Since stocks have a greater tendency to retrace, rather than move in a straight direction, traders use the Fibonacci Indicators as reference points to predict a retracement versus a reversal. Extremely accurate when analyzing chart pattern reversals. Fibonacci indicators also provide an excellent visual map. Combined with Candlestick Signals, the savvy trader can find optimum entry and exit points.

An effective Candlestick trading tactic is to  look for small double bottoms or double tops within these lines to identify trading opportunities. Congestion can form around the 38% and 62% levels, so watching for Candlestick Breakout signals at these levels can forewarn of significant price moves. Just like moving averages, the Fibonacci indicators work like price magnets to old highs or lows. For an even greater degree of accuracy they should be combined with the major japanese candlestick patterns.

Most common numbers used in technical analysis for drawing Fibonacci lines are 62% (61.8% rounded up), 38% and 50%. For existing trends, the 38% level should be the minimum retracement but can go down as low as the 62% level. As price retraces, support and resistance occurs at a high rate near the Fibonacci levels. In an existing rising trend, the retracement lines descend from 100% to 0%. In an existing downtrend, the retracement lines ascend from 0% to 100%.

Technical Analysts use these Fibonacci Indicators  (Fib-lines) to predict Price Targets and Support/Resistance Targets. To accurately draw the lines to identify these patterns you begin drawing from the lowest point (which equals your 0 percent line) to the highest point (which equals your 100% line). The 38%, 50%, and 62% lines will provide your reference point for targets.

While nothing can predict the future with 100% accuracy, adding these to your technical analysis tools  greatly enhances your ability to be in profitable trades. Adding the candlestick signals provide a huge advantage for being able to immediately recognize what is going on in investor sentiment at these levels. Don’t force the picture; should you come across a chart where the Fib-lines conflict with your other technical indicators (such as moving averages), move on to another chart. There will be plenty of charts providing greater confirmation when all your technical indicators are in agreement. (More about our newly released 30-minute training tutorial Fibonacci Trading Techniques)

Most investors do not have a stock market trading system. Unfortunately, that is usually a natural evolution of learning how to invest. We become educated, we develop a career, we earn money and then we have to figure out how to invest our money. There is no educational institution that will show us how to invest or even set up a stock market trading system. We usually learn by the seat of our pants. But the age of computer is changing all that. The Internet has provided the information for investors to make their own investment decisions. This is much different than how investment information was disseminated a mere decade ago. With the development of computer software, the dynamics of the investment arena has changed dramatically. An investor can develop their own stock market trading system. They have all the information that is available to every investment professional in the world right at their fingertips. Candlestick charts provide this information at a quick glance.

Candlestick analysis is just now coming into its own because of computers. Here is a stock market trading system, although a few centuries old, that is benefiting from today’s computer technology. It can be assumed that the correct trade ratio for candlesticks has to be relatively good or we would not be witnessing them today. However, they were developed without the benefit of a multitude of investment parameters that can be found on computer systems today. In the following months you will be exposed to some of the techniques from modern-day computer research that when applied to candlestick signals enhances the probabilities of being in the correct trade all that much more. This is the best of both worlds. Taking a stock market trading system that has worked for centuries and being able to tweak it constantly with improvements that are showing up every day through computer research. The Doji, forming at the 50 day moving average, is one of those patterns that has been found to greatly improve returns.

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Market Direction

As mentioned in last week’s newsletter, the Long-legged Doji, forming right on the 50 day moving average, would and did become the pivotal point for the next major move in the market. The Doji forming a 50 day moving average as an important alert for a substantial move in a current trend. ( Further explanation can be seen later in this newsletter ). Friday was a bullish day. The NASDAQ had a good strong bullish Candlestick signal, a bullish day that came more than halfway up into the last large dark candle of Wednesday, after a gap down inverted hammer. The Dow had the same strong reaction. The Dow did have a good bullish day, a Bullish Harami. The question then becomes whether this is a full-fledged reversal or merely a bounce back up. However, even a bounce should be substantial enough to make some profits on the long side. The 50 day moving average now becomes a resistance target.

Common sense dictates that you try to invest in the direction of the trend on the market. Why try to swim against the current? However, keep in mind that the candlestick signals are the cumulative knowledge of everybody that was buying and selling that day in whatever trading entity or index. That point becomes quite clear in our recommendation of SUPG this week. During a time when the markets were selling off dramatically, the chart of SUPR revealed an extremely strong Candlestick buy signal. The Doji, followed by a gap-up and a strong bullish day, illustrates that the buying was coming into this stock in spite of the fact of the markets were being sold off heavily. The advantage of the candlestick signals is that it tells you exactly what the investors are doing. It can be assumed that something had to motivate the buyers to buy aggressively in SUPR when they knew the rest the market was being sold.

