Candlestick Trading Blog

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Forex traders make their money by trading currency pairs. They use both fundamental and technical analysis. Technical analysis applies to price patterns of one foreign currency as measured by another. But, fundamental analysis needs to cover measures of the economy, balance of payments, and monetary policy of each of the nations whose currencies traders are trading. It is necessary to be aware of the goings on in both nations whose currencies one trades as Forex profits come from changes in the relative value of one currency such as the US dollar versus another currency such as the Yen, Euro, British Pound, Swiss franc, Australian dollar or Canadian dollar. In currency trading those using objective and easy to read Candlestick charts will find this technical chart analysis tool effective in appraising market sentiment when trading currency pairs.

Trading currency pairs including the Euro has been volatile of late as the European debt crisis continues. Traders following the fundamentals of the Euro are waiting for an upcoming meeting of European finance ministers for clues as to how soon and how thoroughly the EU will address the sovereign debt problems of the so called PIIGS group (Portugal, Ireland, Italy, Greece, and Spain). The Euro has popped up and down with each news release, or so it seems. The other day the German lower house of parliament, the Bundestag, voted in favor of measures to support a bailout of Greece and other nations that are in danger of insolvency. In trading a currency such as the Euro it is important to have as clear a picture as possible of the fundamentals of the European economy and monetary policy. But, in trading currency pairs there is always another currency. So, traders follow US employment statistics or pronouncements and actions of Japanese or Swiss central banks, depending upon which foreign currencies one is trading against the Euro. As always the fundamentals are quickly discounted by the market. Thus currency traders pay close to price patterns with Candlestick analysis . Just as with trading stocks , trading futures , trading options , or trading commodities , Candlestick pattern formations provide insight into the sense and direction of the market when trading currency pairs.

When trading currency pairs in Forex trading profit often comes from picking the right currency pair to trade and requires the clear sense of the Forex market that Candlestick patterns provide. By keeping an eye on the Forex news traders have a clear sense of where there is market volatility , where market trends are going, and when a market reversal might be ready to take place. Being in the right place at the right time is important to profits in Forex or any trading. Gaining and maintaining a clear view of market sentiment with technical analysis tools like Japanese Candlestick charts is then necessary to profit from price movement when trading currency pairs. Whether one is trading one major currency versus the other (majors are the US dollar, Canadian dollar, Australian dollar, British Pound, Yen, Euro, and Swiss franc) or trading a major versus a minor currency such as the Ruble, Rupee, or Real, objective and easy to read Candlestick signals coupled with Candlestick trading tactics can make the difference between profit and loss in an active market.

Timing stock investments is commonly the key to profits in the NYSE or NASDAQ. Fundamentals are what drive eventual price of a stock. When fundamentals change so do stock prices. Using fundamental analysis helps in knowing what stock might be selling at a bargain price but not in timing stock investments. Technical analysis with Candlestick charts does not tell us anything about intrinsic stock value, price to earnings ratio, or margin of safety. But, Candlestick pattern formations helps traders and investors decide when a stock has hit bottom. Candlestick pattern formations help investors and traders increase their profits by buying at the bottom of a price curve and not when stock prices are higher. When stock fundamentals change there is often a period of market inefficiency as the market digests new information. News that occurs before market hours often causes a stock to open well above its previous day close. Success in trading a breakout gap like this often depends upon technical analysis with Candlestick patterns.

In the often chaotic and confusing stock market news of today investors are confronted with conflicting opinions and what appear to be conflicting market fundamentals. Timing stock investments can be tough for the investor steeped in fundamentals when the fundamentals are uncertain. At such times a firm grasp of how to use clear and easy to read Japanese Candlestick charts can help both investor and trader. The old saying about not being able to see the forest because of all the trees certainly applies to trying to invest in stocks or trade stocks in a market of confusing fundamentals. Here is where a tried and true system like Candlestick analysis comes to the rescue.

Market trends and market reversal occur in repeating patterns over the years. What may seem to be a brand new stock market trading phenomenon has typically been seen many times before. Rice traders in ancient Japan saw this and categorized various price patterns. They found that when the first part of a pattern occurred the second part was highly probable. Japanese Candlestick charts that first had application in commodities trading of rice have found application in trading options, futures, Forex, and stocks. It not only works for day trading but for long term investing as well. Although investors timing investments may hold a stock for years their long term profits will be substantially higher if they buy stock at the best price and if they sell stock at the optimum price. Investors typically research stocks and by timing stock investments buy when the price is right, and eventually sell when dividend stocks stop paying dividends or stock price appreciation tapers off. Traders benefit from both rising and falling stock prices. Both benefit from the insight into market sentiment that Candlestick chart formations offer.

