www.CandleStickForums.com Stock Diversification Stock diversification is a key to successful long term investing as well as risk management in day trading. Stock diversification protects traders and investors from the investment risk of putting all of their eggs (investment capital) in one basket (stock). A well balanced stock portfolio will include stocks from different market sectors so that adverse economic events will not drive all stock prices down at once. For example, in long term investing an investor will often choose banking stocks or stocks of consumer product companies as part of his portfolio. These stocks are commonly considered to be recession resistant. He will then add growth, high tech, or manufacturing stocks which, commonly will do better in a strong economy. Stock diversification and hedging are two common means of limiting investment risk. No matter what techniques are used to limit risk or offer gains, fundamental analysis of a stock margin of safety as well as its intrinsic stock value are needed for picking stocks and managing a stock portfolio. Technical analysis with reliable and easy to read Candlestick analysis offers investors and traders accurate assessment of market sentiment for both profits and investment risk reduction.

1. By www.CandleStickForums.com

2. Stock diversification is a key to
successful long term investing as
well as risk management in day
trading.

3. Stock diversification protects
traders and investors from the
investment risk of putting all of
their eggs (investment capital) in
one basket (stock).

4. A well balanced stock portfolio
will include stocks from different
market sectors so that adverse
economic events will not drive all
stock prices down at once.

5. For example, in long term
investing an investor will often
choose banking stocks or stocks
of consumer product companies
as part of his portfolio.

6. These stocks are commonly
considered to be recession
resistant.

7. He will then add growth, high
tech, or manufacturing stocks
which, commonly will do better
in a strong economy.

8. Stock diversification and hedging
are two common means of
limiting investment risk.

9. No matter what techniques are
used to limit risk or offer gains,
fundamental analysis of a stock•
margin of safety as well as its
intrinsic stock value are needed
for picking stocks and managing a
stock portfolio.

10. Technical analysis with reliable
and easy to read Candlestick
analysis offers investors and
traders accurate assessment of
market sentiment for both profits
and investment risk reduction.

11. Stock diversification is not only
used by long term investing but
in day trading as well.

12. To limit investment risk a trader
can limit the amount of capital
he risks in a trade.

13. He can also choose a range of
stocks from the very volatile to
the very stable.

14. The more volatile stock trade
may offer more profit while the
more stable stock will be less
risky.

15. During times of high market
volatility it is also possible to
balance risk with stock
diversification in trading.

16. Stock diversification is not a cure
all.

17. Anyone following a buy and hold
investment strategy needs to
follow his stock routinely with
both fundamental and technical
analysis.

18. With the use of Candlestick stock
charts an investor can anticipate
a market correction or continued
market trends and buy stock, sell
stock, sell short or trade options
accordingly.

19. Hedging by buying options goes
with stock diversification as a
reliable means of limiting risk.

20. An investor can protect a stock
position by buying puts on a
rising stock, for example.

21. If the stock corrects he can
exercise the option contract or
simply exit the position by
executing the opposite trade.

22. In exercising the option he sells
the stock at the strike price, the
contract price even though the
spot price or market price is now
lower.

23. If he exits his options contract he
keeps the stock but gains an
amount roughly equal to the drop
in stock price.

24. If the stock does not correct the
investor only loses the price of
the options premium.

25. Using a combination of stock
diversification, hedging, and
market analysis with Candlestick
patterns provides the investor
and trader a means of profiting
from stocks while containing risk.

26. No matter whether traders
diversify or use hedging
techniques profits are made by
anticipating the market and that
is where traders prosper with
Candlestick charts.