Candlestick Trading Blog

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Investment Philosophies – Shaping Your Future
It seems like developing an investment philosophy is automatic. No one would venture into the stock market without a clear understanding of what they want to accomplish and how they are going to do it. Yet surprisingly, many people do not have an understanding of this stock investing concept. It is important to look at how you want to make your money and most times, your investment philosophy falls into three main categories: growth investing, income investing and value investing.

Growth Investing
As the name implies, growth investing is the investment philosophy of looking for the big winners in the stock market. Growth investors are looking for companies that possess a high potential for growing earnings. In theory, high growth equals high stock prices and in turn, high profits. People involved in growth investing take their risks wagering that young, upcoming companies will break through and become leaders in their industry. Google stock is a perfect example of a growth stock, as were technology stocks in the 1990’s.

Many companies that fall into this investment philosophy started with a dream, an idea and nothing else. They were able to overcome the obstacles and become strong profitable companies. Most of the companies in this investment philosophy look like rising stars until reality sets in and they turn out to be falling stars instead. This investment philosophy offers risk reward ratios that are quite drastic. While the rewards can be very high in growth investing, the risks are higher as well.

Income Investing
Income investing is the most conservative and easy to understand investment philosophy. Income investors target companies that consistently pay high dividends. This is one of the preferred stock market strategies for those around retirement age. This investment philosophy looks for companies that tend to be large and well-established. As taught in stock market investing 101, there are always risks, but income investing is the most conservative approach. If such a company’s stock increases, the investor can cash in, trading some capital appreciation for a higher dividend.

Value Investing
Value investors look for one thing; they look for stocks that have been overlooked by the market. While this doesn’t necessarily mean they have a low share price, it does mean that for whatever reason, the market has undervalued a particular stock. Many times, a stock gets overlooked while investor chase profits in another related sector or in a company that is in the same sector but is perceived differently by investors. Stock technical analysis is important with such companies since an investor doesn’t want to confuse undervalued with underperforming. A value investor can look at the price to earnings ratio as one guide to the value of a stock. The hope of the value investor is that the market will recognize the worth of the company and its stock will be bid up to true value, realizing a profit for the trader.

All three investment philosophies are viable and valuable to successful traders. It is neither required nor recommended to strictly follow one particular strategy. One of the keys to a profitable stock trading plan is to have a diversified portfolio; one of the keys to having portfolio diversification is to utilize various trading techniques. One of the best ways to shape a profitable trading future is to take advantage of each investment philosophy that is available.

Although everyone who is investing in the stock market wants to say it; many have said it when it was the farthest thing from the truth. The statement, “I beat the stock market” is a goal of every trader, successful and unsuccessful alike. For that matter, what is wrong with wanting to play the stock market game?; the measure of a trader’s success is his or her performance against its standard. In order to understand “winning the stock market game”, it is important to define what the stock market is. The S&P 500 Index is widely considered the barometer for performance. Such a standard has its flaws since S&P is heavily weighted with large cap stocks. With that being the case, let’s look at a couple of other measurements for winning the stock market game.

As the Google stock price for the Internet search giant passed $500 per share in late November 2006, it continued to evolve as a true force as reported in Wall Street news. The Silicon Valley based firm has moved into the number two spot among all Valley companies in market value, surpassing such companies as Intel Corp, while trailing only Hewlett-Packard Co. Ironically, HP was started in a garage sixty-seven years ago and Google was also born in a garage eight years ago. Google’s powerful rise makes them currently a strong investment option and an excellent target for long term investing.

The incredible success of Google has made multibillionaires of its two founders and its chief executive, as well as making millionaires of hundreds of other Google employees. Many successful traders are looking to own a piece of the Internet’s most powerful company. Google has created a brand recognition so strong that the term “google” has become a part of the English language. All of this has vaulted Google stock into not only rarified air with its stock price history, but cemented its reputation as an investment option while leading investors to use it as a part of their stock market strategies.

Since its emergence as a publicly traded company in August 2004, the Google stock price has steadily risen. The Google stock IPO was $85 per share and the company broke the $100 per share barrier the same day. Google’s trip to $200 per share took less that three months and seven months later, the $300 plateau was reached as well. The Google stock price achieved $400 per share in November 2005. Such a steady rise has caused Google stock to become a reliable portfolio diversification tool for many investors.

Google has used its recent acquisition of YouTube Inc, to fuel this latest climb in stock price and as the company introduces new ways to glean more dollars from online advertising, it is extremely likely that the strength of this investment option called Google will continue to grow.

As investors perform fundamental and technical analysis looking for trade prospects, companies such as Google will continue to rise to the top of the list. While the price per share is prohibitive for many investors, Google stock shows no signs of slipping as an investment option. Analysts generally do not view the Google stock price as over-inflated, citing its rapid growth that many believe will push the company’s market value above $200 billion and its share price over $600 in the next year. Google has shown an aggressive approach to future growth and should be viewed by those investing in the stock market as an investment option not only today, but well into the future.

Google’s rise from the garage in eight short years has been powerful, affecting the Internet and Wall Street alike. As its stock price breakouts soar to new heights, Google will continue to be a strong investment option for many years.

If you are looking for a promising start to your option trading education, corn futures, at their highest in two years, continue to rise because of the combination of increased demand and dwindling supply. Such a combination makes this a great time to consider investing in corn futures.

There is a strong consensus among traders that this year is good for purchasing corn futures. In the USA, a lower than expected number of acres was used for corn and droughts in some areas damaged other fields. As supply continues to decline and demand continues to increase, it is likely that the price of corn futures will follow suit and continue to increase as well. If your stock trading plan includes options trading, corn futures could be a solid gainer, not only now, but for some time in the future.

While the corn crop in the USA this year will be one of the largest ever, it is anticipated to be below the anticipated world-wide demand as countries use more corn for livestock feed and ethanol production. Using a stock trading system such as Japanese Candlesticks, an experienced trader can see the indicators of an upswing in the corn futures market and move accordingly.

While the rush to buy corn futures continues to be incredibly strong, successful traders in corn futures will continue to monitor the market, looking for any kind of corrective pullback. If this correction occurs, futures investors will move in, seeing the opportunity for even larger gains. With indicators showing that end users are getting nervous about prices, which corrective movement may be near.

Corn prices may increase as hedge funds and other large speculators continue to buy more corn futures. This increase has been seen in the Soybean market as well. These groups are moving funds from old stand-bys such as crude oil, copper, and gold as their commodity trading intensifies. Having seen what can happen in other commodities, such as sugar and copper, investors are willing to move their positions in order to maximize their profit.

For the beginner investing in commodities, a futures contract is a forward contract, where the investor agrees to buy or sell an asset (such as corn futures, wheat futures, oil futures, etc) of any kind at a pre-agreed time. Such an agreement may also differ from forwards with regards to margin and delivery schedule. Because futures can be confusing, it is wise to consider taking a commodities trading course prior to any significant investment in the futures market.