The stock market has become the scene for those individuals who have learned to build a strong portfolio with online stock trading.  Most investors keep an eye out for stock that is rising however, some experienced traders are spending their time finding stock that is on the brink of dropping. This type of stock trading is known as selling short.
There are a couple of reasons that an investor would want to sell a stock short when online stock trading. One reason is that a stock will drop in price about three times faster than it took to increase in price by the same amount, meaning faster profits. Another reason is that many stocks run in cycles due to various economic and seasonal conditions. This means that traders can take advantage of all the moves a stock has at hand when online stock trading.

Selling Short When Online Stock Trading

Selling a stock short is the exact opposite as buying and holding stock when investing in stock. Instead of the more traditional method of buying stocks and profiting from the share price gaining in value, it is actually profiting from a stock falling in price. When one sells short they expect the share price to lose value and profit from the decline in price when online stock trading. Please note that when you sell a stock short, you are borrowing the shares from your broker. If after reading this, you decide to begin trading stocks short, you must first open a margin account.

Tips for Online Stock Trading

When new to online stock trading, start low with lots of shares such as 100, and avoid jumping in with orders for 1000+. Mentally, at first, a trade with 100 shares going against you is easier to take than one with 1000 when trading stocks.

When online stock trading, you must know where your exit points in the trade will be, including your stop loss value. It is important to take losses and not let a losing trade run away while you hope it will turn in your favor later on. It’s very possible that it may not.

Stock market tips also include looking at the previous day’s trading range by subtracting the high of the day from the low of the day. Stock chart patterns with large ranges will give more opportunities for larger moves for you to capture compared to stocks which only fluctuate by a few cents each day.

When online stock trading, if the lead stochastic crosses below the 80 band consider this a sell signal, and if it crosses above 20, then it would be a possible buy signal.

For futures analysis, if the futures are in an uptrend, but your stock is moving down this could signal a possible explosive move down when the futures start to go back down again. The same applies in reverse for moves up when online stock trading.

If trading NASDAQ stocks, be aware of what the futures are doing. Stocks usually move with the futures. When online stock trading, it is typically a bad idea to short a stock if the futures are in a strong uptrend and vice versa for going long.

One of the most important steps necessary to begin forex trading is determining what type of forex system you will use. There are multiple trading systems available so you must find one that works for you. When looking you must conduct extensive research and take your time to find one that best suits you. This step in the process is imperative to your success in trading forex. This article provides a few pointers for choosing a system and it discusses the new innovative technology available for forex traders, known as automatic forex trading.

When deciding which system you will use to trade forex, you must be sure that you don’t fall in to the gadget trap. Bells and whistles may draw you in, but fancy systems are really unnecessary. Most forex traders find that the simpler the system the better. The forex system you choose must identify possible profits, should cut your losses and should assist you or enable you to conduct fx trading through using the breakout method.

Automatic forex system trading is said to be the “revolutionary trading mechanism that is going to change the conventional approach towards currency trading.”  This system does not require the manual management by a person to handle the accounts when trading currency, but instead is managed by a machine that manages the buying and selling actions of the trader. It is projected that these systems can assist with increasing the return on investment, and will enable the forex trader to trade with multiple systems. It is said it will also allow the trader to trade for a short or long-term through the use of different trade indicators. Basically sine you can trade in the forex markets 24-hours a day, it is said that this system can potentially make you money while you sleep.

There are two types of automation systems used for forex currency trading. One is web-based and the other is on your desktop. The main difference is the level of security you get with both forex systems. With the desktop version your information is exposed to potential viruses or hackers. Web-based versions are available via your web provider through a secured server. The other difference is that if you use the desktop version you lose your hard drive, you are out of luck. That is where all of the information is stored, so unless you backed up, you are in trouble. The web-based versions of the forex trading systems are backed up by the forex system provider so you don’t have to worry. The desktop version is cheaper so many forex traders still opt to use it.

Manual systems have become outdated in the financial markets due to the atomization of trading systems. If you opt to go automatic, be sure that you select a system that has been programmed by the experts. They are pretty costly so be sure that you find one that is reliable and that works for you if you go down that road. Look online to find a forex system that works for you and also be sure that you talk with fellow traders to get their opinions on systems that they may use.

