Stock Market for Beginners Charting

Stock Market for Beginners - Basic Stock Trading Strategies

If you are new to the stock market, my word of advice is to take care ! The stock market is not a level playing field, it is highly tilted in favor of the insiders. As a stock market newbie there are some basics that you need to understand before parting with your money.

Firstly, you need to understand that the stock market and therefore stock prices are driven higher or lower by professional traders for reasons of their own. It may even be the case that there are certain stock market insiders who drive the stock market up or down based on nothing more than a whim or a desire to cause everyone else to lose money.

As a beginner you can only hope to compete if you have a basic understanding of stock charts. Professional traders use them all the time so you need to understand what they are seeing when they look at them.

Stock Market Charts Support and Resistance
So, where to start with charting ? The most basic aspect of a stock chart apart from whether the price is heading up or down is the concept of support and resistance. Some people trade shares on the stock market using nothing more complicated than this basic notion.

How to make money on the stock market using support and resistance levels ?
Stock prices will often move down to a certain point on the charts before turning round and moving back up again, if you knew when it was going to turn round then you could make some money by buying the stock at that point. This low price is known as the support level. The high point is called the resistance level. Stock prices often bounce around between this support level and the resistance level - if you can spot this trend in the stock charts then you can take advantage of the situation.

When a stock bounces around between the resistance level and the support level it is said to be in a trend. The aim is to buy it when it reaches the bottom of the trend and sell it at the top. This stock trading stragey does not bring in enormous profits in one go, the aim is to make around 7 - 10% profit over and over again. Once you have made a profit you sell the stock and look for another one that is following a similar trend.

It is very basic, but the aim of the stock market is to make money not to devise complicated strategies for trading stocks. The trick of course is to find a stock that is following a predictable trend.

You must also limit your losses. If the stock you buy starts heading down instead of up then at some point you need to get out. You do this by setting a 'stop loss' - i.e. a price at which you automatically sell. Your 'stop loss' should be around 3-4% below your buying price. This way you have the possibility of making a 10% profit but are only risking a 4% loss. The stock market is all about risk/reward ratios. If the risk is too great then you don't do the trade. Above all a stop loss is designed to make sure that you don't lose all your capital in one trade !

So to apply this basic stock trading strategy you need to look at the stock charts and find a stock that is following an upward trend and where you can make a minimum 7% profit. Then identify the support level and buy the stock when it falls back to at or near the support level. Don't buy all your stock in one go, buy half of what you intend to spend then watch the stock to see if it starts moving up. If it does start moving up then buy the other half.

If it starts to move down then sell up when you have lost around 4% of your money - in stock trading it is all right to lose battles as long as you don't lose the war.

For further reading on basic stock charting see - online stock investing
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Investing in Stocks for Beginners Charts

Investing in Stocks for Dummies - Understanding Stock Charts

If you want to make money on the stock market by trading stocks and shares and you want to do it fairly quickly then you are going to have to learn at least the basics of stock charting. Fortunately this is not too difficult to do given the many online stock charting videos that exist for free to teach new traders how to interpret stock charts. Videos are a lot easier to follow generally than books or written explanations of charting, but they do not always contain a great deal of useful information.

The following 2 videos provide an excellent introduction to investing in stocks for dummies using stock charts. They are also very easy to listen to and very clear, which cannot always be said of videos that people put on youtube ! If you are not an absolute beginner to stock charts then you may find these videos rather too easy, but for those who know very little about charting they will provide a good introduction to the basic concepts.

Basic Stock Chart Reading - An Explanation of Stock Chart Terminology

The Basics of Stock Charts - Difference between Line Charts, Bar Charts and Candlestick Charts

For slightly less basic information on charts such as how to spot chart breakouts and how to trade them see this excellent video - stock market for beginners

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Stock Charts Hindenburg Omen

Online Stock Trading -
What is the Hindenburg Omen ?

