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Candlestick chart patterns - Bullish Engulfing
Candlestick signals - The Doji
The doji is candlestick chart pattern consisting of one candle line. The ideal doji occurs when in a trading session the opening and closing prices are the same, but this rule is sometimes relative and you can consider candle line as a doji even when the opening and closing prices are few points or ticks away from each other. For example this is especially true in the forex market due to slightly different data from each platform. In charting software it looks like a cross.
Similarly like spinning top, the doji indicates market in complete balance and indecision between supply and demand. When the doji appears after an uptrend, it can signal market reversal. Probability of this signal is much higher when it's at a level of prior resistance. Altough a doji's appearance in a rally might signal a market top, but in a downtrend it may not signal a bottom, because indecision in an oversold market can be a staid place for a continuing downtrend.
The doji has it's power when it is alone or even greater when it's included in a two or three candle pattern. There are also more types of doji, depending on the position of the open and close price in candle line, but the main interpretation is similar.
Similarly like spinning top, the doji indicates market in complete balance and indecision between supply and demand. When the doji appears after an uptrend, it can signal market reversal. Probability of this signal is much higher when it's at a level of prior resistance. Altough a doji's appearance in a rally might signal a market top, but in a downtrend it may not signal a bottom, because indecision in an oversold market can be a staid place for a continuing downtrend.
The doji has it's power when it is alone or even greater when it's included in a two or three candle pattern. There are also more types of doji, depending on the position of the open and close price in candle line, but the main interpretation is similar.
Candlestick chart patterns - Spinning tops
From start, I will focus on single candle lines. Here belong also spinning tops. Some candle patterns consist of more candle lines, but we can get valuable information also from single candle line. Candlesticks help us visualize market psychology. They portray the battle between the bulls and bears. The essence of market move is in real body. Real body is part of candle line between opening and closing. And spinning top is term for a candle with a small real body. And it's not important if it's black or white (or red or green). Spinning top can but doesn't have to have lower or upper shadow. Only important factor is a small real body. One picture is worth more than tousand words:
Spinning top shows that neither the bulls or bears have dominant power. The main interpretation is that the market is in confusion and indecision. Spinning tops are also parts of many candle patterns that indicate market reversal.
Spinning top shows that neither the bulls or bears have dominant power. The main interpretation is that the market is in confusion and indecision. Spinning tops are also parts of many candle patterns that indicate market reversal.
Option Greeks-Introduction
If you have ever traded options, maybe this scenario is familiar to you: you bought a call when you thought a stock was going to go up but that call lose value when the stock did go up and you didn't know why? It is because the price of option is not affected only by change in price of underlying asset but also by the effects of time and volatility. Many of us can relate to this situation. The problem here is that an options price relies on more than one factor. With stock, you always make money when stock goes in desired direction, so this is one from the most important differences between stock and option.
The Greeks are the name given to a group of statistical references that describe and quantify risks to the variables that can effect the price of options. They describe how the price of options will change in different scenarios. I think that to know what risk you take is very important with every investment you make, it will help with making decisions whether or not to choose any given option.
Option Greeks are delta, theta, gamma, rho, vega, and omega. Each one of them measures some aspect of an option position's market risk-reward profile. This definition is true whether the position is a simple one involving one or perhaps a few different options or a more complicated position. I will explain the most important option Greeks for option trading later in my posts.
The Greeks are the name given to a group of statistical references that describe and quantify risks to the variables that can effect the price of options. They describe how the price of options will change in different scenarios. I think that to know what risk you take is very important with every investment you make, it will help with making decisions whether or not to choose any given option.
Option Greeks are delta, theta, gamma, rho, vega, and omega. Each one of them measures some aspect of an option position's market risk-reward profile. This definition is true whether the position is a simple one involving one or perhaps a few different options or a more complicated position. I will explain the most important option Greeks for option trading later in my posts.
Introduction to Candlestick Charts
What are candlestick charts? If you know something more about technical analysis, you probably know, that candlestick chart is type of chart used to describe price movement of an equity over time. In technical analysis in western world are more popular classic bar-charts than candlestick charts. Differences between these two I will show and describe later. One from reasons that candlesticks are not so popular between traders in western world is in my opinion that candlestick charts were introduced to them only roughly 20 years ago.
Candlestick charts have been developed in the 18th century by Japanese rice traders, that were trying to predict future prices of rice. Charts illustrated price movement based on open, high, low, and close market prices over a certain time period. You can see differences between bar charts and candlestick charts in the pictures bellow.
One from the main points of using candlestick charts is that they have their own chart patterns, that would be not so obvious in other types of charts. These chart patterns are tested by centuries of their using, what I think is enough solid proof of credibility of this method. The amount of data displayed in candlesticks is exactly the same as in bar charts, but the difference is in visual presentation and interpretation. Candlestick charts can be used for all trading time frames and with all investment vehicles like stocks, forex, commodities or options. Repeating patterns are not 100 percent accurate, but for profitable trading they don't have to be and many fortunes have been made by using this methodology.
Candlestick charts have been developed in the 18th century by Japanese rice traders, that were trying to predict future prices of rice. Charts illustrated price movement based on open, high, low, and close market prices over a certain time period. You can see differences between bar charts and candlestick charts in the pictures bellow.
One from the main points of using candlestick charts is that they have their own chart patterns, that would be not so obvious in other types of charts. These chart patterns are tested by centuries of their using, what I think is enough solid proof of credibility of this method. The amount of data displayed in candlesticks is exactly the same as in bar charts, but the difference is in visual presentation and interpretation. Candlestick charts can be used for all trading time frames and with all investment vehicles like stocks, forex, commodities or options. Repeating patterns are not 100 percent accurate, but for profitable trading they don't have to be and many fortunes have been made by using this methodology.
The Stock Market and Financial Crises that We Live In
As you probably realize, we live in financial times, like one advertisement says. We realize this now more than ever, mainly because of recent news in the stock market and financial industry. Even big banks with long history like Lehman Brothers have serious financial problems and the whole financial sector has bad times.
Stock Market has record drops since 9/11 and majority of people are scared from this events and are afraid about their investments, retirement and future. I saw the biggest rush in the stock market in my trading career. For majority of people are events like these disquieting. However the best traders and investors know how to make money in every market, regardless if market goes up or down or how fast it goes. In this market, few days ago I had my the most profitable trade ever. I was profiting from stock, that price was going down. I used put option, that enables me to profit even if the price of underlying stock goes down.
So what's my solution for traders or investors that want to survive or benefit in every market? If you want to prosper and benefit from situations like this you must have right knowledge that will give you advantage. The right knowledge is the key that makes risk much smaller.
Stock Market has record drops since 9/11 and majority of people are scared from this events and are afraid about their investments, retirement and future. I saw the biggest rush in the stock market in my trading career. For majority of people are events like these disquieting. However the best traders and investors know how to make money in every market, regardless if market goes up or down or how fast it goes. In this market, few days ago I had my the most profitable trade ever. I was profiting from stock, that price was going down. I used put option, that enables me to profit even if the price of underlying stock goes down.
So what's my solution for traders or investors that want to survive or benefit in every market? If you want to prosper and benefit from situations like this you must have right knowledge that will give you advantage. The right knowledge is the key that makes risk much smaller.
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