Stock market analysis with Candlestick signals provides objective insight that investors and traders do not get from analyzing stock fundamentals. Analysis of stocks with Candlesticks pattern formations as a guide helps investors in timing stock investments in order to gain maximum profits.

Online Stock Market Reviews presented live via the internet by Stephen Bigalow

Since 2006 it has been possible to trade options on the VIX itself. Options traders expecting to see the VIX fall are the ones buying puts on the so called fear index itself. Traders can trade the VIX directly but stock traders more commonly use the VIX fear index as a guide in helping predict market trends or a market correction. Traders using Candlestick analysis for technical analysis of stocks can use the so called VIX fear index as an adjunct to understanding and predicting changes in market sentiment.

When the VIX fear index peaked recently, traders, expecting a fall from historic highs, bought puts on the index. Those trading the VIX fear index directly can use both fundamental and technical analysis. Those who simply use the so called VIX fear index as a guide will use the expectation of a decline in stock volatility into their calculations for future stock trading. The extreme stock price volatility and index volatility that the market has displayed recently seem to stem largely from concern about the potential economic effects of the European Union not solving its sovereign debt dilemma. Recent pronouncements by German and French leaders seem to have calmed the markets a little to which some credit to the likelihood of decreased market volatility. Considering how uncertain this situation still is traders will be well advised to keep up their Candlestick charts in order to accurately tap into market sentiment. As fundamentals are quickly discounted by the market traders use Japanese Candlestick charting to anticipate approaching price changes and buy stocks or sell stocks accordingly.

Remember when using the VIX as a guide that the so called VIX fear index does not differentiate between a high volume of puts on the S&P 500 index which indicates a potentially falling market and a high volume of calls which indicates a potentially rising market. Also remember that calls and puts on the VIX index itself have to do with expectations of higher or lower volatility, not a higher or lower stock market. No matter what the so called VIX fear factor seems to tell us, traders using Candlestick pattern formations as a guide know that market sentiment can always change and that with Candlestick signals as a guide they can profit in both up and down markets.

Online Stock Market Reviews presented live via the internet by Stephen Bigalow

Trading the US dollar in the Forex market is primarily the business of companies doing business internationally. If a US company purchases machine parts manufactured in Germany they will typically need to convert their dollars and pay with Euros. In order to reduce the risk of changes in currency rates in such a case the US company will often hedge their currency risk by buying calls on the Euro with US dollars. If the Euro falls in value the company need not execute the contract and will simply pay less in dollars for their purchase. If the Euro recovers the company will execute the contract in order to pay the expected price in dollars for their purchase. Trading the US dollar in this case is a matter of hedging currency risk and is a necessary aspect of foreign trade. However, not all traders of foreign currencies do business internationally. Anyone willing to learn the ropes of trading Forex can profit from trading the US dollar or other currencies. Traders familiar with Candlestick analysis will find this technical analysis tool just as valuable in trading the US dollar versus the Yen, British Pounds, Swiss franc, Euro, Australian dollar or Canadian dollar as it is in trading stocks and commodities.

Currency trading is not limited to pairs including the US dollar. However, the greenback is used in roughly 85 percent of all Forex transactions. In fact, many minor currencies are not traded against each other. To convert one minor currency into another one trades the first currency to purchase dollars and then uses the dollars to buy the second currency. Trading the US dollar has been profitable in the last month as the dollar has risen against all major, and virtually all minor, currencies. Fundamental analysis tells part of the story. There is a general concern that the European Union will not solve its sovereign debt dilemma and that Greece, followed by Italy and others will default on national debt. Industrial production is down across the world. In times of economic turmoil there is generally a flight to safe haven currencies including the US dollar. The Swiss franc and Yen might be options but both nations are selling their currencies in order to avoid having their currencies become overpriced. Technical analysis with Candlestick charts helps tell the rest of the story. In the currency market there are waves of trader sentiment that may, at times, seem to be at odds with fundamentals. Using Candlestick pattern formations and Candlestick trading tactics, currency traders can successfully anticipate and profit from changes in rates when trading the US dollar or other currencies.

Online Stock Market Reviews presented live via the internet by Stephen Bigalow

Today’s volatile commodities trading can lead to profits if traders follow fundamentals and trade with technical analysis tools such as Candlestick analysis. Gold futures were going up and now they are going down. Industrial commodities are in retreat as global recession threatens again. The dollar is strengthening as Forex investors seek safe haven in the US dollar which in turn makes every dollar denominated commodity cheaper. Stocks have fallen as well as traders concern themselves with the prospect of Europe not really fixing its debt dilemma and leading the world back into negative growth. Amid all of this mess traders will do well to remind themselves that volatile commodities trading can be profitable commodity trading. The value of trading commodities, stocks, options, futures, and foreign currencies as opposed to long term buy and hold investing is that there is profit to be made when equities go down as well as when they go up in price.

