Stock Investing System - Do You Have One In Place?
It sounds logical enough; an investor needs a good stock investing system. But then comes the obvious questions; what is a stock investing system and how do I establish a good one? First, a stock investing system is a system for evaluating stocks, identifying risk and profit objectives, and planning a long term investing strategy. Secondly, a good stock investing system will also include a stock trading system such as Japanese Candlesticks. While it is important to realize that even the best stock market investing strategy isn’t perfect, successful traders maintain that the discipline to follow their plan contributed to their success more than their trading philosophy. They know that the proof of a good plan is tested over time.
Adding to the success of a stock investing system are the stock market trading tools, specifically the tools used for stock technical analysis. When coupled with a system such as candlestick chart analysis, an investor can know that his or her trading plan contains the components necessary to establish a successful presence in the market. With all of this power available, an investor must still be able to recognize when they have made a mistake and recover successfully. A good stock investing system will include stop loss strategies so that an investor is prepared in the event that a particular investment goes bad. Preparing for exactly such a situation can be the difference between success in the market and complete failure.
Another valuable concept for the investor is portfolio diversification. A portfolio that has a broad variety of commodities, varying levels of risk, and diverse profit potential can be an excellent way to insulate an investment. This way, it is possible to speculate on a stock and use the rest of the portfolio as a hedge against a devastating loss. Such a practice is valuable in any stock market trading system.
How does the investor figure into a stock investing system? The investor is the centerpiece of every successful, or unsuccessful, trading plan! The market is a psychological adventure, with euphoria, boredom, joy, pain, greed and fear all attempting to alter the stock investing system of the investor. A wise trader is able to withstand the emotions of the market and stick to the stock trading plan. Avoiding investing in unknown markets and resisting the temptation to invest out of boredom are factors in avoiding potential problems.
While the market has many pitfalls, a good stock investing system can assist any investor who wishes to realize a profit trading in the market. When beginning investing in the stock market, it is immensely important to develop a plan to trade stocks, acquire the necessary stock market trading tools to create an edge, and learn from those who have gone through it all before. While the market is unpredictable, the principles and techniques needed to be successful are time tested and reliable. As with any event in life, a good stock investing system and the lessons learned by others will provide the best investment advice an investor can ever receive.
Market Direction:
With the market in a steady uptrend, the question becomes "which stocks do I want to get into what the highest profit potential?" The candlestick buy signals forming at the most obvious technical levels become the best candidates. With the market still indicating bullish sentiment, watch for bullish candlestick signals forming at technical levels - these usually provides the best opportunities.
Nasdaq
With the market in a slow steady uptrend, how prices open in particular stocks the next day becomes an important indicator. The proper entry strategies helps an investor participate in the strong moves while keeping them out of the less opportune trades. Good entry strategy techniques incorporate simple common sense. In these market conditions, which stock positions are showing the best buyer enthusiasm. 'How' a stock price opens, after a candlestick buy signal, reveals valuable information.
What do we want to see after a candlestick buy signal? The buyers still participating! The more strength revealed the next day, the higher the probabilities that the new reversal signal is being followed by enthusiastic buying. That is exactly what we want to see.
PANC is a set up for an excellent buy. A Bullish Engulfing signal after a Spinning Top right on the 200 day moving average, just as the 20 day moving average was crossing. The stochastics, in the oversold condition, is a set up for a high probability, high profit trade. The entry strategy becomes very simple. What do we want to see following the Bullish Engulfing signal? The buyers still anxious to get into this position. Our entry strategy becomes 'buy on strength'. With all the indicators in the proper conditions, this position should be bought upon seeing continued buying the next day.
PANC
On the other hand, if the price opens much lower, such as near the midpoint of the previous days candle, that would definitely illustrate that the bullish sentiment was not present. A lower open would warrant holding off buying the position and waiting to see what the price does after the open. Very simple entry parameters can greatly enhance the probabilities of being in correct trades.
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Good Investing,
The Candlestick Forum staff
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