Are You Ready To Start Buying Stocks?

One of budding investors' main challenges is establishing a market bias having little idea whether the market overall is bullish, bearish or in consolidation. 

As a result, people will find themselves on their chosen media channels, getting caught up in ill-informed opinions and poor advice. This will be and continue to be detrimental to your portfolio performance until you move away from this amateur approach. 

Remember, when the time comes, and you look back on where it went wrong, these people won't be around. Success starts with accountability. 

Instead, you want to get to grips with a proven analysis process that removes the noise and gives you an objective bias and direction to the market. 

A simple indicator to use, one that traders and investors have used for decades and institutions still use today, is the 200 simple moving average on the daily timeframe (d200sma). 

Old school traders drew charts by hand and were very selective on what indicators they used. The 200 simple moving average was a proven indicator of the long-term trend. 

If the price confirmed a trend above the d200sma, they would buy.

If the price confirmed a trend below the d200sma, they would sell.

Below is the daily timeframe. 

Price has been trading below the d200sma since January, not including the pop and drops above the d200sma in February and April. 

Since the low of June, the price has recovered by 20% but is now facing immediate resistance at the d200sma. 

A break and close followed by a bull trend continuation is the signal I am waiting for to start buying the strongest stocks being picked up by my scanners.

If the d200sma forces the price down, I will remain on the sidelines until a bear trend has been confirmed. I will then short the market as I did in 2007/2008.

The S&P 500 fell by 25% this year. In 2007/2008, it fell by 55%, so there is still plenty of downside potential if the bears take hold of the market. 

For now, I am standing on the sideline, ignoring all the media channels (well, maybe the odd chuckle at the nonsense that so-called experts sprout) until the price dictates a clear trend direction. 

Patience is a little appreciated skill but very handsomely rewarded, a skill you won't regret mastering.

Image sourced from Shutterstock