Economics is the most important subject in the lives of individual, companies and countries. A ton of economic reports get released daily for the consumption of the markets. Some of these economic reports have the potential of moving the markets in a big way. For some forex, futures and options traders, trading these economic reports is a way of life. Each market has got its own favorite reports. But some reports have the potential of moving almost all the markets.

The most market moving reports are the Federal Reserve’s Beige Book, The Consumer and the Producer Price Index, The Gross Domestic Product (GDP). the monthly Employment Reports or what you call the NFP Report, the Institute for Supply Management (ISM). Now as said before if these reports have no surprise for the markets, nothing will happen. But in case if there is a surprise, markets can turn upside down in matter of minutes! Now when these economic reports are released, market compares the expected with the unexpected. The more these reports have the element of the unexpected, the more the markets become nervous. So, if you are a news trader or an economic report trader, you need to watch CNBC and Bloomberg constantly to know what the market is expecting.

Now, you can know the date of release of these economic reports by looking at the Economic Calendar. By looking at the Economic Calendar, you can know these dates as it provides the listing of dates when these reports will be released. Each month, most of these reports are released by the different agencies that includes both public as well as private at fixed dates.

Now, FOMC Meeting Minutes are considered to be very important as interest rate changes are decided in the FOMC Meeting. FOMC stands for the Federal Open Market Committee. The other important reports can be the CPI ( Consumer Price Index) and the PPI ( Producer Price Index). Now, you never know how markets are going to react to each one of these economic reports. Some are given more importance by the markets. But this preferrence also keeps on changing.

There are NFP Report Traders who easily make 150-200 pips at this time within minutes. Now, Non Farm Payroll Report or what you call the NFP Report is the most market moving report in the recent times. This report is released by the US DOL (Department of Labor) and it gives the state of employment in the economy during the last month period. It is released on the first Friday of each month exactly at 8:30 AM EST.

The release of employment figures is usually followed by frenzied trading that can last from a few minutes to the entire day depending on what the data shows and what the market was expecting.

Now, as the economy shifts gear from slow growth to high growth the state of employment figures can become highly important for the economy. This report is used by the traders, investors and Wall Street Analyst to anticipate any interest rate changes in the economy. In the end, it is the interest rates that stand at the center of the financial universe! NFP Report has become important in the last few years keeping in view the slow economic growth.

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Many brokerage firms make it easy to sell short. When you place the order to sell a stock, the brokerage asks you whether you are selling shares you own or selling short. In case of short selling, the brokerage firm goes about borrowing the shares for you to sell. It loans the shares to your account and executes the sell order.

In some cases,a stock gets so much shorted that there are no more shares of that stock left for you or your broker to borrow anymore. Now, you cannot always short a stock instantly. Most of the investors work on rumors. In that case, you simple will have to cross your fingers and see how the other short sellers do on that stock while you search for another stock to short!

Day traders are not looking for long term fundamentals in order to go short. A day trader might go short on a stock that had go up for three consecutive days, figuring that they will go down on the fourth day. Day traders are only looking for stock that might go down in price for mundane reasons.

In simple words, once the stock starts to move down, you cannot short it. You will have to wait for its price to move up on the last trade, before your short selling order can be executed by the broker. Now, you cannot straight away short a stock as there are mechanisms in place employed by msot of the stock exchanges that don’t want a massive shorting attack on a stock. There is the famous Uptick Rule that has been put in place to prevent that from happening. What the Uptick Rule means is that you cannot short a stock unless it moves up on the last trade. This rule has been placed to prevent a stock from being driven down to almost zero by short sellers.

How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. So if you are wrong in your short selling decision, your loss can be catastrophic. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.

There is something known as Short Squeeze. A short squeeze happens when the stock of the company that you have shorted has some good news that drives the stock prices high. Now if this happens, many short sellers might lose money and even get margin calls. When they get desperate to buy back the stock, its prices go even higher hurting them more.

As said before, companies, investors and many brokers hate short sellers. They think that short sellers had intentionally driven down the stock prices. So sometimes, they will spread rumors of good news to create a momentary short squeeze. Sometimes, a campaign will be started by the owners of a particular stock instructing their brokers not to loan out their stocks to short sellers. So if you have already shorted that stock, you might get a call from your broker to return that stock immediately. In such a case, you will have to immediately return the stock even if it doesn’t make any sense to you!

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There are many candlestick patterns. Some are simple. Others are complex. One stick patterns are simple. Engulfing Candlestick Pattern is a two stick pattern can can signal the reversal of a trend. Spotting a trend reversal before time is what can give you the edge as a trader.

Now two stick candlestick patterns are more complex. It takes two trading days for the two sticks to form on the daily charts. On the first day if you find a two stick pattern forming, you will have to wait for the end of the second trading day for confirmation. Most of the time, it will happen that you find the pattern forming on the first day. But on the second day, your hopes get dashed when the pattern fizzles out and there is no trading signal for you!

There are trend continuation patterns and trend reversal patterns. An Engulfing Candlestick Pattern is a very important trading signal about the reversal of a trend. Two stick patterns are rare! However, it doesn’t mean that these two stick candlestick patterns do not form at all. They do! But don’t frequently. So if are able to spot a two stick pattern correctly, you can make a highly profitable trade.

Bullish Engulfing Candlestick Pattern is formed when the first day candle is completely covered by the body of the second day candle. The first day candle is bullish. The second day trading starts with an open lower than the previous day.

Remember, a bullish engulfing candlestick pattern has to appear in a downtrend to be meaningful. But when this appears, it means that bulls will soon take control of the market and overcome the bears. What this means is that bears are still in control of the market. When the bulls get into action, so much buying takes place that opena and high of the previous day both are surpassed.

On the other hand, in case of the bearish engulfing pattern on the first day, the bulls are in control of the market. However, on the second day or the signal day, the bears have had enough. Sellers or short sellers think that the price has gone too high and it is the time to take profit and exit. They start selling in large numbers.

Soon, the price of the security is pushed down lower than the open of the first day. The second day candle is bearish and completely covers the first day candle. When the bearish engulfing pattern appears, it is an indication that the uptrend has reversed and a downtrend has started now.

Now, the most important thing for any trader is where to place the stop loss. In case of a bullish engulfing candlestick pattern, place ths top loss on the low of the first day to be on the safe side. And in case of a bearish engulfing pattern, place the stop loss near the open of the second or signal day. This way even if the pattern is not confirmed with the subsequent price action, you are on the safe side. Happy trading!

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