Trading momentum stocks works for two basic reasons. It has been demonstrated that stocks that have been performing well tend to continue to outperform the rest of the stock market. Theorists argue as to whether this phenomenon is due to irrational investor behavior or a fundamental reason that these stocks are better managed companies that continually prosper while others fail. For the trader or investor trading momentum stocks the theory does not matter. What matters is having an efficient system of stock market analysis for recognizing and trading stocks that seem to have momentum.

When trading cyclical stocks a day trader will look for support and resistance zones. Day traders will look at Candlestick pattern formations to help them determine when to buy stock and sell stock. Long term investing dictates that the investor must perform fundamental analysis of a stock. So, why can a trader simply choose a stock that is going up and jump on for the ride? Because very often it works out quite well! Whether the fact that a stock keeps going up in price is due to irrational psychology of investing or a warped psychology of trading makes no difference in technical analysis of stocks. It is the time honored principle of Candlestick basics to let the market tell you what the market will do.

In value investing the investor may often discover an overlooked and undervalued stock with promising prospects and a ridiculously low price to earnings ratio. A small cadre of investors who follow just a few market sectors may have found a stock and may be progressively bidding it up. The successful individual in trading momentum stocks does not really care! The trader or investor trading momentum stocks just engages in trend analysis and follows the trend.

Trading momentum stocks involves generating trading software trade signals by following current market calculations, moving averages, and channel breakouts to understand market direction. The individual will trade stocks that fit a set of criteria and sell or buy stocks based upon a predetermined trading strategy. Because the trader does not care what the underlying reason is for the stock price movement, he or she needs to have a predetermined set of rules for exiting a trade if the market reverses.

Risk management in trading momentum stocks includes the current market price, how much money is in the trading account, and market volatility at the exact time of trading. As these factors change, the investment risk management equation changes. This calculation should be part of the trading software. When prices change, the size of the trade typically will increase or decrease. The degree of market volatility will also help determine the size of stock trades. Day trading in momentum stocks, whether the movement is up or down, typically involves the longer term movement of a stock or the “turnaround” of a stock in the market. This type of trading looks for stock market trends, not stock market reversals. When there is a change in price movement the trader needs to have a pre-established strategy that leads to a quick exit from the stock position. However, once the trend establishes in the other direction the trader can trade the stock again. Trading momentum stocks works in both directions.

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Market Direction

A major benefit of candlestick signals is the immediate identification of what is occurring in a price movement. Just a simple factor such as a white ( bullish) candle forming, based upon where the price opens, allows for immediate analysis. What do you do with a position that gaps down during its uptrend? There are very simple rules for closing out positions that are not performing as the chart analysis had predetermined. A gap down below the previous day’s open, in the overbought condition, has different ramifications than if that same situation occurred when the stochastics were showing the stochastics not in the overbought condition.

As illustrated in the NANO chart, which had been a recent recommendation, the initial reaction to the earnings was very negative. It gapped down, well below the open of the previous days candle. The stochastics had just barely started climbing into the overbought condition. The normal rule is to close the position immediately, especially if the price is well into the overbought condition. Logic says that an uptrending stock price should not experience a gap down. That is not what should occur if the Bulls remain in control.

NANO

As witnessed in the NANO chart, the price not only gapped down, it gapped down below the T. line. This would have normally caused an immediate close of the position. However, the visual effects of candlestick analysis did immediately identify the fact that the Bulls started stepping in almost immediately. This would’ve been revealed with the formation of a white candle as the trading occurred above the open price. This provides some very important information. Although there was an extensive gap down in price, the bulls were still participating. Obviously, this would have been a much different analysis had the price gapped down and then was followed by continued buying.
The results would have been to continue to hold that position until it was evident the Bears were taking back control. As can be seen, the remaining day experienced continued buying, followed by another day of buying. The T. line rule was not violated. The price did not close below the T. line.

Candlestick analysis provides the information that prepares an investor for high probability price trend results. That can involve whether to sell or remain long or getting prepared for a change of a price trend. The Dow formed a Doji during Friday’s trading. It formed another Spinning Top today. Both the Dow and the NASDAQ are in the overbought condition. They are both also trading right at the 50 day moving average. This makes the evaluation of the overall market trend relatively easy.

