Utilizing technical analysis is an important component of wise investing in various securities and can be done to any kind of security, including mutual funds, stocks, bonds, etc. When using technical analysis tools on a specific security, you are looking for price patterns, price fluctuations, and trends. Your ultimate objective is to figure out how you stand as an investor. In other words, should you sell or buy?

So, how is stock market technical analysis accomplished? There are several different methods. Some investors use technical indicators as part of their technical analysis process and others do their technical analysis by studying charts of a security's past activity. The best investment advice regarding technical analysis is to use several different methods - comparing one against the other in a system of checks and balances.

There are several assumptions made when using the best technical analysis tools. A first assumption is that the past is a good indicator of the present. However, when dealing with the stock market, coming to this conclusion during technical analysis does not always lead you to profitable results. The other assumption is that all securities have a tendency to form stock chart patterns in their fluctuations. This is fine, and is often the case, but the market is often unstable because of stock volatility.

How then do you make use of the most important technical analysis tools? Why try it if they are not completely accurate? Well, even though they are not 100% accurate, you still stand a reasonable chance of analyzing correctly, depending on how thoroughly you were in your analysis using the methods you have chosen.

Therefore, fundamental and technical analysis methods offer a way to make educated choices when making new investments in securities and determining how to handle your current investments. So you can at least have confidence in knowing you did your absolute best, even though it isn't a sure thing,

So who will do the technical analysis? Well, you can either hire people to perform the technical analysis or you can do it yourself. If you work with a company that helps manage your long term investing accounts, it's a safe bet that they employ human resources to help analyze the market and gather data. Then they pass this information to their clients in an attempt to guide them in their investment options.

If you choose to do it yourself, using technical analysis with candlesticks, it could take a while to get the hang of it. Science and math are used to do the analysis, but many consider it an art. Although you can use formulas to give you a set of numbers, it is an "art" for that person to determine what the numbers actually mean.

Market Direction:  Learning how to use candlestick signals not only makes the analysis of the markets much easier, it allows for quick analysis of all other trading entities that may be affecting the equity markets. Attempting to analyze the general market trends becomes dramatically easier using candlestick signals. An additional proven benefit of using Candlestick analysis is the ability  for quick evaluation of specific markets that may be influencing the stock market.

DOW

Crude oil prices is a prime example right now. The concern of energy prices can have effects on investor sentiment. Having the ability to see the direction of crude oil prices, or natural gas prices, makes the evaluation of market direction much easier. It may influence the markets in general. But, it  can also directly affect specific sectors such as oil and gas service companies in one direction while affecting the utility sector in another direction. This makes the universe of good trade potentials that much greater.

Crude Oil

Trading specific commodities or currencies is extremely effective when using candlesticks signals. The markets in general or individual stock prices usually have multiple influences affecting their price movement. As seen in today's charts, positive trading of crude oil prices made it difficult for the Dow to push through an obvious resistance level.  Commodities and currencies, on the other hand, usually have much less outside influences affecting their direction. This provides one huge benefit. The reversals are much easier to identify and the new trend will persist much longer, usually without dramatic choppiness.

Keep in mind, candlestick signals were developed over the past few hundred years when trading Rice. This is the most basic of all commodities. Investor sentiment is clearly identified in any trading entity as long as it involves human emotions. Our recent trade on live cattle illustrates the effectiveness of a change of investor sentiment.

Utilizing the candlestick signals is the prime factor for identifying a reversal. Adding those signals to the other indicators, that most technical investors will be watching, enhances the probabilities dramatically of being in and out of a trade at the optimal points. This can be clearly seen as Live Cattle formed the Evening Star signal with stochastics in the overbought condition. Excellent probabilities for going short. The Evening Star signal is one of your most accurate and clearly defined reversal signals.  Click here for more information on the Evening Star signal. The 20 day moving average has the possibility of creating a bounce, but the failure of that level was illustrated by a non-confirmed Doji. What became our next logical target? The 50 day moving average.

October Live Cattle

A failure of that level was possible, but the stochastics approaching the oversold conditions provided the alert to watch for a potential candlestick 'buy' signal. The Bullish Harami provides valuable information, the selling had stopped. The close of the Bullish Harami, being right at the 50 day moving average, makes for a very simple closing strategy. If prices open lower and continue lower, the 50 day moving average was just a quick test. Any trading above the 50 day moving average would confirm the buying after the Bullish Harami. Any trading above the 50 day moving average became our stop for getting out of our profitable trade.

Did we short at the exact top? Did we get out at the exact bottom? No, we took the low risk, high probability fat part in the middle.

Click here for  the Moving Averages  and Candlesticks signals training CD

The point of investing is not to maximize your profits on every trade, but to maximize your profits in your account with the least amount of risk.

Live Chat sessions - Chat session tonight for members at 8 p.m., RickyWayne, who has been moderating the daily chat session with live voice will be doing a brief guest appearance describing his trading program using candlestick signals. If you are interested in learning more about short-term trading using the candlestick signals, please join us in the daily chat session. This is a perfect opportunity for learning all the little nuances for successful trades with somebody right there to help you. Come join us, the session is open 20 minutes before the market opens and closes when the market closes. This becomes an a perfect forum for many eyes to identify good trades at their inception.

The daily chatroom  is a good place for both stock investors and commodity investors to monitor specific trades with RickyWayne and Steve Bigalow  at your fingertips.

Good investing

The Candlestick Forum staff