Moving Averages with Candlestick Analysis

Combining Moving Averages and Candlestick Analysis is “Profit-Making Magic.”

I recently added quite a few “new and improved” innovations to the so-called “classic” Japanese Candlestick methodology. Through more than three decades of intense study and analysis of candlestick patterns, I discovered a set of entirely new candlestick trading techniques which make the basic methodology even more powerful.

Case in point? Check out his new free video training entitled “The Profit-Making Magic of Candlestick Patterns at Major Moving Averages.”

When certain candlestick patterns form at specific major moving averages, it does almost seem that magic happens… in the form of unusually large short-term gains as the trading trend drastically reverses.

Click here for instant access to my new training video!

In my new training video I explain:

  • Why Candlestick signals combined with moving averages result in a higher number of money-making trades
  • The 3 major moving averages that most, if not all, money managers use to make decisions about their portfolios
  • Why the moving averages are very important trend indicators and how they can be used to generate more profits
  • How using Candlestick signals along with the major moving averages can identify the ultimate buying and selling points

In this free training video, I reveal strategies and techniques heretofore known to just a handful of traders in the world. You’ll begin to crave these types of situations, because you’ll know that they often lead to exciting, portfolio-enhancing short-term profits.

Using Candlestick patterns, along with the moving averages in a much different capacity, creates a trading program that produces highly profitable trades. The trades are also provided with a much greater frequency. Fortunately, the use of the moving averages is very simple. Once applied to Candlestick charts, it makes the analysis of where a trend may support or resist a very simple visual process.

Moving Averages as Support
When witnessing a downtrend, how do we tell when a bottom is getting near? It could be when panic selling is witnessed coming into a price trend as the stochastics are getting toward the oversold area. That is a helpful alert but it does not give us a roadmap to where panic selling might end. If you are able to utilize the 50-day moving average and the 200-day moving average as important support areas then those levels can at least be used as a target.

Also, when you are able to evaluate the potential target that a trend may want to go to now, it makes the analysis of what is going on in the Candlestick formations that much easier to interpret. For example, if a sustained downtrend is now showing larger candles, the evidence that the panic bottom may be nearing and the price is approaching one of the major moving averages provides extra preparation for seeing what might occur at that moving average level. Panic selling, along with stochastics approaching the oversold area or being in the oversold area, and a major moving average approaching a level where a Candlestick buy signal has a probability of occurring, becomes a trade set up that an investor wants to start preparing for.

Do all charts work well with moving averages? Definitely not! However a large majority appear to. The purpose of Candlestick analysis is to provide an advantage for the investor to see what is happening at important technical levels. The Candlestick signals provide that clarity. If a chart is not providing patterns that make it easy to see what a price movement is going to do, then move on to another chart. There are many from which to choose, especially with the availability of easy-to-use computer scanning programs.

In putting all of the probabilities in favor of the investor, using every technical method can be enhanced when Candlestick signals are applied. How do you discover whether the major moving averages are a positive correlation with anticipating price moves? Easy! Investigate what has happened at those moving averages previously in the price trend. This can be done very quickly. All it takes is a quick visual analysis of what has happened in the past.

Click here for instant access to Steve’s new training video!

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Candlestick Analysis

Stephen Bigalow’s third book on Candlestick Analysis on sale now. Regularly $97 on sale for only $67.77 plus free shipping. Please read below for more information with link to sale following the article.

Why do most investors make very poor returns in the stock market? Unfortunately the answer is very simple, themselves! The investment markets are a level playing field for everybody. However it is a small percentage of investors that make big money from the markets. Why? Because those investors have learned to gain control of their own emotions! Most of the time, to become a successful investor requires many years of hard knocks, gaining costly experience for controlling one’s own emotions. There are many books demonstrating successful trading methods. There are a few books that delve into the description of how the human psyche is what usually keeps investors from making consistent profits in the investment markets

Candlestick Profits – Eliminating Emotions with Candlestick Analysis is a truly unique book. It reviews the major candlestick signals, reiterating the reasons that candlestick patterns have worked dramatically successfully through the past few centuries. This book also strikes at the heart of why most investors cannot make money in the markets. Stephen W Bigalow illustrates the gut wrenching truths of why our own emotions can make the most successful trading programs a failure. This information is what most investors either do not realize is occurring or they do not want to know that it is occurring. Most investors learn how to invest the wrong way. This ingrains the wrong mental disciplines into the majority of investors from the onset.