DOW

One of the Doji rules, the trend will move in the direction of how they open the price following a Doji. A lower open tomorrow becomes very meaningful. The Dow will be experiencing a lower open after a Doji, in the overbought condition, and trading back below the 50 day moving average. This combination of analytical tools would make it quite clear that it was time to take profits and maybe adding some short funds to the portfolio.
There is an immense amount of information built into candlestick signals. Not taking the time to learn that information greatly diminishes the opportunity to consistently take profits out of the market. It allows an investor to be prepared for the next price change or the  continuation of a current price trend. In either case, specific price movements will cause specific results. This may sound like an elementary statement, but the if/then aspects of candlestick analysis permits an investor to move much more quickly for establishing positions or taking profits. This information is vital whether investing in stocks, options, or commodities.

Chat session tonight at 8 PM ET.

Thursday night February 25, Tina Logan will be presenting more information about being a professional thinking trader.

Good Investing,

The Candlestick Forum Team

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Profitable Entry Exit Strategies

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Successful technical stock traders commonly use stock trading signals to profitably buy stock and sell stock. This is the practice of technical analysis which seeks to predict stock price direction based upon past stock prices and stock trading volume. Stock trading signals are effective because stock market history repeats itself, the market effectively discounts stock fundamentals, and the psychology of investing is a major price mover. Using the stock trading signals in Candlestick analysis helps traders to profitably anticipate a market rally, market reversal, and tell if market trends will continue.

The investor may claim that stock fundamentals alone drive stock prices. Certainly, long term investing relies heavily on fundamental analysis of stocks. However, obtaining the best price in selling stock or buying stock is best accomplished with stock trading signals such as Candlestick patterns. Although the price of a stock is driven long term by its fundamentals it is the psychology of trading, as well as investing, that moves prices minute by minute. Combining fundamental and technical analysis as seen in stock trading signals are both necessary ingredients to success in buying and selling stocks.

Traders use stock trading signals to find recognizable, and repeating, price patterns. These patterns happen because of changes in stock fundamentals, the economy, and market psychology. However, the trader commonly does not need to be a market psychologist, an economist, or expert on stock fundamentals in order to see a pattern in Candlestick charting. Because patterns are repetitive the trader knows that the first part of a pattern predicts the last part. Part of the skill set of an accomplished technical trader is to know when to interpret and act upon an evolving pattern. Wait too long and the anticipated price movement has already happened before you can profitably trade. Jump too soon before the pattern is clear and you might just have executed a losing trade. Take online classes, trading in simulation, and studying Candlestick basics will help the trader hone his skills in the effective use of stock trading signals.

Besides following price patterns, stock traders use information on trading volume as well as information on options trading as stock trading signals. Trading volume often precedes stock price movement. When a trader sees that options investors are buying calls much more than buying puts they can safely assume a positive investor sentiment regarding a given stock. The trader will then follow the stock price pattern to determine if a substantial price change is likely and it what direction it is likely to happen. A trader using trading signals will also look at investor sentiment. When everyone believes a stock will keep going up in price it often means that most have already purchased the stock. That leaves few new buyers on the sidelines ready to buy and drive the price up. When a trader sees this signal he may watch price patterns looking for hints of price volatility and of a price decline. The ability to profitably read and execute trades based on stock trading signals increases with time, study, and practice.

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Market Direction

What sectors are going to be the strongest next year? That is the question every investor is trying to analyze during the holidays. Obviously the trading slows down starting a few days before Christmas and the week before New Year’s. This is a time when most investors can assess what they did wrong or what they did right during the past year. This self-evaluation is usually directed more toward the individual investor. We want to learn what we did wrong so we can correct it going into the next year. This is a great advantage when using candlestick signals. We can graphically review what occurred in prices and evaluate what we should have done to make the returns better. Most trading methods do not allow for the self review.

The visual aspects of candlestick analysis also demonstrates what the big money managers are anticipating. Do you know which sectors of the market are going to be the strongest right after the first of the year? Probably not! Unless you have the mental capability of analyzing the dynamics of all aspects of the economic arena, you will probably have no idea which sector or sectors are going to have the best potential. However, candlestick analysis allows the individual investor to see what the investment decisions are of the big money managers. It is safe to assume that a large money manager is going to have numerous analysts and staff members analyzing world market conditions and what those conditions will do to individual sectors. Unless you have a huge research fund for acquiring that information yourself, more than likely investment firms will already be doing that type of research. As a candlestick investor, it becomes much easier to identify what the cumulative knowledge of all the money managers is doing. This makes the investment strategy very simple.

