Candlestick Trading Blog

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As the year draws to an end it seems appropriate to take a look back at stock investing 2009. The year started on the tail end of a stock market meltdown and the possibility of a global recession. Stock investing 2009 was good if you got into the market in January and road a fifty percent increase in the Dow Jones Industrials. Obviously many companies did substantially better than average in stock investing 2009 and some are still waiting to make gains. Buying government bonds was popular early in the year as foreign buyers bought dollars. Buying on margin was frowned upon after the previous year’s market collapse.

The psychology of investing changed for a lot of investors with stock investing 2009 as did the psychology of trading for many day traders. Stock investing 2009 was about rethinking investment strategies, resetting investment goals, and relearning how to invest and preserve capital. Smart investors and traders are going back to basics with such time honored techniques as Japanese candlestick charting.

Although the recession is slow to mend the stock market looks to the future and sees recovery. As the markets have gained it has been possible to make money trading and make money investing in stock for the long term. Using candlestick charts the trader or investor can let the market tell where it is going. Relearning and practicing candlestick techniques is a wise move for stock investing 2009 and profit awaits the involved trader or investor.

In is wise to remember that people seem to always learn the lesson of the last major event such as last year’s meltdown of the stock market and economy. Today things are moving forward and investment opportunity awaits. A sound investment strategy based upon today’s events and today’s markets holds promise for the investor. The basics always seem to work and are the place we go back to in times of uncertainty. Sound tools such as Japanese candlesticks have helped investors and traders though many a market crisis and recovery.

As the Dow Jones has moved from the mid six thousands to the mid ten thousands, many have been slow to get back into trading and investing. However, there is still profit to be made in trading market fluctuations and there are still stocks that will likely join the market recovery. The best stock picks may well be ones that have been overlooked in this year’s rally. As usual finding good stock picks has to do with doing homework. Acting on stock tips works out the same. Always do your homework. Stock research never goes out of style. Stock market analysis always rewards the diligent.

Stock market investing basics tell us that stock price is a result of supply and demand. Although parts of the economy are slow to recover, others, such as basic consumer goods, never really changed with the recession. Promising areas of research continue to receive investment. Thus the demand for certain stocks will continue or even increase before the recession is over. Diligent stock research and application of tools such as Japanese Candlesticks will help stock investing 2009 and going forward.

In order to be a successful investor one needs to understand and be able to effectively use stock investing tools. Stock reports are a basic investing tool. They reflect changes in the economy and even world events with comparable changes in the stock market. The price to earnings ratio of a stock is one of the important stock investing tools. Knowing the tools of your trade will make you a more successful investor and trader in the stock market.

To avoid investing mistakes it is important to know and practice stock investing tools. Japanese candlestick charting is the oldest means on record of predicting prices. This method is used with other technical analysis tools to gain market insight and to assist in deciding when to buy or sell stocks. It is the ability to accurately predict stock movements that makes stock investing tools valuable to the investor.

Understanding asset classes, candlestick patterns, and things such as cash flow ratios will put you ahead of the pack when it comes to buying stocks or selling stocks at the right time. Accurate market timing comes from knowing and effectively using the tools of stock investing.

Analyzing stock market indexes is an important investing tool. A saying of Japanese traders is to "let the market tell you what the market is going to do." Candlestick patterns make stock market analysis easy and accurate. Watching the market and using candlestick signals will help you tune out the noise of herd psychology than often confuses investors. The signals will give you a more accurate indication of investor sentiment than what you hear on the news or on the street.

In stock market trading one wants to understand buying stocks on margin and buying stocks online. The world of stock trading and investing is complex. However, the amount of information you need to know about stock investing tools is finite. Learning the tools of stock investing and learning them well is entirely possible. It is, in fact, an interesting and enjoyable journey. Watching a stock, anticipating its movement, pulling the trigger at exactly the right times to buy and sell is rewarding. Not only does one profit. One develops a sense of personal satisfaction that does not come from exercising stock tips.

