Candlestick Trading Blog

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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.