As the world anticipates another dip to the recession stock prices are down, the US Dollar is rising, and volatile commodities trading is trending to the down side. How does a commodities trader profit it this environment? Is it time to sit on the sidelines, trade commodity futures options, only sell commodities? All might be possibilities but the most important part of trading commodities in today’s environment is to have a clear view of market sentiment. Using Candlestick charts, traders have successfully traded commodities going back centuries to when there were Samurai in Japan. Rice traders recognized price patterns and learned that they could buy or sell rice based upon recognizable Candlestick patterns. Today traders buy commodities futures or sell commodities futures based upon the same Candlestick pattern formations that traders have long used.

Gold and silver futures are trading more like commodities these days than like safe havens for wealth. Both precious metals peaked recently and then fell as the dollar strengthened. The driving force behind the rise of these metals, especially gold, has been the belief that the dollar and Euro were headed for the abyss. As the dollar strengthens many traders have moved in, assessed the markets with the technical analysis insight provided by Candlestick charting and profited by selling gold or silver futures or selling short on gold exchange traded funds. Although volatile markets can be chaotic they can also be profitable. Successful traders can approach volatile commodities trading very objectively with statistically based Candlestick charting techniques.

As oil futures fall traders concern themselves with the unrest in the Middle East as well as the prospect of both a new recession and a possibly stronger dollar. Fundamentals are always discounted by the market but in times of volatile commodities trading traders must rely more strongly on the unbiased assessment provided by Japanese Candlestick charting in successfully anticipating commodity price changes. Candlesticks help traders see new market trends early and anticipate market reversal before being caught in a market correction. As in the days of ancient Japan when rice traders profited by following Candlestick signals traders of today can avoid being caught up on market psychology and objectively trade during periods of volatile commodities trading.

Fundamental analysis gives traders the broad range in which a stock will trade. However, the market quickly discounts fundamentals as soon as they are generally known. Thus traders use technical analysis tools like Candlestick analysis in order to profitably anticipate the movement of stock price of any individual stock. Technical analysis works better with stocks that trade in high volume and are sufficiently liquid. Technical analysis with Candlesticks generates higher profits in stocks that move up and down, namely stocks that are somewhat volatile.

In choosing stocks to trade it is also useful to pick stocks in market sectors that one knows about. For example a pharmacist, nurse, or physician may have a better sense of medical and pharmaceutical products than the average trader. Someone working in the insurance industry may have a better sense of insurance stocks. But, for someone without any specialized knowledge to bring to bear, how does he go about choosing stocks. In our computerized world a trader can use stock screening tools to generate lists of volatile stocks, liquid stocks, and stocks with high trading volume.

Consulting seasoned stock traders is also a good way to go about choosing stocks to trade. For example, members of Candlestick Forum can always watch the video follow-ups of Stephen W. Bigalow’s stock picks or sign up for one of his online webinars. Not only does this help traders in choosing stocks to trade but it gives them insights into how to trade stocks. By following in the steps of a seasoned stock trader, both new traders and experienced traders can pick up useful tips for choosing stocks to trade, tips on doing fundamental stock analysis and how to do technical analysis of stocks. Techniques for choosing stocks to trade also work for choosing commodities, options, futures, and for foreign currency trading. Look for equities that trade at high volume, high liquidity, and high volume. Then use easy to read Candlestick signals in order to profitably anticipate price changes. With Candlestick patterns as a guide traders can gain an objective view of market sentiment and trade accordingly. Choosing stocks to trade and then following up with expert advice from seasoned traders like Stephen W. Bigalow can help all traders in gaining profits in the markets.

Apparent strengthening of the dollar and indications that the European Union will not let its weaker members go bankrupt have weakened gold recently. Fundamental analysis of gold prices has primarily had to do with the immense debt burdens carried by many nations and the worst recession in three quarters of a century. However, all of the fundamentals are discounted quickly by the market. Candlestick analysis of gold prices gives traders an objective view of market sentiment and allows them to avoid falling prey to the trading psychology of fear and greed that so often prevails in periods of market volatility. Looking to the future many gold traders contend that currencies will continually fall in value across the world and that gold will rise, as related to the dollar or other currencies. This was the same argument made throughout the 1970’s as gold rose from $32 an ounce to over $600 an ounce in early 1980. Then gold corrected as the US drove interest rates up. It ended up in the $200 an ounce range which is where gold investing remained for two decades. Today we are a decade into a bull market for gold and at a time when Candlestick analysis of gold prices can help traders decide whether to buy gold, sell gold, or trade options on gold futures or stocks.

