Candlestick Trading Forum
keyword search

Candlestick Trading Forum        

Trading Options Online

For those online stock investors looking to begin trading options online it is important to understand the difference between stocks and stock options. One main difference between stocks and stock options is that stocks give the investor a small piece of ownership in the company and options are just contracts that give the investor the right to buy a stock or to sell a stock at a certain price by a certain date.

There are two types of options called puts and calls. When buying puts it gives the buyer the right but not the obligation to sell a particular stock at the strike price any time before the expiration date. When trading options online you must learn that the strike price is the price at which an option can be exercised. The strike price is set per the options contract and is only good up until the expiration date of the contract.  When buying calls, the stock investor has the right but not the obligation to purchase a stock at the strike price any time before the option expires.

There are two basic types of options that you can invest in when trading options online. These include American and European options. American options can be exercised at any time between the date the option is purchase and the expiration date. The European options can only be exercised on the actual expiration date when options investing. Most of the exchange traded options are American options and all stock options are American options. (See exchange traded funds) Many of the index options are actually European options.

When investors sell options they are actually creating a security that didnít previously exist. This is referred to in the options market as writing an option. When discussing calls and puts again, note that when you write a put, you may be obligated to buy shares at the strike price before expiration of the contract. If you write a call, then may be obligated to sell shares at the strike price before the options contract expires.

When trading options online the risk to the buyer is never more than the amount that is actually paid for the option, but the profit potential can be unlimited. The initial premium is the amount that the investor paid to enter the contract and it the buyer cannot lose more than this premium amount.

Continue to learn about options to determine is options trading is right for you.


Market Direction: How do you make money in a sideways moving market? Most investment advisors tell you that you can't. Fortunately, with candlestick signals and patterns, finding those stocks that are moving positive or negative becomes much easier. Obviously there will be stocks moving up during a sideways market. Having the ability to visually recognize the sectors that are being bought creates a huge advantage. What is everybody else looking for in a sideways market? The sectors/stocks that are moving! Candlestick signals identify those sectors before everybody else starts piling in.

Using candlestick analysis properly allows an investor to evaluate what the market conditions are presenting. That information could be that the strong sectors will continually move while the rest of the market remains flat. Or it could be revealing that a sector will move for a week or two before rolling over and the next sector starts picking up strength. This all reverts back to the Japanese Rice traders stating "Let the markets tell you what the markets are doing."

The markets usually become more sluggish during the summertime. This is a function of traders not being near their trading desks as much when it is warm and sunny outside. This becomes an opportune time for an investor to spend more time and energy in learning trading techniques. An investor should learn how to analyze what the market trends are revealing. From there, they should learn how to exploit price moves for their maximum potential's. Most investors never learn how to evaluate what the direction of a market move or stock move has the potential of doing. A major benefit of candlestick analysis is utilizing all the information built into candlestick signals to make common sense assessments of what is occurring in investor sentiment. This is what creates a huge advantage for the candlestick investor.

Once you learn how to correctly utilize candlestick signals, applying the appropriate trade strategy becomes relatively simple. Whether you are trading stocks, options, or futures, the information built into candlestick signals continually puts the probabilities of being in the right direction at the right time in your favor. If you have not taken the Candlestick Forum Online Training Clinic, do yourself a favor. Learn the commonsense applications of candlestick analysis from start to finish. Once you understand the mental process that correctly analyzes price movements based upon human nature, you will have much more control over your own investment future. Whether a beginning investor or sophisticated options trader, the information provided in a two-day online clinic will organize your thought processes, making candlestick signals easy to understand. Once that occurs, your analytical abilities will improve dramatically. Click here for more information.

Although the Dow closed positive today, the NASDAQ closed negative. However, the Dow formed a small Hammer signal in an area that has shown support in the past. The NASDAQ formed a Spinning Top/Doji after bouncing off the 50 day moving average. This will make tomorrow's trading relatively easy. The market will move in the direction of how they open. The premarket futures will be a good indication of whether to be going long or going short.

DOW

NASDAQ

Flat trading markets also allows an investor to make money in long positions and short positions simultaneously. The strength and weakness revealed in specific sectors allows an investor to have half their positions on the long side and the other half on the shortside. Candlestick analysis provides the information to establish the proper trading program for any market condition. Whether in stocks or options, the directional aspects of candlestick signals dramatically improves the probabilities of being in the right position at the right time. This is merely a function of using the information made available from candlestick signals. When this information is applied to other technical tools, such as moving averages, Fibonacci numbers, and trendlines, the probabilities improve. Candlestick analysis is merely assessing what is occurring in investor sentiment at appropriate times during a trend.

Chat session tonight for members at 8 p.m. ET. Check the Member Area for instructions.

Good investing,

The Candlestick Forum Team

 

Candlestick Trading Forum