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Day Trading Stocks

Day trading in general is the buying and selling of financial instruments, including but not limited to, stocks, stock options, currencies, futures contracts, and commodity futures. These financial instruments are traded within the same day and all positions are closed (most of the time) before the market close of the stock market. Day trading stocks used to be reserved for financial firms and professional investors, however today there are many individual traders who trade from home. Below we discuss the two types of day traders.

The institutional day trader works for a larger financial institution and therefore has large amounts of capital available to them when day trading stocks. This trader has more resources as well as dedicated direct lines to data centers and stock exchanges. They also have analytical software to assist with trading as well as a support team that helps them to minimize risk. The individual day trader works for him or herself and typically works alone at home. This trader trades with their own money and/or money from others to invest when trading stock.  Day trading stocks as an individual came about in the 1990ís due to advances in technology and the increasing use of the internet.

For investors interested in day trading stock online, there are important points to consider. First, to day trade you must concentrate of specific stocks that are suitable. To be suitable the stock must be highly liquid, meaning that that it is bought and sold often. Liquidity varies with the market volume, but stocks that are located on the major exchanges are typically liquid enough for day trading stocks. Second, in order to day trade stock, the stock needs to be sold in sufficient volume. Typically this means that the stock should have at least 500,000 shares traded each day. A stock with a fast changing price is perfect for day trading. Third, it is necessary to have real time information of the market in order to make money. Traders need to able to determine how much stock they can move within a specific period of time. Lastly, day trading requires the use of dedicated stock trading software in order to do the above, as well as a proven trading system. This software should display real time information in the form of stockcharts and other indicators. The trading system should be tested over time and should already prove to be profitable before use. This can be determined by practicing online paper trading that allows you to build a trading system without using real money.

As you can imagine there is a lot to day trading stocks and this article only scratches the surface. For those investors interested in day trading keep in mind that it is extremely risky. However, if you educate yourself, practice paper trading, implement a successful stock trading system, and only trade with money that you have, you can make a great profit. Continue to read about day trading and the different financial securities that you can trade, and decide was is best for you!

Market Direction: Sector rotation, a term often used but very rarely utilized by most investors. Unfortunately it is usually described about sectors after they have moved. It is merely the identification of where big-money is moving out of one sector and into another sector. Where were the big gains made earlier this summer? In the oil stocks! Taking advantage of a sector move is very simplified when using candlestick signals. Buy signals usually appear in a sector well before the media catches on. Once the media does recognize a trend in a sector, the candlestick investor is already taking advantage of the move. The continuation of an uptrend can now be analyzed using the price patterns, for example the Jay hook pattern, for exiting and reentering trending stocks.

The visual advantage gained by candlestick signals allows an investor to dig through the rhetoric the media throws out. The media coverage/hype/ (expert prognosis?) which is usually late, will move prices around. This creates the patterns we can exploit. That makes profiting from a specific sector fairly easy. The major advantage the signals provide is the early identification of the next sector that is being accumulated. The signals made it very clear that the finance stocks were been bought after an extended downtrend.

Why is it important to see when a reversal is occurring in a downtrend? Because the media hype has probably stimulated the panic and sustained selling at the bottom. The sage advice is to buy at the bottom. Unfortunately, most advisers have no viable method for identifying the bottom. They are usually hesitant about buying at low levels because they have no methodology for identifying the turns. "Trying to grab for a fallen knife" becomes their battle cry. A candlestick reversal signal allows candlestick investor's to take advantage of that reversal move. A candlestick buy signal has completely different ramifications than witnessing bullish candles that are not reversal signals. There will always be up days in a downtrend. Witnessing a candlestick buy signal allows for immediate and aggressive positioning as a reversal occurs. Why is this important versus waiting for further confirmation?


As seen in many of the finance stocks this past week, the reversals have produced extremely large percentage gains. Candlestick signals allow for an early entry during the reversal stage. The benefit becomes magnified by other investors that require further confirmation before their indicators say it is time to get in. That later confirmation is what boosts the returns for the aggressive investor to walk off the candlestick signals. Will the finance stocks continue to produce a strong uptrend? As of now, there are not any indications that the uptrend should not continue. It becomes very easy to participate in price movements of 20% and greater at the bottom of a strong downtrend. This is the purpose of candlestick signals. Identifying immediately the change of investor sentiment.

Big profits were made in the oil sector early on the summer. Now money appears to be rolling into the finance stocks. Next month it may be another sector that provides the big profits. Use the information that candlestick signals convey and you have a much greater probability of being in the right sectors at the right times.


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Good investing,

The Candlestick Forum Team


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