Candlestick Profits – Eliminating Emotions with Candlestick Analysis has a truly unique educational theme. Mr. Bigalow clearly demonstrates how the correct investment perspectives are built into the graphics of candlestick analysis. He also brings to light the obvious mental flaws most investors participate in due to their initial incorrect learning process. The most powerful aspect of this book is the demonstration of how the correct use of candlestick analysis not only helps investors ‘unlearn’ their incorrect investment perspectives, but quickly converts an investor’s outlook to evaluating investing in the correct manner. The most successful investing programs will not work correctly without the proper investment perspectives. This book will completely alter your own investment practices. The commonsense aspects of investing built into candlestick graphics allows investors to participate in a well disciplined trading program that has the ability to correct each individual investor’s self-discipline.

How often have you heard investment promotions state that if you learn just one of their trading secrets, it would pay for the whole training? What if your trading profitability is even more deep rooted than that? What if you could learn and/or resolve one of your personal mental flaws. Correcting that one aspect of your investment perceptions will improve your investing capabilities no matter which trading program you decide to use.

Most trading program promotions promise you great profits if you use their system. The unspoken assumption is that you know how to implement trading strategies correctly. The newly introduced trading strategy is successful because of the background of the developer. Do you think a new trading strategy was developed by somebody that had extensive trading background or somebody new to the investing arena? The major advantage of candlestick analysis is that it was developed based on one simple premise, common sense aspects of reoccurring investment sentiment. This factor is so basic, candlestick analysis has the power to convert investors with flawed investment perspectives and turn them into a productive investment thinker. Do not miss this opportunity to discover the hidden nuances of your own mind that might be keeping you from investing profitably.

Don’t miss your chance to get this on sale now.

Happy investing!

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Trading Breakout Patterns

Find Great Stock Market Trades with Trading Breakout Patterns

Looking back at older blog posts in order to dislodge my writer’s block I came across a very good blog article where I discuss trading breakout patterns. While this information is dated it is worth discussing again as it depicts a very good example of how you can find great stock market trades with trading breakout patterns. Using the candlestick patterns to interpret the results of a breakout situation offers a massive advantage to the Candlestick investor.

As you see also see at the end of this blog post, I offer a Free Trading Breakout Patterns Course. Once you complete this 100% complimentary trading session, you’ll walk away with unique new abilities like:

  • Knowing the difference between the safe time to get into a trade and when it’s best to just step aside (so many traders get this WRONG!)
  • Figuring out how to handle a fast moving trade… this is where traders make or break their accounts.
  • Realizing when a breakout is about to occur AND knowing what to do before you miss the boat or things get out of hand
  • Plus much, much, more.

Before you sign up however, please read the blog post below and see how trading breakout patterns work. You can sign up to receive this course now or later!

One main advantage of Candlestick patterns is that they can detect dramatic changes in investor sentiment. One of the main profit potentials for making money on big stock market trades is being able to analyze the investor sentiment upon a stock “breakout” situation.

A breakout is the dramatic movement of a stock market trade moving out of its usual trading area. It also has the component of a significant percentage increase in its standard daily trading range. This is usually complemented by a massive increase in volume. A breakout is typically the result of an unforeseen event or surprise result of a company’s operations. This can be affected by both internal as well as external elements. A key example was Invision Technologies, the company that manufactures the luggage scanning machines at airports. 9/11 brought this company to the forefront. The major move, a tremendously large white candle in that stock price, far above its trading range for the previous six months, quickly revealed a firm change of investor sentiment towards this company. Breakouts, revealed using Candlestick patterns, immediately identify the stock market trades with huge percentage gains potential.

Other trading breakout patterns are frequently caused by new fundamental potentials within a company’s product potential. Whatever causes the new investor sentiment in a stock, the resulting candle or candles offer the information needed that would point to the upside strength of a new move in a stock price. Dynamic Materials Corp., BOOM, is a great illustration of a breakout. Note in the November chart, after trading for four years between $3 and $4 dollars a share, a news item produced a new investor view on this company. The fact that the white candle, that broke this stock out, closed near the high end of the trading range was an indication that upon this stock doubling in price in one day, investors still felt assured to stay in the stock and not take profits yet.

