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Buying Stocks Online

When buying stocks online there are many things to consider. Most importantly, you need to determine the type of stock broker or brokerage firm that you will use. This broker or brokerage firm must be licensed to purchase securities on your behalf and also the services provided must align with the type of stock trading you are planning to do. There are four categories of brokers that you should know about so that you can begin to research the type that you will need. In today’s article we will take a look at money managers, full-services brokers, and discount brokers.

When buying stocks online you can utilize the services of a money manager. Money managers typically handle very large portfolios and they also charge very high fees. Their fees are based on the assets that they manage for you and not per transaction like many online brokers. They basically perform asset management for you and for many investors they handle all aspects of an investor’s portfolio, requiring little collaboration with the investor. They are highly trained, highly skilled professionals whose services are similar to that of a financial or investment advisor.

Full-service brokers work with investors to understand their investment goals in order to put together a financial plan that is suitable. They look at all aspects of an investor’s portfolio, they understand the investor’s investment risk tolerance, and they work with the investor to assist them in managing all of their financial needs. They can also assist with estate planning, provide advice on retirement investing, and provide tax advice. Due to the plethora of services they provide, they are more expensive than discount brokers, but their fees are worth it for the investor who needs this level of service when buying stocks online.

When buying stocks online, you can utilize the services on an online discount broker whose job is basically to take orders and provide the most inexpensive way for you to begin investing in the stock market. A discount broker is basically the same as regular online brokers, but they charge very small fees. They charge per transaction and they allow the investor to open an account with very few funds, comparatively. They do not provide any advice on investment decisions, or recommendations, and basically are only there to ensure that your transaction has been made. They do however provide resources online such as investment newsletters and research and reports for their investors. It is recommended that new investors interested in buying stocks online begin with a full-service broker, and then once they know what they are doing, they move to an online discount broker. That of course is completely up to the investor.

Once you have decided what type of online broker you will use, you then need to decide which brokerage firm you will use. Be sure that you thoroughly research those firms of interest, and also be sure to speak with other investors for referrals, as well as check out the customer service for every firm you look into. This is one of the most important decisions you will make with online investing.


Market Direction: What is one of the basic investment fears? When to take profits! Because it is hard for most investors to make profits in the first place, a new dynamic comes into the picture when trades have produced big profits. What is the first inclination for most investors? Take profits immediately, before they get away. How embarrassing it would be to have big profits and let most of it slip a way. What is the fallacy of this thinking? A decision is being made based upon a completely different criteria than why the initial trade was established. It was bought based upon buy signals occurring in the proper conditions. The buy signal probably occurred when the stochastics showed oversold conditions. Additional confirmation would have been witnessing the signal occurring at an  obvious support level, a major moving average or trendline. What was expected upon purchasing the position when the indicators showed it was time to buy? The price would go up! Now what happens when the price does move in the correct direction? A whole new set of emotions take over. We do not want to lose the profits we have made. We do not want to look foolish by letting a profit turn back into a loss. What if some announcement turned the price around immediately? What if selling started and we could not liquidate the trade fast enough? All these questions start entering the mind.

What is the proper decision-making process when a profit is made? Looking for the signals that illustrates the sellers are starting to take control. Taking profits because there are profits has nothing to do with the parameters of the trading program you are utilizing. Candlestick signals illustrate when it is time to buy. They also illustrate when it is time to sell. The problem most investors run into is getting over the fear factor of holding the profits when they trend is in progress. Candlestick analysis makes that process much easier to cope with. Simple rules can be applied when a trend is in progress. These rules stemmed from the observations that have worked effectively in the past.

Currently, the market trends have been bearish. This seems like an overstatement, but there have been some big profits produced during this bearish trend. The Candlestick Forum recommendations have been heavily to the short side ever since the breakdown from Dumpling Top formation this past summer. The short positions have now produced extensive profits. As those profits grow, normal investment tendency is to take profits just to have some locked back into the account. Unfortunately, this diminishes the potential of where the profits could move to. "Cut your losses short and let your profits run" is often professed by most money managers. However, they never tell you how to cut your losses short and let your profits run. The candlestick signals have very effective means for cutting the losses short. That same analysis technique also allows for letting profits run.

As illustrated in the Dow chart, the Bearish Engulfing signal, formed in the first week of November, instigated the continuation of a downtrend following the Dumpling Top Pattern of this past summer. During that downtrend, there were candlestick buy signals. With those signals appearing, some at potential support levels, what caused the recommendations to continue to be oriented towards the short side? Two simple rules! First, what is required once a candlestick buy signal appears? Confirmation! Bullish follow-through is required. The past three weeks did not show any buying confirmation after a bullish signal appeared. Secondly, the lack of bullish confirmation after each signal produced the failure of the trend to close above the T. line. This was all occurring as stochastics were continuing their downtrend.

DOW

Simple indicators applied with candlestick signals keeps an investor from being tricked out of the market. Positions can be maintained in spite of the possibility of a reversal occurring at the appropriate times. Waiting for the right confirmation that a trend has reversed eliminates emotions taking over. There have been excellent profits made during this downtrend. Shorting individual stock positions as well as buying the leveraged short funds have allowed the accounts to be growing when most investors are desperately waiting for a bottom. Profits do not have to be made only when the market is going up.

QID

TUP

Returns can be dramatically improved by having the visual elements for projecting which direction a trend is moving. Take advantage of the information built into candlestick analysis. It is so simple to use that most investors try to make it more difficult than it is.

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Good investing,

The Candlestick Forum Team


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