Success is such a situation is dependant on a variety of factors. Familiarity with the corn futures (or any other commodity) is tantamount. Secondly, it is necessary to understand the markets and how they operate, especially regarding the commodity you intend to trade. Finally, it is extremely helpful to have a proven system such as candlestick trading tactics for evaluating the market. When fully equipped, a wise investor can be quite successful in the futures market. It is very possible that increasing your wealth today as a great deal to do with the “future”.

As the US economy has surged in recent history, competing forces have been at work. The economy, as a whole, has been carried on the back of a booming housing industry, surging in spite of the fact that other variables have been at work to hinder its growth. With the housing market stumbling into the November elections, the key will be to continue to watch oil economy. As oil economy continues to have a prominent role, its effect could be an important stock option trading strategy.

While the price of oil soared to a record high in 2006 of $78 per barrel, the economic impact of oil prices was offset by the surging housing market. With the housing market faltering, the impact of oil economy will assume a more prominent role in shaping the immediate future of the US economy than before. This will be a signal for successful traders in the options market to begin reviewing their holdings and watching the trends in their candlestick chart patterns for signals to buy and sell due to the impact of oil economy.

As mentioned, the housing market decline has the potential to cause a recession; however, the impact to the economy from falling oil prices will work to reduce this risk to a slowdown only. As fears of inflation subside, the price of oil will affect the economy substantially, whether positively or negatively, in the future. The price of oil shaped the economy in October 2006 when it dropped from its high of $78 a barrel for West Texas Intermediate crude to $58 a barrel. This drop in prices took place without a substantial change in supply and demand. It is also wise to note that no drastic changes in world events took place during this time. In this instance, many experts suggest that the technical analysis of the effect of oil economy was a run-up caused by speculation. Now that recent volatility in the Middle East has tapered off and no major hurricane damage was experienced to production facilities in the Gulf of Mexico, it is believed that price of oil, and its economic impact, will level out as well.

Other factors involving oil economy include:

• An oil strike by Chevron reportedly located in the Gulf of Mexico. While this find will not likely impact short-term, the oil and its economic impact will make a future splash on the oil futures market.



• The collapse of the hedge fund Amaranth. Experiencing one of the all-time investing mistakes, Amaranth lost $5 billion in one week trading natural gas futures. It’s possible that this could have both short and long-term effects on the economy and the oil futures market.



• The demand for oil in non-Japan Asia. While the effects of the staggering Asian demand for oil and its economic impact are indirect, the overall impact could be to keep oil prices inflated. These will have ramifications on both the oil futures and the economy, by keeping demand, and in turn oil prices, elevated.

Successful FOREX traders consider expert analysis and discussion of theory extremely important for FOREX trading. While the technical aspect of trading can’t be overlooked, it is equally encouraging for the trader to hear about examples of trading success in FOREX news. As with any other successful trading, FOREX requires the investor to analyze data and determine a feel for the movements of particular currencies. Afterward, the trader needs to implement his, or her, trading plan and monitor the deal for changes. Successful FOREX traders find that following a tried and true method can often lead to big profits in trading FOREX.

In the minds of successful FOREX traders during 2006, it has been apparent that the Canadian dollar was struggling under the weight of a very sluggish economy. Some analysts foresaw success in FOREX trading using a core long position in Australian and Canadian currency. The logic behind this thought was that had been a breach of trend line resistance, positive carry and the expectation of interest rate changes made this a prime a candidate for some successful trading. As news of Bank of Canada’s announcement of a lower than expected GDP began to trickle out, the experts recommended a long position in the US dollar against the Canada dollar. By trading a long position in USDCAD, this provided successful FOREX traders a hedge fund against a short exposure via the AUD.

Having defined the positions in this example, it is wise to identify some technical conditions involved in this example of FOREX trading success:

• After an extended decline, the AUDCAD showed signs of an improvement as indicated by an inverse “Head and Shoulders” pattern. This pattern was confirmed by an increase in the highs from May 2006 to July 2006.



• The initial correction ended in late July without a daily close below the critical 0.83 level. Because of this, upside beyond 0.87 seemed to be quite likely.



• The bottoming of the inverse “Head and Shoulders” pattern included a classic double-bottom, and was long-tailed in both instances, reinforcing its bullish nature.

All investors go through the same thing. When they first begin, investors search for a commodity or stock trading plan, talk with other investors, and begin studying companies and commodities for possible acquisition. What many investors fail to do is identify a successful stock market trading system for analyzing commodity trading charts. In many cases, a successful stock market trading system can be the difference between profit and loss in the markets.

For a beginner investing with a stock market trading system such as Japanese Candlesticks, it can seem a bit overwhelming and intimidating at first. Is the term “real bodies” a good thing? And can anyone really apply the term “advancing three solders” to the stock market? The answers to questions such as these are a definite “yes”! It is extremely likely that with Japanese Candlestick charts, you will have a more effective stock market trading system than ever before in your days as a trader. Oh, and so it’s not intimidating, don’t worry, this is really a simple stock market trading system to learn.

The heart of Japanese Candlesticks is stock technical analysis and candlestick chart analysis. Technical analysis is the assumption that current prices are representative of the sum of all known information concerning the markets. The price of a stock not only reflects clinical facts, but it also represents the emotions and the “feelings” of a particular moment. Panic, hysteria, elation, greed and fear all are tangible factors when dealing with the markets because the markets can move based on emotions instead of facts. An expert in the market tries to remove the emotion factor from all decisions and base decisions on candlestick chart formations, assuming that the prices reflect all variables.

Candlestick charts are the oldest type of price predicting charts, dating back to the 1700’s when they were used for predicting rice prices. In fact, during this era in Japan, Munehisa Homma became a legendary rice trader and gained a huge fortune using candlestick analysis. He is said to have executed over 100 consecutive winning trades! These charts are easily readable and were given colorful names by the Japanese traders of the day. Because of the military influence of the era, the formations were given such names as “counter attack lines” and yes, “advancing three solders”. The same skill, strategy, and psychology that are necessary in a battle are equally important when utilizing a stock trading system.

Like bar charts, these charts are driven by high, low, open, and close data. If the body of the candlestick is filled, it represents a bearish situation and an open body represents a bullish one. There are thin lines above and/or below the real body that are called “upper/lower shadow”. These candlestick pattern formations represent the price extremes for the desired period. This information is read more easily and provides more information than regular bar charts, providing the investor with a stock market trading system that is powerful, easy to use, and able to provide better stock market results to the investor.