BOOM

tradin breakout patterns image 1

Very seldom is a breakout on strong volume and a huge percentage price move going to instantaneously vanish and move back down to the previous customary trading area. However, not all breakouts immediately go up. An exceedingly large percentage, however, do eventually move to much higher ground after the initial breakout. For those investors who follow the stock picks over the past few years, AVII is one of our long-term holds. That “hold” recommendation was based on the potential future potential of this company’s products. But when will that potential become evident?

Seven trading days ago, an announcement about receiving patents formed a breakout in AVII. A stock that trades approximately 100,000 to 300,000 shares per day moved up over 100% on over 40 million shares traded. This was an intense change of ownership in the stock. The Bearish Harami the following day revealed that there would be some pullback action. Friday’s chart, as can be seen below, formed a Bullish Engulfing signal right at the base of the bullish candle that formed the breakout. The last six days of trading have seen an average of 5 million shares traded each day. The Bullish Engulfing signal reveals that the profit-taking selling may have stopped. (Remember this is an old chart being used for demonstrative purposes only!)

AVII

tradin breakout patterns image 2

The breakout definitely tells us something. There is now a different dynamic in this stock. As with most breakouts, the stock trend has an enormously high probability of moving higher, the first target testing the breakout candle high at approximately $4.20. However, over the long-term, meaning six weeks and greater, the upside potential could be higher. This is not an exact stock recommendation but it provides some educational background on breakout situations. AVII fits into that category.

Sign up to receive the complimentary one hour session on Trading Breakout Patterns and you will see that this is 100% real, actionable training.

You’re going to get an hour plus of video training that normally carries a $197 per seat fee for $0 – that’s 100% FREE!

Just our way of saying thanks for reading and have a wonderful holiday season!

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Stock Market for Dummies?

Stock Market for Dummies? I think not…

Most investors become proficient at investing after some painful experiences. When should we learn how to invest? Well, while we learn everything else when we are young probably. It should be part of our education. Most investors realize this when they discover that the investment professionals have no better clear understanding of how to invest than they do. If the markets go up, they help you make money. If the markets go down, they help you lose money. Are they actually better at anticipating the stock market? Who wrote the all too popular book stock market for dummies? Or is it stock investing for dummies? I don’t remember…but I do know this…

If you have taken the steps to educate yourself in stock market trading, you will find that the candlestick signal investment method is based upon common sense investment procedures. Most investors spend years accumulating assets only to find themselves without the knowledge of how to make those assets grow.

Through the use of technical analysis tools like candlestick chart formations the trader is able to anticipate market trends, market reversal, and successfully trade market volatility.

doji greenThrough the use of candlestick patterns such as the doji candlestick (see image), traders are able to identify changes in market sentiment (such as the market indecision that the doji indicates.)

Additionally, if you combine candlestick signals with the fundamentals of stock analysis such as margin of safety, intrinsic stock value, and price to earnings ratio you will begin to see a new way of investing that just makes sense.

Combine your basic candlestick analysis education with the tools available to members of my forum and you will have a nice foundation in which to see your assets finally grow. Yes, of course beginning with a stock market for dummies book of some sort will get you the started, but if you are reading this you are probably already ahead of the game.

Learn more about the member benefits included in my Candlestick Forum Membership package.

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Stock Market Holidays 2015

Stock Market Holidays 2015

Stock trading in the USA takes place throughout the year, Monday through Friday, except for stock market holidays. The New York Stock Exchange (NYSE), NYSE Amex, NYSE Amex Options, NYSE Arca, NYSE Arca Options, NYSE Bonds, NYSE Liffe U.S., and NASDAQ are open during regular hours, Monday through Friday, from 9:30 a.m. to 4 p.m. Eastern Time. It is important to know when stock market holidays occur because it can also be profitable. Trading volume will often dip in advance of stock market holidays as traders leave town for extended weekends. After stock market holidays, trading may pick up substantially as the market reacts to the collective stock market news that occurs when everyone was out of town.