UPDATE to the Hindenburg Omen sightings - the first Hindenburg Omen was mentioned on August 12 and since then the markets have dropped around 3% - although so far today (1 Sept.) they are up, with the DOW up 138 points at 10,152). The predictions around the Hindenburg Omen seem to vary from a wimplike 5% to 15 or 20%. A 5% drop to me doesn't seem like much and hardly worthy of an omen !

The Zero Hedge website which was one of the first to mention the Hindenburg Omen, it appears that, unlike in 2009, the market's "downside potential is finally starting to be appreciated". So we will see - personally I expect the DOW to drop down to around 9700 before putting in a bottom. But as stock market guesses go that is pretty lame too.

So just what is the Hindenburg Omen anyway ?

Apparently the five factors required for the Hindenburg Omen on the stock market are in place.

It appears that this particular stock market configuration is an early warning of a crash, although it also appears that this signal is not always valid, i.e. it does not always lead to a crash.

However Jim Miekka, the mathematician who discovered it said it is now predicting a market meltdown in September and he is out of the market. He also says that although it is not guaranteed he will be "dancing close to the door".

For a full definition see Hindenburg Omen

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Stock Trading Breakouts for Beginners

Stock Charts for Dummies - Making Money from Breakouts - an Excellent Video

In online stock trading people often like to trade  breakouts. So what are breakouts  ? Well simply put, a breakout occurs when a stock price breaks out above or below its previous trading range based on support and resistance levels - see stock trading for beginners. You can make money trading breakouts but how is it done ?

This excellent video from Lance at shows a way of trading breakouts that reduces risk. It should be required viewing for all online stock traders. It's a pity I didn't see it before I decided that trading breakouts was a good idea ! My strategy for trading breakouts turned out to be very painful but that is because I combined it with the strategy of not applying stop losses. A very sad story which I will not relate here.

However, in this video Lance expains how he trades breakouts by reducing the risk first. His thinking is that breakouts in fact generally represent too much risk for too little reward, so if he is going to trade a breakout then he likes to get in early to put the odds in his favor, which is very sensible avice and he also gives very useful advice on how to spot when a breakout in the charts may be about to occur so that you can get in early and thus put the odds more in your favor.

The usual way of trading breakouts is to wait until a breakout has occurred and then to jump in and to place a stop loss below the previous low. Unfortunately this can mean that the stock price can fall back quite a long way before you actually get stopped out and you can lose even more if you ignore the need for stop losses. My free advice for trading stocks online, whether you are trading breakouts or even just swing trading, make sure you have a stop loss set and stick to it !

By following the breakout trading advice given in the video you can still trade breakouts but you get to reduce your risk, so that you will get out with either a large gain, a small gain or you will break even. Take a look it's quite simple really.

See also the basics of stock trading and two excellent videos about the absolute basics of stock charting stock market for beginners
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Candlesticks for Beginners Hammer Pattern

Stock Trading for Dummies Hammer and Inverted Hammer Candlestick Charts

In candlestick charts there are around twelve basic candlestick patterns which it is important for beginners to stock trading to know how to recognize and the strategies to adopt. In this post we will be dealing with the Hammer and the Inverted Hammer. The Hammer is a bullish reversal pattern. It consists of a single candlestick with the body at the top and the shadow below (it looks in fact the same as the Hanging Man - the difference being that you see the Hammer after a downward trend and it represents a bullish reversal i.e. the stockwill start heading up again - the Hanging Man comes after an upward trend and is a bearish reversal, the stock will start heading down). The body of the Hammer candlestick can be either red or green but green is slightly more bullish.

It has to be confirmed by a gap up and move upwards to trade above the hammer.

The shadow underneath the body needs to be at least twice the size of the Hammer's body.

Aggressive traders will make their the trade as soon as the price starts trading above the hammer high, traders who are not quite so aggressive and beginners to stock trading would be well-advised to wait for the closing price to finish above the high of the body.

See this excellent video from for more details.