Anyone involved in Forex trading knows that the media can have a significant effect on the dynamics of the foreign exchange markets. Newcomers to Forex trading need to understand this phenomenon in order to become successful traders. The British pound advanced on Tuesday, October 17, 2006 after inflation data in the UK supported the media-driven belief that the Bank of England will seek to increase interest rates in November. While analysts said that the data was more correctly supported by the falling oil prices and headline-grapping numbers about inflation merely masked the truth, the Forex news of this anticipated increase affected the Forex trading of the British pound.

While the US dollar showed little movement in spite of a drop in manufacturing production and a rise in capital inflow, the pound had moved 0.5% higher against the dollar and 0.4% higher against the euro. Although some analysts discounted the Forex news and its effect on Forex trading, this represents a valuable lesson in Forex currency trading for beginners. Forex trading involves anticipating movements of two different currencies, buying when the difference is low, and selling when the difference is high. Because an investor can buy on the margin, such trades can become blockbusters from minimum investments. This anomaly may have been the lack of reaction by short-term traders because of a recent cut in US interest rates; however, the fact remains that independent movement of a currency with regards to another currency is exactly what provides the ability for trading successfully in Forex trading.

Another currency that found a likely jump in its value in Forex trading due to Forex news is the Japanese yen. On Monday, October 16, 2006, Russia announced that it will add the yen to its Forex reserves. This Forex news fueled a 0.3% rise against the dollar and a 0.2% increase against the euro. This Forex news was significant, not only because Russia’s Forex reserves are the third largest in the world, but because it would likely spur similar actions by other countries. Understanding such actions helps investors to profit while trading Forex.

In Forex news that downwardly affected the Canadian dollar, the Bank of Canada revised forecast for economic growth and decided against raising interest rates. The Canadian dollar could further deteriorate as Canada’s trade position weakens and merger & acquisition inflows slow. The mergers and acquisitions inflows have been attributed with supporting the strength of the Canadian dollar. As the investor in Forex trading performs technical analysis, such statements are an alert to look for potential profits. Canadian dollars purchased prior to the announcement of economic forecasts could already be sold for profits, and positions held until year-end economic reports are available could be even more profitable. While the Forex news reports are a setback for Canada, they can be quite valuable in Forex trading while an investor tries to learn Forex trading.

Forex trading, like other markets, is based on opportunities; opportunities seized and opportunities missed. While the media earns a living reporting and analyzing Forex news, the investor needs to take advantage of this outlet while currency trading. If there is a little help on the six o’clock news for an investor, it might be the best news of the day!

Stock technical analysis is a crucial practice to embrace in becoming a successful trader in the stock market. Being able to successfully perform technical analysis for stocks helps to determine trends, evaluate changes in the markets, and rationally identify the actions necessary based upon the conditions. Without stock technical analysis, even the best investor is more inclined to react emotionally, rather than intellectually, when the market makes erratic movements.

Being able to determine trends is a learned skill whereby an investor is able to successfully track the stock price history and predict when that stock will be on an upward rise. Analyzing chart pattern reversals and understanding a system such as candlestick chart formations provide an investor with the tools necessary to find such trends. Stock technical analysis shows that the S&P 500 Index tends to be the most popular for technically analyzing “the big picture” in terms of buying and selling.

A wise investor will use stock technical analysis on the trends and do the obvious; buy when stocks are going up and sell when they are falling. Weakness with a stock trading system may appear as indicators of pending economic conditions usually publicized in the media. Indicators of rising interest rates can trigger some weakness in the exchange, as well as common headlines related to gas price changes and consumer spending. There are many resources online that specialize as technical analysis sites, discussing companies with favorable trends for trading and offering various charts that can be used for an advanced education on favorable trading. They also offer stock market tips that help to educate the investor.

Stock market trading tools help the investor make wise decisions resulting in good acquisitions. A stock market technical analysis breaks down investing using various charts to show indicators of favorable or unfavorable trends. These stock technical analysis tools can be a source of logic when dealing with unpredictable market trends. Stock market investing software is available on the Internet and includes different kinds of stock charts, as well as the ability to customize these charts. There are even technical analysis tutorials available. The determined student of investing can even find stock technical analysis courses, where techniques such as technical analysis with candlesticks are successfully taught.

After purchasing a stock, it is imperative to be patient with the outcome by continuing to follow its trends and watching the stock technical analysis for changes. To determine profitability, it is important to continuously monitor the overall health of a portfolio, not getting caught up in emotions related to stock volatility. For many investors, the thrill of tracking a strong buy can be offset by the dismay of overlooking another stock in the same portfolio that is destroying the overall profitability. A successful trader will not be lured into such a position. By performing a stock technical analysis, an investor can act decisively when deciding whether to buy or sell. Having a successful stock trading plan will enable an investor to experience the confidence of knowing as much about stock technical analysis and the stock market in general as possible.

It has been said in investment circles before; oil is the money machine. It’s obvious that many in certain Middle Eastern countries know this is true; there are too many photos of palatial mansions and silver-plated Cadillac’s. This statement is also well known by investors in the oil futures market. The sad thing is that many who attempt to venture into the market of oil futures do so ignorantly and the results from their investing mistakes are usually devastating.

There are many investment options in different kinds of oil, based on differences in chemical and physical makeup. These differences lead to differences in price, although each type of oil tends to follow the track of the market. Each moves independently because of the differences in oil, but globally all oil prices move in the same direction. This sets in motion the parameters in oil futures for profit.

There is an analytical relationship between the price of one type of oil and another; in other words, successful traders find it possible to profit in financial markets from a certain correlation. This means that when the price of one variety of oil goes up by a certain amount, the other types will tend to move relative to the price change of the first oil. In the oil futures market, deviations in this formula create profit generators known as spreads.

A spread in oil futures takes advantage of, and makes a profit from, a price difference which is either too big or too small when compared to its pair. For instance, the price difference between Oil Company A and Oil Company B has been around USD 6 for the last 2 years, but at the end of 2005 this price difference was USD 14.

To learn how to invest correctly and profit from this spread in oil futures, you have to buy the lesser priced product and sell the higher priced product at the same time. When the difference in prices is back to its regular level, you turn around the position again. The term for this tactic is arbitrage; profiting from temporary price differences in the oil futures market.

Remember, however, that spreads and their risk reward ratios tend to move relative one to another. During the period 2002 to 2004, the average price difference between Brent and Dubai oil was around USD 2. The reason for this level was that the oil price was much lower than it is now. Thus, oil futures trading is similar to other commodities trading in that knowing a little, but not fully, about the parameters involved can be a dangerous thing, especially without the aid of a proven commodity trading solution.

Success is dependent on a variety of factors. Familiarity with commodity trading charts is paramount. Secondly, it is necessary to know about financial markets and how they operate, especially regarding the specific commodity you intend to trade. Finally, it is extremely helpful to have a proven system such as commodity trading info optimized with candlestick signals for evaluating the market.