Trading bad news gaps can be profitable when bad news occurs over stock market holidays. A breakout gap can also occur as trading resumes after stock market holidays. The market will open either substantially lower or substantially higher than its pre-holiday close in these two situations. Traders that follow gaps use Candlestick stock analysis to predict evolving market sentiment and profit with candlestick trading tactics. The market inefficiency that comes with gap trading can be very profitable for those who objectively follow market reversal as well as new trends. Using Candlestick patterns as a guide, traders can avoid the pitfalls of trading psychology. The twin demons of fear and greed are powerful adversaries. Using the clear and easy to read signals of candlestick analysis can give the trader a profitable view of the market.

Stock market holidays each year occur on the following days and are as follows for the year 2015:

New Year’s Day
January 1st

Martin Luther King’s Birthday
January 19th

Washington’s Birthday
February 16th

Good Friday
April 3rd

Memorial Day
May 25th

Independence Day
July 4th (observed July 3rd)

Labor Day
September 7th

Thanksgiving Day
*November 26th

Christmas Day
**December 25th

*Each market will close early at 1:00 p.m. on Friday, November 27, 2015 (the day after Thanksgiving). Crossing Session orders will be accepted beginning at 1:00 p.m. for continuous executions until 1:30 p.m. on these dates.

** Each market will close early at 1:00 p.m. on Wednesday, December 24, 2014 and Thursday, December 24, 2015. Crossing Session orders will be accepted beginning at 1:00 p.m. for continuous executions until 1:30 p.m. on this date.

Don’t forget that there are still two remaining stock market holidays for 2014 including Thanksgiving on November 27th and Christmas Day on December 25th.

Those trading in foreign markets will need to be aware of holidays such as Boxing Day throughout the British Commonwealth and the Queen’s Diamond Jubilee. Stock market holidays will vary from country to country but the principles of trading around the stock market holidays will always be the same.

Happy Investing.

Click here to learn how you can Profit ‘Big-Time’ From Trading With Candlesticks

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Eliminating Emotions

The psychology of investing not only affects individual investors but also affects the market as a whole. Many investors often underestimate or are unaware of the affects that our emotions have on our return on investment. Many well educated and competent traders lose money due to trading anxiety and trading emotions. In today’s article we will discuss various emotions felt everyday by online stock investors and how each emotion affects trading decisions and trading performance.

Eliminating Emotions:

Greed and Fear
Greed causes traders to buy at high prices or buy a large amount of the same share, therefore increasing risk. Fear causes investors to exit the markets too early causing a loss of otherwise attained profits. Traders suffering from fear are afraid that the price will decrease further so they get out before the timing is correct, instead of letting the trade play out.

Overconfidence
Traders who are overconfident tend to trade more rapidly and tend to over trade. These traders lose money in commissions, taxes in addition to simply losing out on trades themselves due to the illusion of control. Greater participation in trading stock makes some traders feel more in control even though they are not. These traders also tend to invest in smaller and riskier companies and lack portfolio diversification.

Herding 
The psychology of investing tells us that many investors tend to follow the crowd. They hear of hot stocks and they jump on the bandwagon only to lose money. What they fail to realize is that those stocks were hot until you and everyone else in “the herd” heard about them. Pass on these hot stock market picks. Even if they were money makers at some point, that time has passed. Find your own stocks to invest in based on your own proven research and analysis.

Confirmation Bias
Too often investors believe what they want to believe. We pay attention only to the information that supports what we believe, and ignore information that does not support what we “think we know.” Confirmation bias directly results in poor investment decisions and a loss of profits. An example of confirmation bias is when we become attached to a certain stock. Perhaps it performed very well in the past so we ignore all signs that it is currently not performing as well as it did and we invest anyway.

There are many factors to consider when studying the psychology of investing and how it affects stock traders every day. Successful investors understand investment psychology and all it entails, they have determined their strengths and their weaknesses, and they proactively practice and develop the skills necessary to controlling their trading emotions so that they are successful in the stock market.

Learn more about Eliminating Emotions. The most profitable skill that can’t be taught!

 

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Find the Market Bottom with Candlesticks

Again, I like to look back at previous blogs to revisit where we thought the market was going. Below is a blog done as the euro sovereign debt bailouts regained life and there was another stimulus package coming.

