Candlestick Trading Blog

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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.