The sentiment of the big money managers can be evaluated as to their bullish or bearish outlook going into the new year. Candlestick signals will indicate which direction the initial investor sentiment will take the market. Next, candlestick signals an individual stock sectors will demonstrate where the big money anticipates the best returns for the year. Why will this become so evident on the first day of trading? Just like ourselves, the holiday weeks provide ample time to evaluate for the big money manager to fully assess what is going to produce the best profits for their fund in the coming year. When their livelihood depends greatly upon their analytical capabilities, it can be assumed they have fully researched what particular what particular conditions will do to particular markets.

Not only will the direction of the market be easily evaluated but the identification of individual sectors will stand out immediately. This will be the result of a couple of weeks of assessment and reassessment of money managers portfolios. They will want to get into the sectors they deem as the best potential for the coming year. These will be easily seen based upon the candlesticks.

The current market trend continues to show a slow uptrend without evidence of any major selling pressure. There are particular sectors that have been producing good steady profits during this uptrend. Maintaining those positions have been dramatically profitable due to some very simple trend analysis. For most profitable positions, as long as a candlestick sell signal was not confirmed with a close below the tee line, the uptrend was considered to be still in progress.

The investment strategy at this point should be the liquidation of positions that are showing some weakness. Adding to the cash position will allow investors to participate in the high profit/high-powered moves that should occur right after the first of the year.

Chat session tonight at 8 PM ET.

Good Investing,

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Stock market traders and investors use a firm knowledge of stock fundamentals as their basic tool in stock market investing, day trading, and trading stock options. The review and study of stock fundamentals is referred to as fundamental analysis and differs from technical analysis as an approach to trading or investing in the stock market. Stock fundamentals focus on the financial health and growth prospects of a company that issues stock. Investors will want to be assured of the competence and vision of the company’s management as well as the company’s competition in the market sectors in which it operates. Stock fundamentals include the company’s financial statements, especially its cash reserves and other assets which will provide the company with a margin of safety in the event of an economic downturn. The primary concern in long term investing is intrinsic stock value. This is the discounted forward looking income stream of the company. Although fundamental analysis focuses these issues the investor is wise to use technical analysis tools such as Candlestick pattern formations when buying stock and selling stock in order to optimize purchase and sale prices.

An investor studies stock fundamentals in order to add high value stocks to his stock portfolio. Part of the value of the stock to the investor is its current price. A well run and growing company with excellent products and profits will often sell at what seems to be a premium to other stocks in its market sector. It will commonly have a high price to earnings ratio. In other words investors buy the stock, at a high price, because the rest of the market is doing so. This psychology of investing often leads investors into paying too much for a stock and, thus, diluting their long term profits. By using both fundamental and technical analysis the savvy investor will study stock fundamentals to discover long term value. Then he will follow the market price of the stock with Candlestick analysis and profit from buying at the bottom of a stock price correction or market reversal due to a hiccup in the business cycle.

When an investor buys a promising stock based upon strong stock fundamentals his analysis of that stock should not stop. A smart investor will routinely reassess the fundamentals of stocks in his portfolio and will sell those that be come “under performers.” Additionally in investor will remain aware of technical market factors with the use of Candlestick charting. When an investor has made really good stock picks the stock prices on his stocks may rise rapidly, too rapidly. Such hot stocks often experience a “correction” on their way up. When the investors knows that the stock fundamentals on these stocks are still strong he will not want to sell these stocks for a profit but he will also not want to see part of his investment lost when the stock price corrects. By skillful reading of Candlestick patterns an investor can often anticipate the point at which the stock price will correct. By buying puts on the stock he will be able to insure that he gets the current stock price on a sale even if the market corrects. In fact, he will sell at the current price and then buy again after the stock price as dropped in the correction.

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Market Direction

Being able to accurately analyze the market conditions provides a huge advantage. After a bullish start just over a week ago, the Dow has gone flat the past five trading days. This became relatively evident after the second flat day. It produced a chart that could predict sideways movement in the markets until the T-line caught up. Is a flat trading market detrimental? Definitely not, there will continue to be prices moving relatively strong one way or the other in a flat market. The advantage we have with candlestick analysis is having the visual ability to see which charts are still showing strong price patterns. A breakout from a price pattern is still going to produce significant profits in spite of the fact the market in general is trading sideways.

DOW

When the T-line is trying to catch up with a sideways moving trend, there are expectations when they do come together. Many investors will witness the support at a specific moving average and start buying.