The most-used or obvious way to support your decisions is by using technical analysis tools. The good news is that everybody can become an expert. But as with any endeavor; experience and training, coupled with the best of strategies, separate the successful traders from the rest.

The currency trading or foreign exchange (FOREX) market is the biggest and the fastest growing market on earth. More than 2.5 trillion dollars is “sold” every day, giving turnover rate manifold times greater than the NASDAQ daily turnover. Markets are places to buy, sell, and trade goods; the same is true with trading FOREX. The FOREX goods (or merchandise) just happen to be the currencies of various countries. For example, you buy Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars. That's really all there is to this entire market. The objective of FOREX currency trading for beginners is actually very simple and obvious: buy a currency cheap and sell it for more than you paid! The profit is generated from the fluctuations (changes) in the currency exchange market. Coupled with technical analysis tools such as candlesticks, stunning profits are possible. Why use candlestick trading tactics? This method, with all of its signals and analyses, can help even the newest investor see great gains with FOREX currency trading for beginners.

Once you learn FOREX trading, the nice thing about the FOREX market is that you are able to leverage your investment at a rate as high as 200 to 1. This is called “marginal trading”. Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX, investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. This can become a strong part of any investor’s long term investing plan. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500. In virtually every time zone in the world, there are currency dealers who are able to quote rates and exchange currency literally 24 hours a day. These dealers, in many cases, offer credit lines to investors, which makes the ability to participate in marginal trading possible for the smaller investor.

FOREX currency trading for beginners is incredibly rewarding, and it can evolve into one of the most potentially profitable types of investment skills available. There are significant risks, but the ability to participate in marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. This, coupled with the knowledge and experience of a method such as candlestick chart analysis, provides the opportunity for impressive gains. Another benefit of FOREX is that its tremendous volume prevents almost all attempts by others to influence the market for their own gain. It is possible to feel confident that each investment made has the same potential for success. Although investing in FOREX as a short term practice requires diligent research, investors can use there own ability, paired with a technical analysis tool such as Japanese Candlesticks, to analyze the daily fluctuations in the market and make intelligent decisions for each transaction. FOREX currency trading for beginners is not for everyone, but it is for the investor who is ready to step forward in an effort to make profits that are the dreams and envies of those nearby.

Want to be successful in the world of commodities trading? The professionals consistently show that it can be done; however, most beginners venture in, lose a significant amount of their capital, and leave commodity trading without understanding that there are principles involved in good trading. Spurred on by academia, they believe that the markets are equally random and efficient. With this flawed approach, it would be impossible to learn how to invest with a thoughtful plan or intellect to improve your performance against the masses.

This concept has been dismissed by successful traders; these people make their fortunes by living the principles of commodities trading, not by theorizing from a college campus. George Soros, arguably one of the greatest traders of all time stated, “The random walk theory is manifestly false -- I have disproved it by consistently outperforming the averages over a period of twelve years”.  Mathematics concurs with the comment from Soros; it has been shown that the markets are non-linear, dynamic systems. Mathematicians are able to analyze such chaotic systems. Their appearance of chaos merely hides the fact that they are not completely random. Price movement in the commodity market has an element of chaos, but also includes a small trend component.

The misconception for the beginner investing in commodities trading is: in order to make money, it is necessary to know the movements of the market. The random walk, or chaos, theory suggests that the commodities (as well as other) markets are not predictable, except in the most generic sense. So states “Trader Vic”, in his book, Methods of a Wall Street Master. Famous trader Vic Sperandeo warns: "Many people make the mistake of thinking that market behavior is truly predictable. Nonsense. Trading in the markets is an odds game, and the object is always keep the odds in your favor." His message is clear; good commodities trading involves following chart formations and trends in such a way that you can be profitable.

There are several obstacles in the paths of commodities traders. Finding a long term investing method that actually has demonstrated a statistical edge over the rest is the first task. Second is consistent adherence to your method. Finally, staying with your method long enough for this “edge” to manifest itself on the bottom line. A method such as candlestick chart analysis can assist both the experienced and inexperienced commodities trader with all three hurdles. Understand this; the principles of candlestick analysis were developed in Japan while trading rice, which is a commodity! Such a method has a proven track record, as well as the edge that distinguishes it from mere gambling on the market. It ignores the desire to establish order in the commodities markets and follows basic commodity trading info optimized with candlestick signals in a given commodity. When followed, such a method can give the investor the edge and the discipline to stay successful in commodities.

The ultimate responsibility of the commodities trader is to forsake the search for order in the market, find a method, such as commodity swing trading, to enhance success, and stay the course. Commodities trading is not the monster that many investors fear; with patience and discipline, it is a means for great financial success.

If you are new to trading forex or if you are not new to trading forex but you just aren't making any money, it's not comfortable but you are not alone. As you have probably already heard, an estimated 90% of traders lose money as they learn forex trading.

So what can you do about it?

By following the eight steps listed below, you have a very good chance to take yourself from unsuccessful trader to successful trader.

1. Stop trading and don't even think about trading forex with real money. This is the best investment advice for the beginner. Why would you continue doing what you are doing if you are not making money?

2. Buy a ready-made system that has proven itself by delivering positive results. Be careful! Don't go out and buy just any system, or a system that is too expensive. There is a time and place for an expensive, yet proven, stock trading system. They are readily available. Don't let clever sales copy persuade you into buying something worthless. And as you learn to trade profitably, your reliance on any system will diminish anyway.

3. Using books and the internet, study everything you can about money management. You should think of yourself as being in school. Learn the system you purchased in step two. Study everything you can on risk reward ratios and trade size. Realize that the self-control of proper money management makes picking winning trades seem easy in comparison.

4. Demo trade your chosen system utilizing sound money management principles. You are now ready to trade but only with pretend money.

5. Once you've demo traded for six months, and only if you have begun to see profits in your demo trading, should you start trading with real money. Your initial trading account should be as small as possible. Try not to get too impatient with your investment timing. Six months may sound like a long time but do you want to make money or lose money?

6. At this point, evaluate your progress. Start looking for a proven signal provider if you're not experiencing successful trading with real money yet. If you are already profitable, skip to step eight.

7. Using your chosen signal provider, keep trading as you continue to turn your trading profitable. There is no reason to rush when you pick a signal provider. There are a lot of bad providers. Participate in forums and ask questions as part of your research. Talk to your trading buddies in the stock market community. Choose someone who is proven and with whom you feel comfortable.

8. Sooner or later your trading will become profitable because you don't have the stress of having to be profitable (the signal provider is profitable for you). So you will then find your own trading making you money as well.

Hopefully at this point you have made it into the small and elite class of traders who consistently make money from currency trading. Congratulations!

