basics, a margin of safety and intrinsic stock value . A margin of safety in the form of unencumbered hard assets and cash in hand provides a company, and its stock price, protection in times of economic difficulty and stock market crashes . Intrinsic stock value is the forward looking income stream of a company and is the key to expected stock price appreciation. The best stock advice for a long term investor is to pick stocks with both strong growth prospects and sufficient cash or hard assets to help them weather an occasional economic downturn. That leaves the issue of when to buy stock and when to sell stock . With the use of Candlestick pattern formations the investor as well as the trader can pick and choose when to most profitably enter and exit a stock position.

The best stock advice for traders is to learn how to choose promising stocks to trade and to learn the skillful use of technical analysis tools such as Candlestick charts . While investors seek to profit from stocks with long term growth potential, stock traders take advantage of the fact that stock prices rise and fall. Traders profit from selling short, trading options, and buying at the bottom of price curves as well as selling at the top during a market reversal . With the skillful use of technical analysis with Candlestick patterns traders commonly profit during periods of confusion and market volatility . With Candlestick signals as a guide, traders avoid the pitfalls caused by the psychology of trading . They can trade profitably in up and down markets and sometimes the best stock advice is to sit out trades when the market makes no sense. It is a little like the movie, War Games, in which the young man teaches a computer that there are no long term winners in tic tac toe. The use of Candlestick signals gives the trader as well as the long term investor a rational means of trading the stock market based upon market history and the fact that trading patterns repeat themselves. Typically the best stock advice is simply to follow Candlestick signals and trade accordingly.

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Market Direction

Cut your losses short and let your profits run! That is the Sage advice that all professional money managers tell their clients. Unfortunately there is one major flaw in that advice. They never tell you “how” to cut your losses short and let your profits run. Fortunately, candlestick analysis provides very simple stoploss processes that show when to get out of a bad trade situation and when to continue to hold. Today’s market action is a prime example of entering when the probabilities were extremely good that the Bulls had taken over but then the bullish signal was negated, indicating any weakness in long positions should warrant closing long positions.

Candlestick analysis works for all trading entities. Join us tonight as Brad Powell will demonstrate how his Right Angle Trading techniques produces huge trading advantages when trading ETF’s.

Chat session tonight is at 8 PM ET.

The Candlestick Forum Team

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Stock futures can be purchased or sold for single stocks or for exchange traded funds based upon stock indexes. Stock futures are traded on margin. A futures contract on individual stocks, like options contracts, is for 100 shares of the underlying equity. Because stock futures are traded on margin, using a margin account, they offer the trader a degree of leverage. Unlike trading options the buyer of stock futures is obligated to buy on the delivery date or execute the opposite trade in order to exit the contract.

Unlike buying calls or buying puts in options trading the trader is not protected against downside risk. Unlike buying options there is no premium paid by the buyer. The value of an options contract starts at zero the moment the contract is made. However, as stock prices move and both fundamental and technical analysis reveal new pricing possibilities the contract gains, or loses value, depending upon if one is buying or selling. As with options trading using Candlestick pattern formations as a guide traders can anticipate stock price movement and profit from buying or selling stock futures.

Single stock futures are not heavily traded in the United States. The largest market for single stock futures is, in fact, in South Africa. Other markets for stock futures include the UK, Spain, and India. Total daily trading is typically less than a million contracts a day. Stock futures exchanges typically act as a clearing house and cover the counterparty risk associated with futures trading. In the United States OneChicago is a market for single stock futures. Unlike single stock futures exchange traded funds futures trade in the millions of contracts per day. The analysis for this type of futures trading commonly leans much more toward technical analysis that that for individual stocks. Using Candlestick analysis a trader can follow pricing for an ETF and profit from recognizing Candlestick pattern formations and trading effectively.

There are somewhat complicated formulas that (theoretically) price stock futures. Despite their apparent complexity they simply put in mathematical terms what is know about stock pricing and what is assumed. The problem for the trader is that much of what is in the formulas is largely fundamental information, such as whether or not a dividend is about to be paid on a stock. Thus, to profit from stock futures, the trader needs to get a glimpse of the future. He does this with technical analysis tools such as Candlestick chart analysis.

By following stock price the trader can commonly anticipate price movement and have a clearer view or what the stock price will be at the time the futures contract expires and the contract must be satisfied. Also, market psychology works as much on futures as on stocks themselves. To the extent that futures seem to act independently of the stocks themselves Candlestick patterns will commonly be a better guide than any “fundamental” information. Using the fact that market price patterns repeat themselves in futures trading as well as trading stocks traders can profit buying and selling stock futures.

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Market Direction: The slow steady upward trend of the market may be the result of investors waiting to see what political ramifications will be, now that the election is over. It was reported last week on CNBC news that the Dow had not had a trading stretch where it didn’t have a 100 point price move during the day since 1996. This has allowed for the maintaining of positions that continue stay above the tee line. It has also allowed for the liquidation of positions that have closed below the tee line. Keeping this money in cash will be advantageous for the first day/week of the new year.

There should be some tremendous opportunities after the first of the year. Keep in mind, the holidays are utilized by money managers just as most people use them for themselves. It is a time to reflect on what went right and what went wrong during the past year. It also gives some quiet time to evaluate where the strength in the markets will be in the coming year. It is not unusual to see which sectors are considered to be the ones with the strongest potential on the open the first trading day of a new year. This is where the big money is going to be anticipating the high profit returns. Obviously, most of us do not have the time, smarts, or access to research to make a sophisticated analysis of which sectors should perform well during the coming year. This usually involves analyzing world market and political situations. It also involves a staff of people researching specific industries and countries. Fortunately, the benefit of candlestick analysis is the quick and easy assessment of what the big-money consensus will be.

The longer the Dow and NASDAQ maintains a steady uptrend, the higher the probabilities investor sentiment will maintain a positive outlook. This is important for anticipating the direction of the market during the first two weeks of the new year. It becomes important to be able to analyze pre-market conditions during that first day of trading. Huge profits will be made during the first few weeks of the coming year. It is knowing how to anticipate which sectors will be forming the best patterns. Members should be prepared for a online analysis starting 30 min. before the market opens on January 3. Being in the right sectors on the open can easily produce 25% to 50% profits over a two-week period.

2010 was a profitable year. As usual, although the markets created some stagnant movements during the year, the visual aspects of candlestick signals allowed investors to maintain positions in the strong sectors. Taking advantage of the common sense elements found in candlestick analysis keeps an investor on the front edge of price movements. This coming year, the Candlestick Forum will be concentrating on everybody’s learning process. The mini training sessions are for the purpose of educating investors in all aspects of successful investing strategies, using candlestick analysis. January 4, 2011 will be a mini training on options. This session will expose investors not fully educated on how the option market works. It will also clarify the disadvantages of option trading and how to circumvent those disadvantages with candlestick analysis. If you have been interested or attempting to learn how to trade options successfully, do not miss this training. It will at least mentally prepare you for what you should be expecting for successful option trading, no matter which trading method you plan to use.

Please join us next Tuesday. It should be well worth your while.

There will not be a chat session tonight. Tomorrow’s trading should be fairly lethargic.

Good Investing,

The Candlestick Forum Team

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