The Inverted Hammer Candlestick Pattern.

The inverted hammer candlestick is what is known as "a bullish single candle reversal pattern". The body is either red or green or black or white (green or white is more bullish). The shadow above the body is at least twice the size of the body and the trend needs to be heading down before the inverted hammer pattern is created.

Ideally there should be a gap down leading to the inverted hammer. Trading above the candlestick pattern is seen as confirmation. The inverted hammer has a lower probability than the shooting star or hanging man and needs good confirmation before a long trade can be entered.

If the price trades above the high of the inverted hammer then shorters will get stopped out, which will help the price move higher. There is however no guarantee, only a probability. The inverted hammer is considered less bullish than the hammer.

This video on the Inverted hammer Candlestick pattern gives more details

For how to trade the inverted see video - inverted hammer candlestick

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Stock Market Beginners Fantasy Game

Stock Trading for Beginners - Fantasy Stock Market Game

Interested in investing in the stock market with no risk ? Well the Daily Telegraph and J P Morgan are organizing a Fantasy Fund Manager game - you can check it out here Fantasy Stock Market Game . It's free to enter and you get to play with 100,000 fantasy pounds (around $150,000) that you can invest in a selection of funds in a no-risk way of testing your investing skills and knowledge. If you are a beginner to stock trading it could be a good way to get to know something about the ins and outs of stock market investing or trading without risking your own money.

They have increased the stakes and changed the rules from last year, and have added new games and new prizes.

In the words of the organizers you can use "your ability and intuition to build a winning portfolio and learn new skills". You get to pick investments from a range of fund management companies, including J.P. Morgan Asset Management. They say it's very easy to get started so we will take their word for that. And you don't need to be an expert to win.

If you are a total beginner to the world of investing, you can just go for the ''Lucky Dip'' option which will randomly create a balanced portfolio for you to start with which you can then modify and trade as you gain more knowledge and confidence and as the game progresses. There is also the option of referring a friend who might also be interested in investing and your name will be entered into a cash prize draw.

There is a monthly prize for the best performing team, so you can create a mini league and compete with friends and family as well as against other teams to advance to the top of the overall league.

Whatever your investing strategy it is useful to know something about stock market charts, what they mean and how to use them - click here to read my free introduction to investing using stock market charts

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One Stock Trading Tip for Beginners

How to Trade Stocks Online

Lots of beginners to stock trading and the stock market feel that there is something basic they need to know to ensure they make the right decisions. Well, apart from the obvious answers like use your common sense, don't believe snake oil salesmen, a mine owner is a liar standing next to a hole in the ground etc... there is one basic thing you can do for yourself. Learn how to understand basic stock charts signals. For example one basic signal if you intend being a swing trader not a long-term buy and hold investor is "don't buy a stock if the 5 day moving average is pointing down". If you don't understand what that means then you really need to find out. 

The moving average is just the average of a stock price over a given period of time e.g. 5 days and it moves i.e. each new day is added to the end of the sequence and the first day is taken off the front. So if the price of a stock over five days is 10 - 11 - 12 - 13 - 14 then the 5-day average is 12  so a 12 is plotted on the graph/chart. If the next day the price moves up to 15 then the 5 day  average is now 11 - 12 - 13 -14 -15 divided by 5 i.e.  13

Here is the chart for Microsoft showing the 5-day moving average (in green) and the 200-day moving average (in blue)

at the moment the 5-day moving average is pointing up (but as this chart updates itself automatically it may not be pointing up when you look at it) and the stock price is above the 200 day moving average.

So it seems a fair enough short-term trade based on the moving averages. Another basic point is never buy a stock that is below its 200-day moving average, wait until it gets back above it.

There is a lot more to charts and online stock investing than this of course, but it is important to realize that the stock market professional traders use charts and if the charts seem to them to be saying it is time to sell then it would be foolish for you to start buying, there would be too many sellers selling and this would force the price down. It is therefore doubly important as a beginner to the stock market to know when the professionals are likely to be buying and selling, which means understanding a minimum about stock market charts.