A reliable stock trading system can help if you want to get into stock market investing. Often, it's hard to know if a lack of success or failure in trading is the result of poor marketing, greed and fear, or a lack of knowledge about stock trading systems. Either way, if things start to go bad you may end up thinking that the stock trading system you are considering looks simply like a get rich quick scheme.

It probably isn't. This kind of rationalization is largely misperception and misrepresentation. However, the question remains, will a stock trading system really work, is it really worth investing in a stock trading system software to help with learning to invest in the stock market?

The abbreviated response is that it depends. One stock trading system may produce good results, one may produce bad results, and another may produce no results at all. It all depends on your personality, your objectives, investment options, and which stock trading system you select.

Exactly what is a stock trading system? A stock trading system is simply a brand of software that assists you in your trading. These trading systems are designed to help you accurately determine what kind of profits to expect as well as when to buy and sell. But since it is a brand of stock market investing software that was designed by a human being, there is always a question about how accurate it can be.

A stock trading system bases its functionality on certain technical analysis tools, and since there are many kinds of analysis tools, the results may be different depending on which system you use. It's great to find an automated system that can help with this analysis, but the accuracy will depend on which tools it uses.

So that's the problem with a trading system, whether or not this program will work as it advertises depends on the programming. This is exactly why a lot of research and care needs to be used to determine which trading system will be best for picking stocks according to your objectives.

At this point you may want to give a trading system a try. Will it help you to make money investing in stock? Keep in mind that it is possible to get good results if you choose a good system, but if you choose a bad one, or one that isn't suitable for your needs, it can cost you money.

The best investment advice is to read product reviews and ask other successful traders which trading system they use, but make sure to ask people who are actually using successful trading techniques. Just because someone "likes" a particular trading system does not mean it produces good results.

Generally, you'll want to look for a trading system that uses successful, proven stock market trading tools such as, Stochastic Oscillator, Bollinger Bands, Relative Strength Index, Moving Averages, and others. A good stock trading system may include all of these.

Fundamental analysis is a widely used method in value stock investing that is based on the performance of a company and the economic situation in the country or countries in which the company is based and/or trades. All of the large investment houses such as Schroeders and JPMorgan use this approach as it is very good for the determining long term value of a share.

The Approach To Fundamental Analysis

The most common approach to fundamental analysis is known as the "top down" approach and comes in three steps:

1. Analysis of the macroeconomic environment in all of the relevant markets.

Indicators that investors may want to consider in their stock market strategies include productivity, GDP growth, exchange rates, interest rates, and inflation. First the investor must prioritize these indicators as well as others to choose which are more likely to have the greatest effect on the financial performance of the company.

For example, a company based in the United Kingdom but whose main markets are overseas may find themselves negatively influenced by the movements in the exchange rates. An investor must decide whether the company is prepared for these changes either by sufficient diversification across different countries or by hedging currency trading.

2. Second, investors should conduct industry analysis to gauge the relative health of the sector in which a firm is operating.

Factors such as growth in competition (both domestic and foreign), exit from and entry into the industry, stock price history, and sales are among those that need to be considered.

Investors should realize that just because an industry is not attractive, it doesn't mean there are no investment opportunities within the industry.

3. Finally, the performance of the firm needs to be analyzed carefully to determine whether true value really exists in the firm's shares.

An investor interested in long term investing must interpret the firm's published results in the correct manner. Results should be compared year to year to decide whether the firm is improving in the long term. For example, is performance cyclical or has the company seen profits grow at a consistent rate?

Other indicators include cash flow, the debt to equity ratio, dividend payments, and all the information that is found in the statements which can give a good prognosis regarding risk reward ratios and the company's future direction. The comparison of industries is a very useful tool in evaluating a company's growth potential.

In addition to the financial information, successful traders will investigate further to find out whether a company is sustainable and also has a competitive advantage. In order to do this, one must inquire if the firm has any core competencies that other firms in the industry don't have, such as superior managerial expertise and money management, exceptional reactionary abilities to changes in the market environment or high brand loyalty.

The Outcome of Fundamental Analysis

From the evidence gathered using the stock market investing advice above, an investor can get a good idea of the long term prospects of the firm's share price. An investor will use "intrinsic value" upon which to validate his or her decision.

Intrinsic value refers to what should be the "real" price of a company's shares and so if the intrinsic value is above the current market price, it indicates that an investor should enter a long position and vice versa if the intrinsic value is lower.

Fundamental analysis is primarily utilized to address the long term future share price of a company as it cannot account for short term stock volatility. To more accurately predict the short term price variations of a particular share, investors may wish to use technical analysis tools instead.

Why do we need to use multiple time frame trading?

The answer is simple - it will improve the efficiency of our stock market investing strategy. We tend see the predominant trend using a higher time frame than what we intend to use to select positions, and we tend to use a lower time frame to actually enter the trade, hence the term “multiple time frame trading”.

For example, you may want to use the daily stock chart patterns to decide on a particular trade, but you use weekly charts to see the major trend. Suppose you see an uptrend in the weekly chart. In this case your tendency is to only trade long positions. Therefore you will use entries in the daily charts to enter long positions only. If the candlestick patterns indicate sell signals, you will just exit your long positions. In other words, you don’t short sell.

Suppose, on the other hand, you see a downtrend in weekly Japanese candlestick charts. In this case your tendency is to only trade short positions. Therefore you will use entries in the daily charts to enter short positions only. If candlestick buy signals are seen, you will just exit your short positions. In other words, you don’t buy long positions.

In using both the daily and weekly candlestick pattern formations in the above examples, you would be utilizing multiple time frame trading with two time frames. Now comes the issue of timing the entries into trades. You may begin using the hourly charts to time your entries. Suppose the daily and weekly charts are in an uptrend. We will enter a long position or add a long position when the hourly chart gives us a candlestick buy signal. Suppose the daily and weekly charts are in a downtrend. We will enter a short position or add a short position when hourly charts give us candlestick sell signals. This time frame would be used solely to improve the timing for entries and not be used to exit trades. For exits the signals generated in the daily charts would be used.

So how would you incorporate multiple time frame trading into your basic knowledge of stock investing concepts? Take three charts of the same security, the weekly chart, the daily chart, and the hourly chart. The daily chart would be used to trade and the weekly chart would be used to see the weekly trend. Assuming the weekly trend is up, the information will be used only to trade long positions in the daily chart. The daily chart can be used to look for buy opportunities and the hourly chart can be used to find the desired entry points. For entering additional positions, buy opportunities in the hourly chart can be used. We would exit based on the daily chart only, because we were trading based on the daily chart.

In the same way, trading short may be preferred when the weekly chart is in a downward trend and the daily chart generates a sell opportunity. Additional positions are entered whenever sell opportunities are seen on the hourly charts.

