Over the past month, I have had several women ask me whether now is the right time to invest in the stock market. When I tell them that I have several stocks and exchange traded funds (ETFs) that are profitable, they say to me, “What about Facebook?”
Trends are the most important checkpoints to consider when deciding whether to buy or sell an investment (stock, ETF, mutual fund). A trend is simply how a stock has performed over time. When I look at a stock’s performance on a chart, the first trend I consider is the 200-MA (200 day moving average).
The 200-MA tells me how a stock has performed over the last 200 days. Has the stock price been increasing, decreasing, or remaining constant? This is why I do not participate in IPOs (initial public offerings), because there is no established trend. IPOs are 100% gambling. Your odds are better in Vegas. You are hoping that a newly publicly traded company will perform well and that you will make lots of money when the stock price goes up. In fact, because you THINK this stock will perform well based on what others are saying, even though it has no past performance, you choose to invest a portion of your hard-earned money into this company, only to lose a huge chunk the first day the company goes public. It is a tough and expensive lesson to learn, but you have now found out, along with the investors who chose to invest in the Facebook IPO, that the stock market does not care what you THINK. If you want to take calculated risk investing in the stock market and be profitable, you need to look at the trends. Meaning… you need to look at past performance.
As I mentioned earlier, I start with the 200-MA. I also look at the 30-MA and the 7-MA as well. These are important characteristics to consider as a part of one of the trading templates I use. These trading templates help keep my investment decisions objective, and I no longer invest based on emotions, or what other people are saying or doing.
Best of luck to you in your investments!
Aneshia
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