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Trading Stocks in a Bear Market

When trading stocks in a bear market, traders seek to profit from continued downward movement of stocks and from an eventual turnaround in stock prices . When trading volatile markets, stock traders do well to use solid technical analysis tools such as Candlestick stock charts in order to objectively read market sentiment and avoid falling prey to the trading psychology demons of fear and greed. When stock prices are falling, it can be profitable for those engaged in long term investing as well as those involved in day trading . In both cases one needs to be able to anticipate when the market will bottom out. Both fundamental and technical analysis are necessary when trying to predict market trends and market reversal . Fundamental analysis commonly helps investors and traders understand the limits of stock price variation. Technical analysis with Candlestick charts taps into market sentiment and provides an objective view of when the market will turn. When trading stocks in a bear market such as seems to be emerging today Candlestick analysis helps traders spot and capitalize on trading opportunities.

Trading stocks in a bear market can seem difficult when bad news follows the sun across the globe and market after market drops even before the NSYE and NASDAQ open for business. Many choose to sit on cash during periods of high market volatility . But it is often in downward trending volatile markets where stock traders can find the best profits and those interested only in long term buy and hold investing can pick up the best bargains. Fears that the European Union will not be able to solve the Greek debt crisis and that a debt default by Greece will proceed like falling dominos to Italy, Spain, Portugal and Ireland have markets spooked. The Dow Jones Industrials fell recently to their lowest in well over a year. The S&P 500 is down as well as the NASDAQ composite. The Greek government announced that it probably will fall short on austerity measures which were part of the bailout bargain. The head of the US Federal Reserve recently spoke about shared responsibility of all policy makers in dealing the US economy, in a pointed reference to continual bickering on Capitol Hill. Meanwhile Candlestick traders follow technical price information and profit when trading stocks in a bear market.

Although traders are well advised to keep an eye on the news veteran traders know that the market quickly adjusts for the fundamentals. Smart traders can follow Candlestick pattern formations during these times in order to anticipate market swings. Smart traders can avoid falling prey to market hysteria by consulting Candlestick patterns in daily trading. Candlestick trading tactics can be used to create profits when trading stocks in a bear market or any market. Candlestick trading gives traders an objective means of predicting stocks prices. Wise use of Candlestick signals reduces the fear factor in trading. Whether on is trading stocks , options, futures , commodities , or Forex , Candlesticks are a good guide in a bear market.


Market Direction: There is a more powerful element to candlestick analysis then merely identifying reversal signals. Because each signal and pattern has built-in information, it allows the candlestick investor to be much more accurate in identifying where a reversal might occur. The information built into candlestick signals allows the candlestick investor to interpret what is occurring at specific technical levels. If a reversal does occur, the decision of whether to participate in the next trend is subject to analyzing where that trend may possibly move to. This could include a trendline, a moving average, Fibonacci numbers or any other technical level that other investors would be watching. The great benefit of the visual aspects of candlestick signals is that they can easily demonstrate what type of investor sentiment is occurring at those technical levels.

Many investors do not have a good concept of which direction the markets are moving. Candlestick analysis allows for clear-cut evaluations with a high degree of probabilities. However, the term "probabilities" remains a very important description. Today's trading was the result of watching what the markets had been indicating over the past eight weeks. The longer-term analysis illustrated the Dumpling Top. The shorter term timeframe, after a Piercing signal indicated there would be an uptrend that would probably test the upper trajectory of the Dumpling Top. The candlestick charts at least provide investors with a framework of what to do based upon the expectations of individual patterns. Today's trading broker the trajectory/rounding curve of the Dumpling Top as well as significantly penetrating up through the 50 day moving average. Putting some long positions on in the portfolio after the piercing signal was done on the basis that long positions would be fully analyzed once they got to the resistance area. They would've been sold upon a sell signal at the resistance area but continued with their profitability if they went through the resistance level as they did today.

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Good Investing,

 

The Candlestick Forum Team


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