It's so easy to do, it will surprise you. The excitement of joining the world of investing, the opportunity to turn your $500 into millions, and the chance to impress your friends make it irresistible. You don’t know many stock market terms and you have no clue about a productive investment philosophy, but you are ready to go. Are you really? Even if you're an investing veteran, it won't hurt to refresh your memory. We’ll start with the basic types of investment strategies: growth investing, income investing and value investing.

Growth Investing
The name says it all; growth investment is the investment strategy of looking for the big winners in the stock market. Growth investors are looking for companies that traditionally have high growing earnings. In theory, high growth equals high stock prices and in turn, high profits. People involved in growth investing take their risks wagering that young, upcoming companies will break through and become leaders in their industry. When you think of this investment strategy, think Google. Google stock is a perfect example of a growth stock, as were many of the technology stocks in the 1990’s.

Many growth companies applicable to this investment strategy started with a dream, an idea and very little operating capital. They were able to overcome the obstacles and become strong profitable companies. Companies like this can achieve initial success but tend to be limited by capital. As they start attracting investors, the results can be very good. This investment strategy offers risk reward ratios that are quite drastic. While the rewards can be very high in growth investing, the risks are high as well.

Income Investing
Income investing is the most conservative and easy to understand investment strategy. Income investors target companies that consistently pay high stock dividends. This is a preferred stock market strategy for those around retirement age. This investment strategy looks for companies that tend to be large and well-established. There is always risk in stock market investing, but income investing is the most conservative investment strategy; in fact it is also known as defensive investing because it tends to protect the trader.
 
Value Investing
This investment strategy is a search for one thing; investors try to find stocks that have been overlooked by the rest of the market. While this doesn’t necessarily mean they are low priced stocks, it does mean that for whatever reason, the market has undervalued a particular stock. Many times, a stock gets overlooked while investors chase profits in another company in the same stock sector or a similar company that is perceived differently by investors. Technical analysis is important with such companies since an investor doesn’t want to confuse undervalued with underperforming. A value investor can look at the price to earnings ratio as one guide to the value of a stock. The hope of the value investor is that the market will recognize the worth of the company and its stock will be bid up to true value, realizing a profit for the successful trader.

Conclusion
These investment strategies are all beneficial to the successful investor. The significant difference between them is their level of risk. Part of formulating your stock trading plan is identifying your current risk tolerance. It is likely that a younger investor will have a greater tolerance for risk due to a greater time to make up for any losses, while an investor close to retirement might choose a conservative approach to make money yet better protect his or her investments.

Market Direction: Candlestick signals are all visual. They provide the graphic depiction of high probability reversal situations. They also provide a format for analyzing the continuation of a trend direction. Utilizing the visual aspect while also understanding the investor psychology, that creates a good signal/candle, makes for a very powerful analytical format. The signals and the patterns are a graphic recognition of investor sentiment performing as investors reacting to  market conditions over and over.

Knowing the probable results after specific signals and patterns allows an investor to properly allocate funds to positions that have a much greater degree of profitability. This degree of profitability not only includes being in the right direction, but also exploiting the information that create much greater rates of return, the big price moves..

A good example of high profit returns is in the METH chart. Recognizing the result of a gap up trading day after a frypan bottom pattern provided the opportunity to make good profits. METH was a recent recommendation, based upon the expected results, after visually being able to analyze the change of investor sentiment.

METH

The information produced from a candlestick pattern makes the trading strategy very easy to implement. What is expected at the end of a Fry Pan Bottom? Exuberant buying coming out the other side. The Fry Pan Bottom provides some simple measuring techniques. A dimple in the Fry Pan Bottom is usually the halfway point of the pattern. That creates a timing element for when to enter a trade. A breakout to the upside should be very close. Conversely, a breach of the pattern would become an immediate signal to close out the position. Candlestick analysis makes the practice of cutting your losses short and letting your profits run easy-to-apply.

MNTA

What is one of your strongest reversal signals? A Doji in the oversold condition, followed by a gap up in price. Additionally, if the Doji day experienced inordinately large volume, that becomes another indication that the weak have sold to the strong. A gap up from a Doji is one of the strongest indications that a powerful uptrend should be in progress. This was illustrated in our recommendation at the beginning of the month for CTRP. An Abandoned Baby signal, which includes a gap up in price after a Doji, produced a very strong price move.

CTRP

Recognizing the same set up in SPC creates the opportunity to get into a position that could have a 25% to 35% profit move in a very short time frame. Major indecision at the bottom of a trend, when stochastics are in the oversold condition, followed by a gap up in price reveals a dramatic change of investor sentiment.

SPC

The subprime lending problems have to be well baked into this market by now. Today's reports on foreclosure advances created an initial selling reaction. Both the Dow and the NASDAQ sold off exactly to the tee line. The NASDAQ was positive on the day in the Dow closed right on the 50 day moving average. A positive open tomorrow would be a clear indication that the Bulls were still in control this market.

NAS

April 14 and 15, Houston, Texas - A two-day training program is scheduled. Two solid days of learning how to analyze candlestick signals correctly will produce an investment perspective that most investors never received in their entire lifetime. Candlestick signals reveal an immense amount of information. When you understand that information, you understand how to invest profitably in all markets. Do not miss this opportunity to learn how to analyze what investors are 'doing' despite what the experts are 'saying'. Click here for details.

Chat session - Tonight for members at 8 pm ET. Thursday night will be an open session illustrating a major candlestick pattern. Come join us. Click here for instructions.

Good investing,

The Candlestick Forum Team