Candlestick Trading Blog

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

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

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

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

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

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

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

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

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