For stock market daytrading, the 5-minute, 15-minute, and hourly charts can be used when trading the 15-minute chart. Or the 3-minute, 5-minute, and 15-minute charts can be used when trading the 5-minute charts.

Hopefully, the tips given above will greatly enhance your multiple time frame trading techniques and improve your overall stock market timing strategies.

What exactly is hedge fund investing?

A hedge fund is a managed pool of capital for wealthy individual investors or institutions that employs one of various trading strategies in bonds, equities, or derivatives, attempting to gain from market inefficiencies and, to some extent hedge underlying risks using fundamental and technical analysis.

Hedge funds are usually loosely regulated and often are much less transparent than traditional investment funds. That allows them to trade a little more "under the radar". Typically funds have minimum investments periods, and charge fees based both on performance and funds under management.

According to many experts, it is a mistake to classify hedge funds as an asset class, rather the industry embraces a collection of trading strategies. The right choice of hedging strategy for a particular investor depends mostly on its existing portfolio and money management techniques; if for example, it is heavily invested in equities, it might seek a hedging strategy to offset equity risk. Because of this, discussion of relative returns between hedge-funds strategies can be misleading.

Hedge fund investing uses stock investing concepts that are not usually allowed for more traditional funds, including "short selling: stock - that is borrowing shares to sell them in the hope of buying them back later at a lower price - and using big leverage through borrowing.

Stock market strategies tend to change. In the past the hedge-fund industry seems to have been equity driven but currently in 2006 there is less long/short. Lately, the picture has been more diverse with less of a concentrated exposure format.

Here are some of the more common strategies:

Market neutral: In this hedge fund investing strategy, equal amounts of capital are invested long and short in the market, attempting to neutralize risk by taking short positions in overvalued securities and purchasing undervalued securities, otherwise known as "value stock investing".

Fund of funds: In this hedge fund investing strategy, investments are made in an assortment of hedge funds to enhance risk reward ratios. Some funds of funds pursue multiple strategies and others focus on single strategies. An added layer of fees is a characteristic of these funds.

Convertible arbitrage: This strategy involves going long in the convertible securities, usually bonds or shares, that are exchangeable for a certain number of another form (usually common shares) at a preset price, and simultaneously shorting the underlying equities. Stop loss strategies were often incorporated into the process. Although previously this strategy was considered a very effective a standard, it now seems to have lost effectiveness and crowd favor.

Global Macro: This strategy involves hedge fund investing in shifts between global economies, usually using derivatives to speculate on currency trading or interest rate moves.

Emerging markets: This strategy involves hedge fund investing in securities of companies in the ever emerging economies through the purchase of corporate or sovereign shares and/or debt.

As demonstrated here, you can see the terminology in dealing with hedge fund investing is both ever changing and confusing, even to successful traders.

You should be familiar with both the stock investing concepts and the language to make intelligent rather than confused choices in your investments.

Keep in mind that it will be you and not your advisor or broker that will pay the costs of negligent investment planning and comprehension.

Financial markets are where the purchase, exchange, or sale of financial instruments takes place. People who are looking to engage in currency trading, sell or purchase commodities, stock, bonds, or any other related instruments find financial markets to be the ideal place to make this happen.

Several of the primary functions in an economic market include reducing the operation expenses incurred by the participants in the financial market, guaranteeing liquidity, and forming assets prices within the established proposition.

What you do in a financial market, whether you are investing long term or trading short term, financial markets can provide you with many rewards for finding the best stock picks. Listed below are some general guidelines you need to think about while making a sale or purchase of financial instruments:

While learning to invest in the stock market, be fully aware of your weaknesses as well as your strengths. By weaknesses and strengths, we mean that every person has a specific structure in which he or she operates depending on his or her experience, education, time and many other factors. Therefore, before any investments are made in the market, each investor or trader needs to decide how much time will be available to operate, how to make his or her own trading and investing decisions, what you can trade successfully, and how you will control greed and fear.

After the first step above has been completed, it is now time to learn about the "Price to Earnings ratio (P/E ratio)". P/E ratio is considered as an important tool which helps one to appraise a company. The determination of whether a company is overvalued or undervalued can be discovered using the  P/E ratio.

Closer research into the company's history, including the current situation of the company and its desired future position, is the next step. This can mostly be determined through graphs and technical analysis tools. The charts provide a graphical representation of the stocks volume and activity over a definite time period.

These are some of the central points one should consider as part of your overall stock market investing education. Until you are comfortable with your knowledge of investing, it is also recommended to consult with an experienced financial advisor before you make any investments. This reduces the risk in investing in a company which does return enough profit to you.

In a nutshell, rather than rushing into trades and ill-conceived investments that haven’t been researched, be disciplined in trying to make informed decisions, get to know your investment areas, and set yourself goals and limits as you develop your best stock market strategies.

Check out our Stop Loss Strategies & Techniques Training Video!

A 'stop loss' is a pre-defined point at which you will get out of a position in a stock based on the idea that it is not moving in the direction that you had anticipated. Every successful and experienced trader utilizing the basics of stock market investing will tell you that establishing and adhering to a reasonable stop loss is extremely important if you are going to make profits in the long run.

There are many reasons why traders will not sell shares when a loss is imminent. This is problematic because there will be many occasions when a trade they enter does not head in the right direction. At times, it is difficult to adhere to the rule of 'cutting your losses' when it obviously the right thing to do. This is often done by traders who feel a strong sense of greed and fear, or an unearned feeling of self-confidence, and may find it difficult to close the trade because, in doing so, it acknowledges the fact that they got the trade wrong in their minds. This may be a bitter pill to swallow so the easier option is to keep the trade open in the hopes that their ego will not be adversely affected. Yet, they will be violating one of the most important trading rules there are. To most traders, the idea of not closing a trade at a loss means that they haven't had a loss despite the fact that they may have a larger loss down the road.

A detailed plan that guides successful traders when to close positions is one of the things that separates them from the majority of the stock market community. For them, this is a necessity. It is fair to say that a lot of traders don't have a clue about what conditions would warrant closing a trade. It is also fair to say that the majority of market participants routinely adopt a 'buy and hold' approach.

While a stock market investing strategy will always require decision making, there are no more important decisions you have to make than when to sell shares. This part of trading is often overlooked its importance is frequently underestimated. The act of buying simply puts one in a position where money can be made. It's the act of selling a position that is directly related to whether or not any money is made from the trade.

When it comes to considering your stock market investing strategy for exiting, what is important is not the manner in which you decide to exit, but the fact that you have a plan in place to advise you when to exit. What is also important is that you remain consistent in whatever approach to exiting you adopt.

Selling shares is probably the most complex money management decision you will face but, as a rule, it is the most important. The decision is especially difficult when you are faced with a loss and all you want to do is wait for the shares to return to your buying price. When the shares move away from you, making your loss even greater than you would have ever imagined, it makes the situation even more difficult.

