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Stock Market:How to Enjoy the Upside without the Downside
Written by: Sean HymanArticle Overview: Back before I knew anything about stock analysis, financial statements, ratios, etc… I was introduced to a method that helped me to follow trends. The method can help you to know when to get into a fund or ETF and when it may be best to get out.
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Stock Market:How to Enjoy the Upside without the Downside
Way back in the day, when I was just getting my feet wet in stock investing, I learned a simple concept. It helped me to profit even before I knew the first thing about earnings, balance sheets, P/E ratios, etc. Honestly, at that point in time, it was way over my head. I’m sure some out there can relate.
So what did I do? I learned to follow trends. I devised a simple formula that anyone can follow. It helps them to know when to get into a mutual fund or ETF and when it may be best to exit.
It made me quite a bit of money and yet it saved me so much “downside” that others experienced. It smoothed out my returns and took away some of the volatility out of my portfolio.
Who wouldn’t want that? …especially when you go through times in the stock market like we’re going through now.
Don’t get me wrong, I didn’t invent this process. I simply found out how to hone this simple charting concept and it helped me to propel my returns far past my wildest dreams.
Want to know what it is? Here’s the simple concept.
Markets are driven by trends. I knew if I could find a way to know when BOTH short term trends and long term trends were headed in the same direction, I knew I had great odds in my favor.
So with that in mind, I defined how to determine a short term trend and long term trend. Once I had it “quantified”, I could put it on my charts.
The blue line indicates where the short term trend is going and the red line indicates where the long term trend is going.
When the short term line is above the long term line, I’m a buyer of the fund. However, when the momentum shifts in the short term to where the short term blue line drops below the red long term line, then I get out of my fund.
You can see how this can allow me to enjoy tons of upside but yet avoid much of the downward spiral that happens in the stock market.
If you look to the far right of the chart, you will see that it appears like the short term trend is overtaking the long term trend once again. This could be a sign to consider re-entering the fund. After all, it’s been heading much higher lately when most stocks are still headed lower in steep downtrends.
Once you learn how to use the charting indicators, you can use the exact same indicators with Stocks, ETFs, Mutual Funds, Commodities, Currencies, etc. Therefore, you can allow these indicators to increase your odds of success in whatever market you are involved with.
Sean Hyman
Head Course Instructor
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Article Tags: balance sheets, downside, downward spiral, earnings, etf, momentum shifts, money, mutual fund, odds, point in time, ratios, red line, stock market, term trend, term trends, volatility, way over my head, wildest dreams
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