As the Euro sovereign debt bailout regains life and another economic stimulus package is on the horizon it may be time for traders to find the market bottom with Candlesticks. Two things drive stock and stock market prices. These are the fundamentals of the economy and individual stocks on one hand and market sentiment on the other. In both trading and long term investing, margin of safety and intrinsic stock value are good measures of the value of a stock. What may look like a promising stock with a low price to earnings ratio may be underpriced as regards forward looking earnings but market sentiment may be such that the stock remains inactive and underpriced. Market sentiment is the composite action of everyone from the day trader to one who only engages in buy and hold investing. While fundamental analysis helps spot hidden stock value in a bottoming market, it is often more profitable to find the market bottom with Candlesticks. Stock technical analysis with tools such as Candlestick charts is useful in spotting new market trends and market reversal. If a trader or investor is looking to profit from a market turnaround he will do well to find the bottom with candlestick patterns  and trade or invest accordingly.

It is fine to talk about finding bargains in a down market but just how long will the market be down and how long will a given stock be ignored by the market? Both fundamental and technical analysis are necessary in both short term trading and long term investing. However, it is with Candlestick analysis that smart traders are often able to spot when the market is going to turn and profit from buying at the bottom. To find the market bottom with Candlesticks, either for the market in general or for individual stock prices, traders follow stock price patterns and their representations as easy to read Candlestick signals. A commonly useful signal is the Doji Candlestick. This Japanese Candlestick signal indicates market indecision. It is useful in predicting a market rebound or a correction in an ascending market. The Doji is a very short to virtually flat candlestick with long upper and lower tails. It tells us that the market opened and closed on a stock at nearly the same price but that the market tested both higher and lower during the trading period. This signal often precedes a breakout. It is not especially useful in a flat market as it does not tell us in which direction the stock market or individual stock will move but in an upward or downward trending market it commonly warns the trader of a turnaround. In a falling market it is a way to find the market bottom with Candlesticks.

After a recent sell off took two and a half trillion US dollars of value out of the markets many are predicting that the market has hit bottom. The smart stock investor or stock trader will not rely upon the pundits. He will work to find the market bottom with Candlesticks and profit thereafter with Candlestick trading tactics.

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Spinning Top

Spinning Tops are depicted with small bodies relative to the shadows. This demonstrates some indecision on the part of the bulls and the bears. They are considered neutral when trading in a sideways market. However, in a trending or oscillating market, a relatively good rule of thumb is that the next days trading will probably move in the direction of the opening price. The size of the shadow is not as important as the size of the body for forming a Spinning Top.

spinning top

Candlestick patterns are clear and easy to identify demonstrating highly accurate turns in investor sentiment. Japanese candlestick patterns consist of approximately 40 reversal and continuation patterns which all have credible probabilities of indicating correct future direction of a price move. However the twelve major candlestick patterns provide more than enough trade situations to most investors. There are only twelve major patterns that should be committed to memory but this does not mean that the remaining secondary patterns should not be considered. In fact those signals are extremely effective for producing profits. Reality however demonstrates that some of them occur very rarely. In order to utilize candlestick analysis to its fullest all patterns, including the spinning top should be used and understood.

The twelve candlestick patterns illustrate the major signals. The definition of “major” means two things. First, they occur in price movements often enough so that they are beneficial to producing a supply of profitable trades. Second, they clearly indicate price reversals with strength enough to warrant placing trades. The twelve major candlestick patterns are listed below and as you can see each candle formation has a unique name. Some have Japanese names while others have English names.

Twelve Major Candlestick Patterns: Doji, Bullish Engulfing, Bearish Engulfing, Hammer Signal and Hanging Man, Piercing Pattern, Dark Cloud Cover, Bullish Harami, Bearish Harami, Morning Star, Evening Star, Kicker Signals (Bearish and Bullish), Shooting Star, and Inverted Hammer.