Regrettably for many traders, they cannot bring themselves to set stop losses. If they do, they abandon them when the pressure is turned on. To make money investing in stock, cutting your losses is one of the most important trading rules there is. If you fail to do that, you are most likely going to be worse off for it.

To learn FOREX trading, it is essential to know exactly what it is. FOREX trading is defined as direct access trading of dissimilar types of foreign currencies. In the past, currency trading was mostly limited to large banks and institutional traders. Recent technological advancements in internet stock trading have enabled small traders to also take advantage of the various benefits from FOREX trading by using many technical analysis sites and technical analysis tools.

FOREX markets have unique characteristics which present an unmatched potential to learn FOREX trading and achieve profitable trading within any market or any stage of the business cycle. First, FOREX trading utilizes a 24-hour market, allowing traders the ability to take advantage of lucrative market conditions at any time. Secondly, the FOREX market is the most liquid market in the world. FOREX traders can enter the market or exit the market whenever they want, during almost any market condition. Additionally, there are minimal execution barriers or risk and no daily trading limits.

However, even with all of the advantages of the FOREX market, there is one important difficulty. The FOREX market is considered as unregulated although the trading operations of major dealers, like commercial banks and money centers, are regulated under the banking laws. The day by day operations of retail FOREX brokerage firms are not regulated under any laws or regulations specific to the FOREX market. Many of these organizations in the U.S. don't even report to the I.R.S. To learn FOREX trading and get the greatest benefit from its explosive potential, traders should adhere to these rules.

1. Determine the quality of the broker institution you choose. Unlike equity brokers, FOREX brokers are usually an agent of large banks or lending establishments because of the large amounts of capital that are required. FOREX brokers should be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Future Trading Commission (CFTC).

2. Ask for a free trial. Before you commit to a particular broker, ask for free trials so that you can test their diverse trading platforms. Brokers usually provide fundamental and technical analysis commentaries, economic calendars and other research to help with investing. Basically, a quality broker will give you everything you need to determine your best investment of funds to achieve success.

3. Monitor two financial meetings to provide insight into the upcoming FOREX market. Two important meetings FOREX traders should become familiar with are the federal Open Market Committee and the Humphrey Hawkins Hearings. By perusing the reports and analyzing the commentary, FOREX fundamental analysts can get a better understanding about any and all long-term market trends and it also gives short-term traders the ability to profit from extraordinary occurrences.

An investment newsletter is defined as a publication which is sent at regular intervals and which discusses one primary stock investing topic for the benefit of its readers. Investment newsletters are published by associations and businesses to present their clients and prospects with information relevant to their company and the basics of stock market investing.

A stock market investment newsletter is written to provide stock market investors with time-sensitive information on the market's current trends and normally include free stock picks. These types of newsletters are distributed by trading companies to their clients and subscribers.

A stock market investment newsletter provides interpretations, commentaries, news, and analyses which are applicable to the current market developments and which are interesting to a company’s clients, prospects, and subscribers. It is designed to help the stock market investor review and analyze the best stock picks, choose the correct investment opportunities, and learn how to invest wisely.

An investment newsletter is akin to other accepted paid and free stock market newsletters. It is frequently written for stock market investors and traders and usually incorporates the following:

Company profiles – this information includes the business’s description, past trading performance, and its recent stock charts.

News articles – these articles keep stock market investors up to date on the current trends in the market and the company’s recent developments and notable accomplishments in the stock market.

Stock portfolio – a stock portfolio is the compilation from the corporation’s stocks and bonds, in addition to other investment related resources.

Feature articles – these articles are made up of features regarding the company, stock market tips and other helpful information about the stock market.

Monthly top gainers and losers – this section of the newsletter is very supportive because it illustrates and compares the price movement of stocks over the previous month. It could also be distributed on a quarterly or annual basis.

Stock performance tables – the investment newsletter can include and discuss all the stocks which are similar in type and present financial and other valuable content.

Stock market newsletters can be published online via the company's websites or printed and mailed. Subscribers can get both free and paid versions of most company investment newsletters and client prospects can download and view investment newsletters from the company's website. These websites normally also provide archived versions of previous newsletters that can be printed directly from the company's website or read online.

Others say that investment newsletters give investors, as well as other subscribers, investment and trading tips, presented with all possible styles and methods. Investors can now effortlessly discern which stocks to buy, which companies to buy stocks from, and what particular stock market trading tools work for him/her – all by using the stock market investment newsletter.

Risk reward ratios are a critical component to successful trading. Trading can quickly become gambling if you continue to press your bets by taking positions with poor risk reward ratios. While identifying good risk reward ratios does not guarantee success, ignoring them usually guarantees failure.

Candlestick traders look for patterns with proven higher probabilities for placing trades. Once the pattern is identified, the next step is determining entry and exit points. For both, profit targets and stop loss targets. These points can be determined based upon moving averages, Bollinger bands, or other technical indicators to evaluate possible support and resistance levels. The onslaught of computerized trading programs provides traders with quick calculations to base one’s risk/reward targets.

Calculating Risk Reward Ratios

Let’s assume our computerized scanning program provides us with a dozen high probability patterns from which to choose. Most traders will only be able to add one or two new positions to their portfolio. This is where utilizing risk reward ratios come into play.

The simplest calculation will take into account:

1) Entry Price

2) Profit Target

3) Stop Loss Target 

For example:

Stock XYZ has the Entry Price of $20.35 with our Profit Target of $21.50 and Stop Loss target of $19.85.  Our Risk = the difference between our Entry Price of $20.35 and our Stop loss of $19.85 or Risk = .50.  Our Reward is the Entry Price of $20.35 plus the Profit Target of $21.50  or Reward = $1.15. We are risking .50 to make $1.15. In this example a little better than a 2:1 ratio.

The rule of thumb for a reasonable risk reward ratio is a minimum of 2:1. It is important to analyze your potential loss in the event your analysis is wrong and the trade does not follow in the expected direction. And, no fair setting your targets using fuzzy math! The risk reward ratio is meant to provide an unemotional evaluation before risking your hard earned money. Don’t ‘jiggle’ the figures to justify the trade.

Use this approach to narrow down your trades until you find the highest probability patterns with the greatest risk reward ratio. The more systematic you become in evaluating your trades the more likely your portfolio will prosper. Additionally, this approach helps to remove emotional trading which is a continued struggle for many investors.

Where to Begin

Evaluate your previously closed positions, using both your winning and loosing trades. Since you should constantly be evaluating your previous trades to evaluate the success of your most important technical analysis tools, you will kill two birds with one stone. Yes, I realize this is a boring exercise but it is essential to your success. The old adage ‘Insanity is doing the same thing over and over again but expecting a different outcome’ was never more true. At least take the time to consider whether you want to add the risk reward ratio to your trading criteria.

