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Increase Investment Profits

The goal of every investor is to increase investment profits. Doing this without a great increase in investment risk is important. To increase investment profits over the long term an investor needs to do both fundamental and technical analysis of his stock investment. The fundamentals are important because they are the underlying drivers of intrinsic stock value. Technical analysis of stocks is important because it guides investors and traders in buying stocks and selling stocks at optimal stock prices. By discovering a stock with a low price to earnings ratio and a large margin of safety the investor will have found a potential multiyear income stream. By using Candlestick analysis of stock prices, an investor can buy stock and sell stock using limit orders and thus greatly increase investment profits over both the short and long term.

Which fundamentals are most important when an investor wants to increase investment profits? The point of long term investing is to find stocks that grow their earnings steadily over the years. Thus the investor will look for companies with good research and development, companies that have a strong track record of turning ideas into products and successfully marketing those products. The price of a stock should be closely tied to the discounted value of its future income stream. Finding stocks that fit this picture is a reliable way to increase investment profits. A company with a high price to sales ratio or price to earnings ratio has probably already been bid up by the market and will only be a good buy when its stock price corrects downward.

How and when should the investor apply technical analysis in order to increase investment profits? For long term investment profits the investor needs to be picking stocks with strong fundamentals. However, the market will take a stock price up and down depending on the economy and the psychology of investing of each and every investor. By using technical analysis tools such as Candlestick chart analysis the investor will be able to profitably anticipate stock price movements in order to buy and sell at the best prices. Using applied technical analysis the long term investor can increase investment profits. Picking the right stocks can lead to buy can lead to long term profits. Picking the right time to buy the right stocks, like after stock market crashes, can, at times, lead to two and three times the profit on the same stock.

Ideally the investor will combine the fundamentals and an up to the minute assessment of technical factors to increase investment profits. It is the ability of investors to think like traders that allows them to increase investment profits. Buy stock for ten percent less than it was selling for last week and you will gain 11 % greater profits in capital gains and dividends over the years as the stock appreciates. Sell stock for 10% more and experience at 10% increase in long term capital gains. By applying the wisdom of Candlestick pattern formations the investor can greatly increase investment profits over what he would gain just from investing based upon the fundamentals.


Market Direction: When is it the appropriate time to make big profits in the markets? This may seem like a very elementary question but it is one that gets diffused when most investors get too close to the market. Because many investors do not have stable programs for the correct analysis of a market trend, they do not have the ability to be correctly positioned when market trends are in progress. As illustrated in the Dow chart, there was a clear indication of when investor sentiment was changing. After two Hammer signals, the premarket futures indicated strong bullish sentiment during the middle of last week. This had immediate implications to the candlestick investor. Two hammer signals indicated a possible change of investor sentiment of the current trend.

Dow

The strong premarket futures of last Wednesday was acted upon much more forcefully by candlestick investors because of their knowledge of what Hammer signals were indicating. There did not need to be a time frame for confirmation. With stochastics closer to the oversold conditions, the strong bullish premarket futures of Wednesday revealed the confirmation of the indecisive hammer signals, making the closure of short positions and the purchasing of long positions the prudent strategy. Is this 20/20 hindsight? No! This is being prepared for what the market trend should be doing.

Candlestick analysis has the major advantage of the ease of visual interpretation. What investors need to remember is the fact that candlestick signals are the results of reoccurring investor sentiment. If they did not illustrate what investors are more likely to do, they would not be in existence after 400 years. Knowing what should occur in specific trends and patterns allows investors to make decisions with a much higher probability result. Does the market indexes need to be moving up strong to make big profits? Absolutely not! As long as the markets do not show a drastic change of investor sentiment, price patterns can perform as they should. Usually a price pattern will create a big profit opportunity.

When the pattern is identified and the market is moving in a direction, whether positive or negative or sideways, the result of that pattern can be expected with a high degree of accuracy. As witnessed in the FCS chart, without any major change of investor sentiment in the market in general, the wave three profitability can be calculated with a fair degree of accuracy. Wave three will be somewhat equivalent to wave one. This allows for two very simple functions, when to buy and when to sell. FCS is a recommendation that has produced good profits based upon the appropriate buy signal. The correct time to take profits is now a function of when wave three becomes the equivalent of wave one. This becomes a good time to watch for a candlestick sell signal.

FCS

Staying with the probabilities of candlestick analysis will provide a much bigger  profit return for an investor. Candlestick signals provide an immense amount of information associated with a price trend. The more you can learn how to use candlestick signals correctly, the more your trading program will have planned entries and exits. This process dramatically reduces the amount of emotions that will influence your decision making.

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Good Investing,

The Candlestick Forum Team


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