Candlestick analysis of gold prices - with Japanese Candlestick Charts - can be profitable. Gold has gone up nearly eight fold in price in the last decade or more. Anyone who bought gold around the year 2000 has done well. However, gold, like all commodities has had its peaks and valleys as its price has risen. Traders using technical analysis tools like Candlestick charts have been able to profit with each significant rise and fall in gold prices, surpassing the profits earned by those who simply bought and held gold bullion over the last decade. Now as the gold rally enters its second decade smart traders are aware that gold can go down in price as easily as it can go up. By following trading patterns with Candlestick pattern formations as a guide, traders can obtain a clear view of market sentiment and both profit from upswings in the price of gold and avoid being caught in a big market correction. If, for example, the US raises interest rates and gold prices plummet, like in 1980, Candlestick analysis of gold prices could lead to profits instead of losses.

Economic uncertainty and a valid concern about the solvency of nations have introduced a note of panic into today’s stock market. But, stocks that depend upon economic growth are more volatile than consumer products stocks. A double dip recession may reduce the sales of computers, cars, new homes, and luxury items but it very likely will not do much to change sales of household bleach, hand soap, or other common household items. In trading commodities, such as with gold futures, traders benefit from economic uncertainty but oil futures fall in response to the threat of an economic downturn. On the other hand, wheat, soybean, and corn futures are typically less affected by the economy and more affected by global weather patterns, which in turn affect harvests.

Traders can choose trading commodities or stocks to benefit from today’s chaotic markets and they can also play it safe by picking stocks or commodities to trade that are less affected by the economic drivers of today’s markets. No matter whether one is trading commodities or stocks the trader does well to use both fundamental and technical analysis to make profits. Fundamental analysis gives traders a clear sense of the potential in an individual stock or commodity. But it is technical analysis with Candlestick chart formations that gives the trader an objective view of market sentiment. In times like these the psychology of trading can destroy even the most well designed trading strategy. Greed and fear have ruined many well-made trading plans. But with easy to read Candlestick analysis signals as a guide in trading commodities or stocks, traders can profitably navigate the ups and downs of the market.

In short, both stocks and commodities offer market volatility as a path to profits. Also, in trading commodities or stocks one can find more stability in some equities than in others. In both markets traders can buy or sell directly or trade options. In both markets traders are well advised to do technical analysis with Candlestick charting techniques in order to obtain and maintain a clear view of the market and its immediate potential. Candlestick traders can profit by buying stocks or commodities, selling stocks or commodities, selling short with either, or staying out of either market based on Japanese Candlestick trading signals that have served traders well and gained traders profits for centuries.

The truism that the market immediately discount the fundamentals has already played out for those trading bank stocks. Bank of America and others all saw declines when news of the possible US Federal Housing Agency law suit surfaced. However, law suits go on for years and the news relating to such suits has the potential to drive share prices up and down many times. These banks may survive, may end up with government bailouts again, with the US tax payer owning shares, may join in mergers, and may go bankrupt. Trading bank stocks in this potentially chaotic situation could involve direct trading of shares and could involve buying options in the form of buying calls or buying puts depending upon which direction Candlestick analysis indicates prices of shares will move next.

Analyzing foreign stocks listed on US markets commonly provides those involved in both day trading and long term investing with sufficient information for accurate fundamental analysis. Technical analysis with tools like Candlestick stock charts is as effective in analyzing foreign stocks as with home grown stocks if they both trade on either the NASDAQ or NYSE. Those interested in trading ADR’s of foreign stocks or interested in long term investing in foreign companies will be able to trade level II and III ADR’s and have access to information of similar accuracy and depth about the stock as they would have with stock of an American company.

Analyzing foreign stocks for short term investment or for buy and hold investing is similar to analyzing domestic stocks. However, a foreign stock will usually represent a company that operates in different markets than US stocks. Chinese banks listed on the New York Stock exchange are in a much more rapidly growing economy than domestic bank stocks. Employment figures, economic growth, monetary policy can be important in analyzing foreign stocks. However, the numbers will commonly refer to China, India, Brazil, Russia, Japan, or whatever other nation the company is located in. On the other hand company specific financials will be the same and should have investors and traders a clear idea of the company’s intrinsic stock value and margin of safety. As with US stocks a high price to earnings ratio may indicate that a good stock has already been bid up in price and that the market is anticipating exceptional growth.

With Asia leading the way out of the recession foreign investment may be a good way to earn profits in both stock investing and stock trading. As with all trading and investing, both fundamental and technical analysis are necessary for profits. With the use of Candlestick patterns it is possible to anticipate market trends, both domestic and foreign, and to profit from market advances as well as market reversal.