This seems to me to be the one basic point that all stock traders need to understand i.e. that it may all seem random but there may be some method to the madness and if you are serious about making a living from online stock trading then you need to get to grips with the basics of stock market charts.

See these related posts for more information on charts - Stock Charts for Dummies or Stock Charting for Beginners

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Key Candlestick Chart Patterns Reversals

The Power of Understanding Candlestick Reversal Patterns

By Mark Deaton

Traders claim that 'the trend is your friend'. That's true - until the trend reverses unexpectedly. This is why it's critical for you to understand candlestick reversal patterns. A surprise change in trend is likely to be triggered by news. There will almost always be hints or rumors before the information comes out publicly. For example, news from one company may cause speculation about what is happening to competitors in the same or related industries.
Markets will react or prepare for that anticipated news based on speculation. Buyer and Seller behavior actually becomes somewhat predictable at this point. Traders often 'buy on the rumor and sell on the news', in an attempt to beat the crowd.
Clear evidence that lots of people are "in the know" shows up as patterns within multiple trading sessions. Candlestick charts can help you be nimble enough to stay one step ahead of whatever major move is about to occur. You just have to know which candlestick reversal patterns to look for.
Stars - Trend Exhaustion Signals
The Morning Star and Evening Star are two opposite-meaning candlestick patterns. Both indicate a possible change in trend - one up and the other down. They tend to be reliable signals when the trend has been strong for an extended period. There is already a sense that it is time for a market correction.
For example you might have a long candle with very little shadow the first day followed by a Doji (a candle that is all shadow with no body) formed on the second day. A gap in trading appears between the first and second trading sessions. The Doji indicates indecision where the bulls and bears equalize or cancel each other out. The opening and closing the second day are the same price.
The third day gaps again with a long candlestick in the opposite direction from that of the first day. It provides confirmation that a new trend has begun. This single description actually fits both the Morning and Evening Star candlestick reversal patterns. Each predicts a reversal in the opposite direction - but for similar reasons.
In the case of a Morning Star, the bulls have taken control of the market and prices continue upward. In the case of an Evening Star, the bears are firmly in control and prices continue lower on the third day. The old trend is clearly broken as the price closes beyond the midpoint of the first day candle. Why does this move happen?
Value Adjustments
Price trends usually change for reasons that are based on perceived future value. Extreme price movements need to be justified by fundamentals and estimates of true worth. If an upward trending stock suddenly issues an earnings warning, perception of future worth abruptly changes. This explains the diverging pattern associated with the Kicker where trading shifts dramatically in the opposite direction of the former trend. Other, more subtle candlestick reversal patterns occur when the market needs time to evaluate news.
Breakaway Candlestick - This 5 day reversal pattern starts out similar to an Abandoned Baby, except there is slightly more indecision before the major move. In a downtrend, a long black candle forms. The 2nd day gaps down to form a black short day called a star. The next 2 days are consecutively lower candles with the 4th day closing lower than the 2nd. The 5th day opens lower still but trades up and closes within the gap of the 1st and 2nd days. The bearish form of the Breakaway Candlestick starts with the prior trend being bullish instead. The candle formation is flipped and features colors that are the opposite of those described above.
Ladder Bottom - 5 day pattern. Three Black crows form during a downtrend. On the 4th day a short black body forms as an Inverted Hammer. The 5th day is a long white candle that opens above the 4th day body and closes above the opening of the 3rd day.
Three Stars to the South - 3 consecutive black candles in downtrend (paradoxically bullish because shorts in the market have failed to create a new low). The 1st day has a long shadow on the bottom. The 2nd day is a smaller version of the 1st and trades completely within the body and shadow of it. The 3rd day is short and black with no shadows but trades within the complete trading range of the 2nd.
Tri-Stars - 3 Doji in a row indicate a reversal of the current trend because of the extended and extreme nature of the indecision. Tri-Stars can be bullish or bearish candlestick reversal patterns.
If you want to master the craft of identifying and profiting from candlestick patterns visit our site for flashcards, our FREE candlestick pattern asters kit and much more.