Being able to take advantage of what the charts are revealing allows investors to continue to make good profits when many other investors are waiting for the market to break out of the sideways mode. A sideways moving market as one obvious feature. It demonstrates there has not been a change of investor sentiment. That knowledge allows an investor to continue to participate in patterns that will perform well provided there is not a severe change of investor sentiment. This ability puts the candlestick investor at a great advantage. Positive returns are not dictated by the direction of the market. Positive returns can continue to be made during all conditions of a market trend. Candlestick price patterns have inherent strengths that have created the pattern in the first place. These reoccurring price movements occur because of reoccurring investor sentiment.

For example, the trend of KOG is a direct result of what should occur after a frypan bottom pattern breakout. In this case, the frypan bottom pattern acted as wave two in a three wave trend. The past week has shown flat trading in the Dow as well as the other indexes. However, the result of a frypan bottom breakout is a strong uptrend. When the market in general was trading flat for the past five trading days, this stock price has built up the enthusiasm that is usually associated with the end of wave three. Recognizing candlestick signals and patterns puts investors in situations where the probabilities are greatly in their favor.

KOG

The price trend seen in KOG had a high probability of occurring based upon the frypan bottom pattern. To disregard the basic results of candlestick signals is to put one’s self against the probabilities. Very simple scanning techniques allows an investor to identify which stocks have the best potential. The application of candlestick formations makes it much more clear to identify where a bullish or bearish breakout should occur. This capability reduces the risk and dramatically improves the probabilities of being in the right position at the right time. The CandlestickForum is providing a training program on December 14, Tuesday night, to demonstrate simple scanning techniques that exposes the best trading potentials. Please review this mini-training session information on the home page, or click here for more info.

Chat session tonight at 8 PM ET . Learn some of the basics on how to identify where the next big trade is going to occur.

The Candlestick Forum Team

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Today the markets traded positive after trading lower early in the day. The Dow traded up 200 points after closing at the 200 day moving average yesterday. Does today’s positive trading mean there is a reversal in the market? Using candlestick analysis today’s trading may be more inclined to be a bounce versus a full-scale reversal. Although the indexes traded up strong, they did not produce candlestick reversal signals. Why is this relevant? Simple logic! If trading formations such as today’s trading was signifying a relevant change of investor sentiment, it has to be assumed that the Japanese Rice traders, with 400 years of observations, would have provided a name for these type of reversal days.

The fact that they didn’t makes for the assumption that these are merely up days in a downtrend. The other high probability factor is that the indexes closed below the T line. Because candlestick analysis is based upon the graphic depiction of human nature, the signals working in conjunction with some high probability confirming indicators provides an extremely strong trading format for investors. A format that is based upon high probability human nature reactions that have work extremely well for centuries.

Candlestick patterns provide expected results. The advantages of working with candlestick patterns is twofold. One, it illustrates when there is a high probability of an expected price move and secondly, that price move usually has much more strength than mere uptrending stock prices. Today, HCLP was recommended based upon the cradle pattern, a high profit candlestick pattern. The utilization of candlestick signals and patterns puts an investor in situations where the probabilities are greatly in their favor.

Chat session tonight at 8 PM ET with Guest Speaker Steven Brooks. Click here to register.

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Before the take off of trading online stock in the 1990’s, big-time investors were able to double their incomes by investing thousands of dollars in the stock market. Most of America’s wealthiest Americans made a lot of their money by investing in stocks. With the advent of the internet however, the smaller investor can now get in on the fun. The stock market is even more open now and millions of Americans can now make money investing in stock. Those with limited funds can now invest in their company’s 401k accounts and can become shareholders in the company.  The great thing about it also is that now people can do this from the comfort of their own home.

Getting Started Trading Online Stock

First you must have the minimum dollar amount necessary to open a trading account with the brokerage firm of your choice. The minimum dollar amount is usually about $500 but it can vary from firm to firm. Additionally, you will have to pay a membership fee with the firm which can range from about five dollars to twenty dollars. You will also need to become familiar with the trading system that the firm provides as well as the investment software you plan to use. Then you can begin to trade and manage your funds. You should be able to access the market in real time, examine trends quickly and efficiently, and you must be able to trade instantaneously. Lastly you must be sure that you make full use of your online brokerage firm’s research facilities in order to grow and maintain your investments.

