Stock Trading Strategies - Taking Profits, An Easy Process With Candlestick Signals
The application of stock trading strategies is the most important element for a successful investing program . Most investors never implement any stock trading strategies. Most investors do not have a game plan when it comes to their investment dollars. They buy when somebody tells them about a good stock to buy. The next purchase might be something they read in the newspaper or a magazine article. After a while, they have a portfolio of positions of which they don't remember why they bought each position, which certainly means they do not have a program for when to sell the positions. Stock trading strategies require entry parameters and exit parameters. These functions are greatly enhanced with Candlestick analysis.
Candlestick signals hold an immense amount of information in their formations. Over the past few centuries, Japanese Rice traders have made fortunes by recognizing reoccurring patterns in investor sentiment. These signals are as accurate for defining the time to sell as they are for showing the time to buy. Considering that the signals are still around after hundreds of years of utilization and producing profits, it should be assumed that there is something in the signals that work. As hard as it is for most investors to find a system that produces profitable trades, it is even harder to find a program that designates when to sell, especially when the enthusiasm is running-over for owning a particular stock.
Buy low, sell high! When is it time to buy? Usually when there is panic in the streets! However, most investors cannot get by the emotional hurdle of buying at the bottom. The same emotional problems occur at the top. The Japanese traders say "let the market tell you what the market is going to do." The utilization of Candlestick signals makes analyzing the direction of the markets and stock price trends relatively easy. It becomes difficult at times to sort out price direction when listening to the many scenarios from the so-called “market experts.” Watching the financial news stations will always provide a multitude of opinions of where the market or a stock price is going. Using Japanese Candlesticks signals will circumvent all that noise.
The one basic factor built into Japanese Candlesticks signals is that they are formed by the cumulative knowledge of all the investor input, the buying and selling of trading entities during a certain time period. No matter what you hear as opinions about potential price moves, the Candlestick signals tell you exactly what investor sentiment is doing now.
When an investor is fortunate enough to be sitting with a stock that has made a strong up-move, difficult emotional factors enter the selling decision. Where do I sell? Two emotional elements enter the picture. Greed is first. The average investor wants to hold on to a profitable stock position because this one could keep going to the moon and ‘make me rich'. We imagine how much money we would make if the trend continued for another profitable 20 points. This emotional thinking usually deters the rational decision for selling when it is time to sell. Instead of analyzing where the trend could be ending, ‘hoping' for what the stock price could potentially do becomes the overriding factor. Unfortunately prices did not give a hoot about what an investor is “hoping” for.
Fear is the next factor. How stupid we would look if we sold a stock at $20.00 and it went to $30.00. The biggest fear becomes ‘selling out too early.' Investors usually have a hard enough time identifying profitable trades. They definitely do not want to sell out too early. That fear now causes investors to hold on to a position well past the time that it should have been sold, giving back a good portion of the profits. Candlestick signals eliminate that dilemma. Hundreds of years of refinement
high probability sell signals. Using the major Candlestick sell signals will immensely increase your profits. Candlestick analysis provides a format for establishing buys and sells.
Buying a position using a Candlestick buy signal puts the probability of being in a correct trade highly in the investors favor. Conversely, selling a position when the Candlestick sell signals start to appear puts the probabilities of being out of a trade near the optimal sell areas highly in the investors favor also. The critical word is probabilities. The probabilities already have been identified, through the use of Candlestick signals, for centuries.
Does that mean that every buy signal is going to work correctly? Definitely not! But it does get the Candlestick investor into positions that have a great probability of working. It also allows the investor to close out trades that aren't working immediately, cutting the losses short. The Candlestick sell signals create a high probability situation indicating that is time to take profits. Does this mean that every sell signal indicates the absolute top of a trend? Definitely not! But it does provide a format to identify when the �probabilities' indicate that the top is near. Additionally, there is nothing wrong with selling a position when the probabilities say it is time to sell and buying back later when the signals indicate that is time to buy again.
Additionally, there is nothing wrong with getting out of a position when the signals say it is a good time to get out and then buying back, even at a higher price, when the signals indicate the buyers are coming back in. The point of investing is not to maximize your profits on each trade. The point of investing is to maximize your profits in your account as a whole.
When the Candlestick signals indicate that the probabilities are not in your favor, why a fight it? As seen illustrated in the Dow chart, the bullish trend from late October into mid-November 2004 started to reveal Candlestick sell signals, a Evening Star signal, a Bearish Engulfing signal and a few Doji's. This congestion area became an opportune time to take profits in some of the stock charts that had moved up and were now getting toppy. And with simple analysis, upon seeing the trend exhibiting bullish Candlestick formations, coming up out of the congestion area, a signal to buy back into the positions that had pulled back or buy new positions that were showing good strong buy' signals at the time the Dow was moving up again would have been identified.