Recognizing and understanding the psychology that forms the spinning top and the major candlestick patterns will provide completely new insights for investors to understand optimal times to buy and sell. Japanese rice traders realized that prices do not move based on fundamentals but instead that they move based on the investor perception of those fundamentals. The Doji signal is one of the most predominant reversal indicators. It is very effective in all-time frames whether using a one-minute, five-minute, or fifteen-minute chart for day trading or daily, weekly, and monthly charts for the swing trader and long-term investor.

 

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Marubozu Candlestick Patterns

This article explains the closing and opening marubozu patterns used in candlestick charting.

Closing Marubozu

A closing marubozu has no shadow at its closing end. A white body will not have a shadow at the top. A black body will not have a shadow at the bottom. In both cases, these are strong signals corresponding to the direction that they each represent and are used in stock analysis.

closing marubozu images

A white body that has a lower shadow but no upper shadow is called a bullish white closing marubozu. When the days opens the prices go down but then begin to go up all day where it then closes at the day’s high.

The bearish black closing marubozu has an upper shadow but no lower shadow. Prices go up when the day opens and then they move down all day and close at the low of the day. This signal indicates a day of the bears and could show either a final sell off before the bulls come back into control, or the continuation of a downtrend.

Opening Marubozu

The opening marubozu has no shadows extending from the open price end of the body. A white body would not have a shadow at the bottom end and the black candle would not have a shadow at its top end. Though these are strong signals, they are not as strong as the Closing Marubozu.

opening marubozu images

The bullish white opening marubozu has an upper shadow but does not have a lower shadow and when the day opens, the prices go up all day. The price then closes higher than the opening price however it does not close higher than the day’s high.

The bearish black opening marubozu indicates a bearish day that concerns the bulls. With this candlestick pattern, the day opens with prices going below the opening price. Then the price goes down all day with a final closing price that is lower than the opening price. The final closing price is not at the low of the day however.

One of the biggest misconceptions of investors is that prices move based upon fundamental reasons when in fact prices move based upon the “perception” of fundamental reasons. The Japanese Rice traders discovered this many centuries ago. Why do prices go down when good news is announced? The answer is that the anticipation of that good news was already built into the stock price.

Please continue to learn how to identify each different candlestick trading pattern as well as what that pattern indicates is occurring in the markets.

 

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Japanese Candlesticks – Black Marubozu

When studying Japanese Candlesticks it is important to know about the black marubozu. The black marubozu is a long black body with no shadows at either end. It is considered a weak indicator. It is often identified in a bearish continuation or bullish reversal pattern, especially if it occurs during a downtrend. A long black candle could represent the final sell off, making it an “alert” to a bullish reversal setting up. The Japanese often call it the Major Yin or Marubozu of Yin. Ideally you would not want to have any small wicks on either end of the black candlestick but it is possible and would signify that the open and the close were close to the high and low price of the day.

Some who study Japanese Candlesticks also refer to the black marubozu as the bearish long black candle and it is the opposite of the bullish white marubozu candlestick pattern. Again, this long black candle signifies that a bearish trend is occurring and the sellers are in control in which the sellers end the day selling pretty low. So basically, Japanese candlesticks tells us that, if the price opens at the high of the day and it closes at the low of the day, then the outcome is the black marubozu. In order to confirm that this signal is valid, you need to watch it over the next few days.

The psychology built into a major Japanese candlesticks signals is simple common sense investment philosophy. When you learn how to utilize the candlestick charts correctly you now have the knowledge to improve your trading techniques for those trading entities you want to trade. You do not have to depend on canned programs that sometimes work and sometimes don’t work and you do not have to buy or sell stock recommendations blindly based on a research analyst’s recommendations. The candlestick signals provide guidance as to what investors are actually doing at a certain point in time. Learn the 12 major candlestick patterns as well as the secondary patterns and your investments perceptions will greatly improve.

Continue to learn about candlestick patterns and read about the Dark Cloud Cover, the hammer signal, the bearish engulfing, and others.

 

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Trading in the Stock Market, Trading Options, Trading Futures, and Options on Futures, involves substantial risk of loss and is not suitable for all investors. Past Performance is not indicative of future results. CandlestickForum.com, Candlestick-Trading-Forum.com, StephenBigalow.com, and Candlestick Forum LLC do not recommend or endorse any specific trading system or method. We recommend that you research all trading systems, methods and market strategies thoroughly. Full Disclaimer here