Portfolio management is the key to successful investing. When trading online stock it is also wise to study the history and performance of all of the stocks in your portfolio. Whether you are investing in stocks using fundamental analysis or technical analysis, you must ensure that you have portfolio diversification. This will ensure that you don’t have all of your eggs in one basket.

If you want to practice short term stock trading and use the concepts associated with technical analysis you should research Japanese Candlesticks. Candlestick trading analysis does not require knowing intricate formulas or ratios for trading online stock. The stock investing basics of Japanese Candlesticks result in clear and easy to identify patterns that demonstrate highly accurate turns in investor sentiment. There are really only 12 major Candlestick patterns that need to be committed to memory. The Japanese Candlestick trading signals consist of approximately 40 reversal and continuation patterns. All have credible probabilities of indicating correct future direction of a price move. Continue to learn about other technical indicators and find out if Japanese Candlesticks are for you.

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Market Direction

Why was there expected profit-taking today? Both the Dow and the NASDAQ had reached their prospective resistance levels. The Dow closed at the recent top  on Tuesday. The NASDAQ closed at the 50 day moving average on Tuesday. Yesterday the markets demonstrated indecisive trading at those levels. That may seem like a fairly simple observation, but it becomes simple when using candlestick signals for your analysis. Trend analysis becomes much more accurate when knowing what each of the 12 major signals represent.

DOW

Indecisive trading is represented by Doji’s, Spinning Tops, Harami’s, Shooting Stars or Hanging Man signals. When an indecisive trading signal is occurring at a  potential resistance level, trend evaluation becomes much easier. Was it time to take profits today? Knowing that  investor sentiment was getting indecisive once the prices hit resistance levels, that should have made the anticipation of taking profits better clarified. The past few weeks have produced an extremely good profits from our recommendations. The shipping stocks and the mining stocks created some very good profits. DRYS was recommended in the $8.00 area on December 9, 2008. It gapped open today at $13.52, above the 50 day moving average. The gap up in the overbought area was an indication that some profit should be taken in the very near future. It closed back below the 50 day moving average. It is in the range of a 52% to 60% profit. The dark candle formation today becomes an indication that bearish sentiment may be starting.

DRYS

Many investors have a hard time taking profits. Emotions start stepping into the decision-making process. “What if we take profits at this level and the price continues for another 10 points higher?” This is the biggest fear most investors have to overcome. The strength in the price confirms to our own ego how smart we really must be. Not only did we invest in a stock position that was moving in the right direction, but our analysis put us into a position that has made big profits. Boy, we must be smart. So smart, the price trend might even move past our conservative expectations. When the mind gets into this euphoric state, rational analysis starts slipping away. There is a tendency to ignore what the signals are representing. This becomes a battle between rational analysis and the emotional expectations of what a price could do.

SSRI

Quite often, the fear of taking profits, because prices might go even higher, dramatically reduces profits. Most investors have the tendency to hold onto a positive price move way too long. Many of us have probably held a profitable trade all the way back down to where we bought it or below. Applying the proper technical analysis is as important as controlling for the correct decision making process. Candlestick signals allow for much better control of one’s emotions.

 
Private training session

Mr. Bigalow also will be committing time to a private training session during the January and February time frame.

These training sessions are limited to a very small number of people. This provides individual attention for eliminating the past bad trading habits and applying the high probability candlestick analysis trading philosophy. If you are interested in attending one of these sessions, e-mail Steve at steve@candlestickforum.com to discuss more details.

Chat session tonight at 8 p.m. ET – everybody welcome. Click here for instructions; if you already have HotComm installed, click here to connect.

Good investing.

The Candlestick Forum Team

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This Week’s Specials

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

*Free shipping offered only for domestic orders; same shipping rate will apply for international orders.

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Semi-Private Training Sessions 
Live and in person with Stephen Bigalow

Now Scheduling for

January 3rd & 4th, 2009
Contact us ASAP to register via email  or call 1-866-251-4015.

Group size is  limited to FIVE participants
Sessions fill quickly – Pre-register early

Short term trading requires that investors understand important concepts. This style of trading attempts to capture gains in a stock within one to four days and moves very fast, so understanding these concepts and the ins and outs of short term stock trading is crucial to your success as a stock trader.

Short term stock traders must have a sense of the overall market trends in order to successfully trade stocks. You don’t want to take the chance of having the market trend go against you so if the trend is negative, then you should consider shorting and buy very little. Conversely, if the trend is positive, then you may want to consider buying stock and doing very little shorting when short term trading.

