Profit from Stock Market GainsDid you profit from stock market gains recently when the stock market had its best day in a year? Companies like Apple came in with substantially higher earnings than expected. In general, US companies are profitable and building up cash, which translates to a margin of safety. On the other hand the staggering US debt and specter of a debt default weigh heavily on the market. In this sort of an environment how do stock investors and traders profit from stock market gains or for that matter from any stock market trends or stock market reversal ? It may be too soon for jumping on the bandwagon of better than expected profits if congress canft get a handle on the US debt or if the EU does not move quickly enough to quell the evolving panic of bond holders as Italy joins Spain, Portugal, and Greece in their sovereign debt dilemmas. But, how do we profit from stock market gains when they come? Hold onto our cash until we see the market move? That is typically too late to profit from stock market gains. Using Candlestick analysis to anticipate the market is a better choice.
The answer to how to profit from stock market gains is to be ready before the market goes up. Picking a stock with a low price to earnings ratio and the promise of strong future earnings is a good place to start. Doing diligent fundamental analysis will give a stock investor or trader a strong sense of the range within which a stock will trade. However, traders know that the market quickly discounts stock fundamentals . Smart traders use technical analysis of stocks to profitably anticipate movement of stock prices. By keeping in touch with Candlestick stock charts , traders profit from stock market gains by virtue of anticipation.
In the most recent set of quarterly financials three fourths of companies in the S&P 500 beat earnings estimates. However, this is yesterday news. Most of the job of gaining profit from stock market gains is anticipating where stock action will be. For example, a takeover bid such as Karl Icahnfs bid for Clorox can drive stock prices higher, even in a falling market. The sovereign debt problems in Europe and the USA are weighing heavily on the markets. However, in all likelihood, the US congress and president will come to an agreement to raise the debt ceiling. If this agreement is coupled with laws detailing a clear path to debt reduction we could see a significant market rally. Choosing stocks likely to benefit from such a rally, reviewing stock fundamental analysis, following these stocks with Candlestick patterns, and using Candlestick trading tactics will give the trader a strong chance of making significant profit from stock market gains. Options trading is often a good stock trading strategy in such situations as buying options limits risk and can significantly leverage trading capital. Whether the trader or investor chooses to trade directly or use options he will greatly enhance his prospects of profit from stock market gains if he uses Candlestick pattern formations as a guide.
Market Direction: Do you have a problem holding a position that has produced gains? Most investors do! Why, because they learned how to invest with the wrong parameters. Many investors are exposed to their initial trading education without a game plan. This usually leads to losses before most investors eventually try to figure out how to keep from making losses all the time. This causes a dilemma when a trading method starts producing gains. There is a basic reaction! "My experience demonstrates that I do not make gains very often, so I better take them while I have them."
This method of thinking is normal. Most investors fear losing gains they may have made and looking foolish that they did not take those gains before they turn into losses. Candlestick analysis provides a trading platform that produces gains a high percentage of the time. Unfortunately, many investors will cut their gains short so they do not experience a profitable trade turning into a loss. This makes it very difficult for an investor to take advantage of big profit moves.
There are some very simple analytical tools to assess whether a price trend is completed. What is the general market doing? Where are the stochastics? Has there been an actual candlestick sell signal? How far away has price moved away from the tee line? How close is the next potential target? These questions need to be part of the analysis versus watching a specific candlestick formation during a price trend. There will be bearish looking candles during an uptrend. There will be bullish looking candles during a downtrend. The overall price movement will be made up of the individual candlestick formations that make up the trend. Do not allow one bearish trading day allow for making two quick a sell decision. Learn how to let your profits run and cut your losses short.
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Good Investing, The Candlestick Forum Team
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