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Charts for Beginners Shooting Star

Stock Market Charts for Dummies - Shooting Star Candlestick Bearish Reversal Pattern

For the basics on how to trade stocks online - click here for the no frills lowdown ---> how to trade stocks online

Understanding stock market charts is important for stock trading or investing. It is not necessary to understand the meaning of every tiny move but a knowledge of the basics that professional investors use will help in interpreting what is happening to a stock price, and more importantly, what it might do next.

As explained in a previous post - see candlestick stock charts for beginners - Japanese candlesticks are commonly used as they provide a lot of information in an easyily understood graphic format.

The pattern known as the shooting star is one of the more important candlestick patterns. It has a small body (which can be either white, black, green or red depending on the trading software you use) and a long upper shadow with a very small or even non-existent lower shadow.

The upper shadow needs to be at least double the length of the body and the difference between the high point and and the low point should be significant. The low/high range needs to be wide compared to the range for the last 10 to 20 days.

A candlestick is called a shooting star if it gaps up from the previous day. This is not a hard-and-fast rule however, particularly in so far as concerns trading indices and stocks, as it is not unusual for these to open near the close of the previous day. If there is a gap up this indicates a stronger shooting star, but even if there is no gap up the reversal still holds true.

A bearish reversal must also be confirmed. A reversal means that there are less buyers than sellers for one or more days, but there is no guarantee that it will continue. Confirmation is needed. This confirmation is provided if there are further moves to the downside, such as a gap down, major decline in volume or a long black candlestick. Bearish confirmation should be clear within 1 to 3 days.
This video from gives a more detailed explanation

Further reading : Investing in Stocks for Beginners

For how to trade the shooting star video - shooting star candlestick

Stock Market Training Trading Courses

How to Trade Stocks Online - Internet Stock Market Trading Training Courses

Are stock market trading courses and seminars worth the money?

Well, if they're free then sure, why not! The Internet is full of free information about all aspects of the stock market. Some people even put up stock market trading videos on sites like youtube so it is clearly a good idea to take a look at them, particularly if you are a beginner to stock trading.

But what about the trading courses that are not free and that in fact are pretty expensive - usually costing several hundred to several thousand dollars ? The philosophy behind these stock investing courses and seminars seems to be that the more expensive they are the better they must be. Although from the sites I have looked at it is very difficult to see how much they actually cost before you give them your details, they seem to like to stress how much information they are including for free ! Personally I can't see how that can be the case.

Let me first add that I have never tried any of these stock market training courses so I can't judge on the merits or otherwise of any particular course. However, it seems to me pretty obvious (as is the case with all schemes and courses designed to make you lots of money once you have paid the sign-up fee) that if the people selling these courses had a sure fire way of making regular returns of 10%, 20% or 50% and more, then they wouldn't need to be selling stock market training courses to make a living.

It makes no sense to me to be putting a lot of effort into selling your 'secrets' or your 'system' or even just plain old charting information, when all you need to do is to apply your system to get rich. It is clear therefore that these stock trading courses are designed first and foremost to make money for the people selling them, not the people buying them.

The same is true of course for all such get rich schemes. It is apparently possible to make money online from blogs, but the vast majority of sites that I have seen that purport to tell you how it is done seem more interested in selling you their e-book first, which contains the 'secret' method you need to buy so that you too can join them in their online money making endeavours.

So are stock market trading courses worth the investment ? Well, I won't be taking up any offers. But take a look at some of the links I have put up to see if you are impressed by what is available. Once you have waded through the hype and promises of a bright future after you have parted with your cash, then go back to youtube and watch the free videos or use this site and get the information you need for free !

For free information on stock market charting take a look here - stock charts for beginners

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