There is another other element to consider after the risk reward ratio has been determined. What is the length of time you expect to be in the trade? The shorter the time period the more trades you can place and the more money you can make. A 5:1 ratio is less attractive if your opportunity money will be tied up for too long a period. You must use your capital on the highest probability trades. Using the simple risk reward ratio should produce more profits to your portfolio.

To summarize; you should be willing to risk $1 to make $2. You should not be willing to risk a $1 to make a $1. Keep it simple and keep your targets honest, (the data is only as good as the person plugging in the figures).

By doing the risk reward calculations for every potential trade you will have your exit criteria before placing your trade. This keeps you from getting greedy when your profit target has been reached. You can take your profit and re-enter if the new trade meets your criteria. This also helps you from dropping your stop-loss, in the hopes that your trade will soon go your way.

What if I determine one of my open positions has a poor ratio?

Over the years, I have found one of the best ways to evaluate if it is time to take a loss is to look at my existing trade as if I were considering placing it today. If I could not justify taking it at the current price, using the same criteria I use for entering a trade, then it is time to take a loss. If you would not buy it today then more than likely, you already know the answer. Allowing your losses to grow is not a good habit to get into. Hoping and praying are not profitable stock market trading tools. The key is to win more than you lose. Loses are simply the cost of doing business. Every business has an income and expense allowance and candlestick stock trading is no different.

Making sense out of the recent stock market activity is a challenge, to say the least. Our society has become so complacent that we rely upon the latest stock market tips from CNBC instead of doing our own market research. Some investors consider ‘sound bites’ from these sources as sufficient market research, and maybe that explains why the market is so sporadic. On any given day, you will hear conflicting views for predicting stock market activity on the same stock. Take the opinion of  four ‘talking heads’, all disagreeing on the same stock, and flip a coin as to who is correct. One authority insists the growing earnings will cause the price to move up, while the other is adamant the stock has hit its peak and is already overpriced. Is it any wonder we sit mesmerized in front of our stock screens in a state of suspended animation? Even the experts cannot agree on the explanation behind the recent stock market activity.

No one can predict with any certainty when the Bulls will take over (or vice versa). There is but one certainty, eventually, all trends will change direction. This causes many investors to sit on the sidelines to wait for more predictable stock market activity. While this is an understandable emotion, it is not going to allow you to build any profits. Investors need to take advantage of human emotions behind the uncertain stock market activity.

Fear and greed are the main emotional drives behind any stock market activity. This type of emotional investing often results in bad decision-making, and the ultimate demise of many investment portfolios. The emotional investor may pull out of strong Bear market activity, only to miss out on the early stages of a recovery where the biggest gains may be recorded. Sadly, many investors allow fear and greed to propel them into exactly the wrong moves during any stock market activity.

We are uncertain exactly when a trend will end or begin. But, one thing that can be said with certainty is that sitting on the sidelines, until one understands the rationale behind recent stock market activity, is not a proven stock market investing strategy.

Stay invested! Learn to read investor emotions that are clearly illustrated in Japanese Candlesticks. Use the uncertainty of the recent stock market activity to your advantage. Stay disciplined by trading the candlestick signals and stop falling prey to your emotions.

If you are waiting for more predictable stock market activity, you may be waiting for a long, long time. There are too many factors contributing to the sporadic activity behind the market. The war in Iraq, the possibility of a housing bubble, the increasing budget deficit, and continued oil rises. This doesn’t mean you should avoid beginning investing in the stock market. But, it does mean you better know what you are doing. The stock market will provide you with excellent returns if you will take the time to educate yourself. Pull yourself away from the television and take charge of your own investment decisions.

Utilize the information that is built into candlestick signals. The signals provide valuable stock market information. No matter what the rhetoric is being verbalized on the investment stations, the signals reveal exactly what investor sentiment is doing. This makes candlestick analysis very easy. The Japanese Rice traders have spent centuries of surveying high probability reversal signals. Identifying the signals at the tops or bottoms of major trends provides a very valuable advantage. Investors that understand candlestick technical analysis can immediately start taking action.

The appearance of a candlestick reversal signal produces a high probability situation. It also aids an investor to understand how to utilize investor sentiment to analyze what the market trends are doing. This permits an investor to better understand how the markets work. The common-sense that is built into candlestick evaluation  enhances the ability to move portfolio positioning in the proper direction. Candlestick chart analysis is not a hard process to learn. Learning the important candlestick reversal signals, the 12 major candlestick signals, produces a market evaluation process that investors will utilize for the rest of their investment career. Take the time to understand what is being conveyed with the appearance of candlestick reversal signals. It provides an extremely important format for investing in any trading market.

The basics of option trading require the evaluation of a price direction. The most effective analytical features of price direction are built into candlestick signals. The basics of option trading should incorporate risk/reward analysis. This is made very simple when analyzing price trend reversals. The candlestick signals clearly demonstrate what investor sentiment is changing in a price trend. This information can be exploited in different manners.

The basics of option trading is to gain as much leverage as possible for taking advantage of a price move during a specific timeframe. Candlestick analysis can be used very effectively for analyzing both the price trend and the potential magnitude of a trend. This allows an investor to apply the correct stock option trading strategies. For the option trader seeking a profitable option trading education, having knowledge on a number of different option trading strategies produces two benefits. First, it allows the leverage of the upside potential of a trade. Second, if the right strategy is incorporated, it can greatly reduce the risk.

Candlestick analysis creates the opportunity to develop the highest profitable option trades. The evaluation of a price move in a specific timeframe makes for an easy option trade strategy. The magnitude of a price move during a specific timeframe may best be exploited by a vertical spread, buying call options outright, or selling puts. The analysis of the candlestick signals create a high probability trade direction. The evaluation of the premiums in the options of a stock will be the critical decision process.

Being able to analyze a high probability reversal spot during a price trend produces a number of uses for options. In the example of MTW, after the initial buy signal off the 200 day moving average, a Morning Star signal, witnessing the consolidation makes for an easy analysis. On the next buy signal, buying a 35 call and selling a 40 call against it reduces the amount of funds exposed to the trade. It expiration is within a few weeks away, a price move to the $40 area which would coincide with the 20 day moving average as first resistance, becomes the first likely target.



Being able to project the direction and the possible price target makes developing an option trade very easy. The candlestick signals demonstrate the investor sentiment. The use of other technical indicators provide logical targets. The basics of option trading should start with the strategies that are going to work most effectively for the projected price move. Keep the analysis simple. Keep the option trading strategy simple. This allows an investor to know when to establish a trade and when to liquidate a trade. Use candlestick analysis to develop the best option trading system.