Stock investing tools include the effective use of a computer for online buying and selling of stocks and include the ability to read stock charts, quarterly reports, and the business news and understand how what you read will have an impact upon the stocks you hold or might want to buy.

Basic stock information often included the more detailed information that will bring one to a decision on a stock purchase or sale. Knowing how to read and understand basic information will give one the ability to effectively buy and sell in option trading, benefiting from the world of put options and call options. In the end it is all about the homework. Find the skills, learn the skills, and practice the skills. You will be glad you did.

Learning to invest wisely takes time and patience. It will pay rewards for years to come. Learning to invest requires that you start by learning the terminology and mechanisms of the stock market, of buying stocks and selling stocks. You will need to learn to evaluate companies whose stocks you want to purchase and you will need to learn about market timing. You will want to develop an investment strategy.

A dictionary definition of the word “invest” is “to apply money for profit” or “put money for profit in stocks, etc.” The point of learning to invest well is to maximize your profit while minimizing your risk while investing in stocks, bonds, Forex, etc. The balancing of risk reward rations is important in learning to invest. Start with stock market terminology.

Shares of stock represent the amount of money that an investor can purchase in order to invest in a corporation and become one of many shareholders. Each share represents ownership in the company and this ownership entitles the shareholder to certain rights such as dividends and voting rights. Shares in a company entitle the holder to a share of company assets if the company goes bankrupt but only after primary creditors.

Stocks are bought and sold on stock exchanges. A stock exchange is an institution that hosts a market where stocks and bonds, options and futures, and commodities are traded. It is where buyers and sellers can come together during specified hours to trade on business days. US stock exchanges are the New York Stock Exchange and the NASDAQ. One can buy and sell stocks through a stock broker or online with a trading account.

When learning to invest it is wise to have a model to follow, someone whom you trust and it is wise start with investing money in small amounts. A good piece of advice is to stick with stocks in companies whose products you know and understand or market sectors in which you have expertise.

For example, a physician may start using a very effective medicine to treat his or her patients. The physician understands that this medication will become the treatment of choice for a given disease. Stock investing for beginners does not mean the beginners have no life experience. Use what you know to help your stock investing.

Learning to invest should include developing a long term plan. If you have a clear idea of where you want to go it will be substantially easier getting there. There is retirement investing, for example, and there is investing for short term profit. It is usually wise to put part of your investment dollars in a long term investment where the stock is allowed to appreciate in value over many years free of taxes which are only paid on capital gains when you sell the stock. On the other hand there are always short term trading opportunities where you will take advantage of currently cheap stocks with the prospect of fast growth.

The choosing of several different stocks for several different purposes is part of portfolio management. Choosing stocks in different market sectors is portfolio diversification which is good risk protection. In learning to invest start slow, develop a plan early, and don’t be afraid to make changes in how you invest as you learn the ins and outs of the markets.

With all of the bank bailouts last year bank stock investing did not seem like a very good idea. However, a strong portfolio often has a bank stock. There are pros and cons to bank stock investing. A well managed bank is a money making machine and a bank with a portfolio of bad loans is a disaster waiting to happen. If you want to get into stock investing in banks you will want to know how banks make their money and what the stock market risks are for banks.

The basic money maker for banks is the difference between the interest that the bank pays and the interest that the bank receives. The bank’s job is to attract savers with sufficiently high interest rates and good service. The bank’s other job is develop a loan and/or mortgage business with sufficiently high interest rates and reliable loan payers so that there is more money coming in than overhead plus what is paid out in interest. The price of bank stock shares and their dividends depend very heavily on how banks handle their loan portfolios.

Traditional bank products include savings accounts, checking accounts, and certificates of deposit. Banks receive money from their customers and then lend it out. The key factor for banks is to develop a loan portfolio with borrowers who reliably pay on their loans. In addition to savings accounts and loans banks offer services such as trust departments, credit card processing services, payment services for merchants, and various service fees. To invest in stocks of banks it is wise to have a clear idea of how the bank whose stock you want to invest in makes its money.