Short term trading also requires that traders understand the overall patterns that take place in the stock market. The market tends to trade in cycles and these cycles are used by traders to determine when they should enter the market, exit the market, and whether or not they should go long or short when they enter the market.

Moving averages are also important to understand for short term traders. The moving average tells us the average price of a stock over a specific amount of time. The purpose of using moving averages is to indicate to the trader whether or not a stock is trending upward or downward. There are different types of moving averages including the simple moving average (SMA), the exponential moving average (EMA), and the weighted moving average WMA). Understand how to read moving averages and you are one step closer to successful stock trading.

Swing trading is a type of short term trading where technical analysis is used to look for those stocks that have short term price momentum. Swing traders will hold onto a stock for typically a few days or for two to three weeks. They trade stock based on its intra-week or intra-month oscillations. Candlestick analysis is helpful tool for swing traders. The characteristics of candlestick signals create the parameters that make swing trading successful. Pattern recognition is necessary when trading stocks using candlestick analysis. The trader must learn to identify signals indicated in various Japanese candlesticks patterns that tell a trader when it is time to enter and or exit a trade.
There is a lot more to learn about short term trading in addition to what was briefly addressed in today’s article. Continue to learn about the different technical analysis tools available to investors and find those tools that work for you. Just be careful that you keep it relatively simple by using only a few different technical indicators. Trying to incorporate too many can actually go against you. Master a few and you should start to see results.

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Market Direction

Observe the obvious! A major advantage provided by candlestick signals is the clear visual information that is conveyed. It makes the obvious technical analysis indicators more obvious. As can be observed in the Dow chart, the trend channel was acting as support. When a trend channel, trend line, moving average, or any other indicator that can be obviously observed as having an effect on a trend, the utilization of candlestick signals allows an investor to make strong and appropriate decisions immediately.

DOW

Even with the weakness in Friday’s trading, the Dow still closed in the trend channel range. The NASDAQ formed a Doji right on the 50 day moving average and the T. line. This made for a very simple analysis. There is an expectation in price movement after a Doji. A trend will usually move in the direction of how it opens after a Doji.

NASDAQ

Having that knowledge made for a very easy strategy decision for this morning’s trading. The Dow and the NASDAQ pre-market futures showed a significant downside. A bearish indication in the NASDAQ futures illustrated that it would open below the uptrending channel. This presented the opportunity for a very simple game plan. Closeout long positions that were not demonstrating excessive strength. Add short funds to the portfolio. Why could this be done with great confidence? Simply because of the results that should be occurring based upon candlestick signals and support levels.

FAZ Short Fund

Many investors have a hard time making decisions when closing out existing positions and adding new positions. Too often hesitancy is created because of the lack of a defined trading strategy. Candlestick signals, in conjunction with other technical indicators, allow for rapid and decisive position changing. Todays gap down in the NASDAQ, after a Doji and below the lower trend channel required immediate action. The candlestick investor has the benefit of simple trading rules that create high probability results. Once an investor learns a few easy-to-identify price patterns and signal actions, the fear of moving funds into and out of  positions becomes dramatically reduced.

Why do professional investors consistently make money? Because they understand price movements are caused by reoccurring forces as a result of investor sentiment. Investors that trade for a living or are dependent upon substantial income from the markets recognize the reoccurring signals and patterns. This is what allows many investors to make a career out of trading/investing in the markets. Knowing and understanding the details involved with successful candlestick analysis allows an investor to move from making good money from the markets to making their career income from the markets

Are you the investor that seems to be able to get into good positions but do not know the correct time to exit a trade? Do you seem to be losing more money on bad trades then you should, offsetting the gains of the good trades? Do you get caught up with nursing a bad trade and letting the rest of the trades flounder around? The Candlestick Forum boot camp allocates extensive time in into to each of the aspects of candlestick analysis that allows an investor to trade successfully. Knowing the correct manner to enter and exit trades, positioning stop losses, and taking profits at the appropriate times, dramatically reduces the emotions that sabotage most investors mental thought processes.

Do not miss this opportunity to gain insights into successful investing techniques that you will utilize for the rest of your investment career. The boot camp provides actual  hands on analysis. Each training is limited to only 15 people. This allows for better interaction with each participant, dissecting and formulating corrections into each persons investment technique. Seating is limited, only a few spaces left.

Chat session tonight 8 PM ET for members.

Good investing,

The Candlestick Forum Team

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This Week’s Special

2-Day Training Seminar on CD

Scanning Techniques

Click here for details.

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