Banks carry a reserve against expected loan losses. If the bank has a substantially larger percentage of non performing loans than expected they will experience losses. A recurring problem in picking stocks in the banking industry is that when interest rates are high and the economy is booming, banks may tend to write loans to borderline customers. Stock shares go up but when the economy goes bad non performing loans increase.

Bank stock investing is about stock dividends and, in some situations, bank growth stocks. Investing in banks can be a good idea if a bank offers a good dividend yield, has more than adequate loan reserves on good quality loans, and has reasonable prospects for growth. A well managed bank may demonstrate excellent growth with multiple takeovers whereas a poorly managed bank may look strong with takeovers and end up disappointing shareholders with losses.

When one sees large banking receiving Federal Funds to help maintain credit in the economy it is not reassuring to individuals interested in bank stock investing. However, one might argue that the bailout money was meant to keep the overall economy going, not to keep individual banks afloat. The economy was in trouble and the stock market looked like it was collapsing. However, there were still stock picking opportunities among bank stocks during the panic to sell and get out of the market.

Bank stock investing is susceptible to the same investing and trading psychology as all stock market investing. When things look bad all stocks drop, including banks that are really in good shape is often a good time in bank stock investing to pick up a good deal or two. Much of the appreciation in bank stocks comes with buying at the bottom of an economic cycle instead of at the top. Picking stocks among banks with strong balance sheets, loan reserves, and performing loans will pay well as the market rebounds.

Investing in banks, like all stock market investing requires that you do stock market analysis and that you continue to do stock analysis in your portfolio. It can be very lucrative if you learn what makes banks tick and pay attention to detail. Often times doing your homework is everything.

Over the two centuries from 1802 to 2002 monies invested in stocks averaged over six percent per year rate of return. Stocks grow in value giving a capital gain and many companies provide dividends to shareholders. With all dividends reinvested, stock investing would have returned over $8 million on an investment if held for two centuries. This is an extreme example but makes the point that “buy and hold” investing can provide excellent returns over the long run. This is the type of reasoning that goes into picking stocks, for “buy and hold” investing is called fundamental analysis whereas technical analysis is used in day trading. Welcome to stock investing.

Welcome to stock investing basics. In the USA each stock exchange will allow you to buy stock through a stock broker or buy stocks online. American stock exchanges are considered to be reasonably transparent and fairly priced based upon current knowledge.

To buy stock for the long term requires that you do a fundamental analysis of the company whose stock you wish to purchase, or later, sell. Welcome to stock investing and fundamental analysis. Fundamental analysis means that you read financial statements of a company, look at how competent its management seems, reflect on the competitive advantages the company enjoys, what market it operates in and who its competitors are. Once you have looked at a company’s past performance and judged its prospects you buy the stock.

The rationale of long term, “buy and hold” investing is that the long term is predictable, if you believe that past performance is an indicator of future performance. However, things change, including the fundamentals of individual stocks and market sectors. Welcome to stock investing and managing risk.

Market risk is determined by the law of supply and demand. If the company is doing well and investors believe that prospects are good, the price goes up and, if not, the price goes down. Liquidity risk has to do with how large a company is, how many shares there are, and the ability to buy and sell the shares easily.

If you own a stock in a small company and there are no buyers, at any price, when you want to sell, then welcome to stock investing liquidity problems.

Today we can buy stock online. Commissions are lower and the market is more liquid. Going on your own without the advice of a stock broker can be a problem if you are new to stock investing.

There are stock exchanges throughout the world. Not all stocks are listed on all exchanges. However, many foreign stocks are listed on the New York Stock Exchange as American Depository Receipts (ADR’s). Thus it is possible to trade stocks directly on foreign stock exchanges or by proxy through ADR’s.

Investment in the stock of a well-run company, with excellent products, and good management can outperform other, more conservative investments over time. What someone new to stock market investing needs to do is learn stock market terminology, learn about the workings of the stock market, and learn about individual stocks. Welcome to stock investing homework!