The purpose of this post if to tell you exactly how to use a stock market predictor to make money in stocks. There are many ways to approach Wall street and every expert will have their own opinion. Therefore, what makes my idea better than any expert in the investment field?
The answer is this, it works and is so simple. I really do not care what you do with the information. I really do not care if you believe me or not. I am not my brother’s keeper, especially when it comes to investing. However, if you look closer at this investment strategy you will see how simple and effective it is. It is up to you want you do with it.
I will also give you some excellent external resources that I recommend you read if you are serious about understanding the way the investment world works and want to profit from it. That last one I recommend is by Anthony Mirhaydari. It is the most important article on trading and investing. Read his article on why “buy and hold” investing does not work. View these resources as supplements to my article and just as important as my guide for equity investing.
Please note as a disclaimer of course I am not giving advice or telling you what to do about investing. I just wrote this post as advice to myself based on my own personal experience. I was a stock broker for years and I have invested on my own since I was 15 years old. I also have a Master’s in Economics from Trinity and trust my advice. That being said read on if you want to know the secret to investing.
Seven step to predict the stock market
The first six steps are really just a preamble to the seventh step which is the real stock market forecaster technique. Even if you were an index investor, put your money into the S&P 500 index with the last point, you would do well. If you want to skip to the seventh step you can.
- Use a trusted discount broker – Only use an online discount trusted discount broker like Scottrade (seven dollars a trade). There are many trusted retail trading firms, decide for yourself which is best, but Scottrade is pretty respectable. Similarly stay away from other people’s trading systems and package deals on how to make money. Do not trust anyone. Use your own judgement.
- Do not listen to the Stock market experts – The news will only confuse you. If the news journalists knew the answers to life and investing they would not be ‘making’ the news. They would be making the green stuff. similarly do not listen to the experts or read too many books on how to make money from the stock market. Too much noise. Further, many of those books were written in a different time. Not even The intelligent Investor by Benjamin Graham or anything by Warren Buffet will do you much good if you do not understand the basic idea of this post, those types of books are a waste of time. And no, the financial markets are not the same markets as it was many years ago, the rules are different. Few if any expert saw the last stock market crash, most have CFAs and read those books. Investment firms pay millions in salaries yet the experts were wrong. Just remember that. It’s all fake. I know I was in the business. The experts are bloated with ego and fancy degrees but lack intelligence. Please read this article if you need further convincing, stock market experts and predictions.
- Turn out the Internet clutter even further – Now that you have turned out the noise, turn it off some more. I am often in the Polish countryside with no Internet and no news for long periods of time. Sitting on my butt in a Polish village, really. I am an American expat living in Poland. Nothing has cleared things up for me more than getting away from corporate America and the clutter and bombardment of information. I do well in terms of investing. My advice is, you do not need to check your investments everyday. You do not need to read up on the Internet on investing. I have been mislead many times by respected sites like Motley Fool’s. I use MSN money for some limited information a guy like Jim Jubek is not bad either as the one stock picker expert on the Internet I would trust, however, not as much as myself. I use MSN money’s top ten stock picker and valuengine.com. But these do not replace your own brain for making the final decision. However, the whole world is trying to sell you. America is becoming the land where everyone makes money by services. Everyone is pressing each other’s pants and looking for new clients. I am telling your do not get sucked into another person’s system for making money. Whether it be an investment system or website that promotes financial news. Cut out the clutter and start to listen to yourself.
- Buy companies with money and ideas – This point is how to find specific companies in the big picture of stock market prediction. The specific stocks you want to buy are company that you personally would buy from. That is it. Do not buy stocks that other people say are great. If you have no intention of buying a Mac computer or device do not invest in Apple. The other side of cutting out the clutter and noise is using your own senses and perceptions. Do not listen to expert predictions rather look around you. Use your own judgement about where people are spending their dollar. When I lived in Boston people would try to tempt me with exotic sounding companies that did with Harvard and MIT brains like make artificial blood. I do not think those companies have made much money yet. Altruistic ideas they are, but this is business and the experts and geniuses are always wrong. They are geniuses only in their own mind. You be the genius and look for companies that people in your own observation are growing. Let me tell you a story. I meet a 100-year-old man who was a great investor, when I was a Merril Lynch broker. I asked him his secret to investing. He said, do not buy companies that are going out of business. He is right. Only buy companies that are making money now. Have a large profit margin and little or no debt and strong cash flow. Do not buy a stock based on some hope or hype. For example, I like computer games so I invest in the companies I would play or do play. I know something about the industry almost as an insider. One last note on buying companies is, there are a lot of boring companies that are going no where fast. Look at the management and see if they are smart and open to ideas.
- Diversify your investments – Systematic and unsystematic risk. Listen to these stories. I use to mow lawns and saved 2000 dollars when I was a kid. I invested it and turned it to over 50 thousand dollars pretty quick. Then I got greedy and when on a tip (actually from my dad, who is a great investor by the way). I put all my money in one stock thinking I could turn it to 100,000 dollars. It went back down to 1000 dollars. I was a kid and learned my lesson early. Another friend of mine invested her 401k in one stock. The stock was an airline that was flying high until a crash and it when out of business, poor people. Learn the lessons of others. Invest in 5 to 16 stocks. Some people invest in more but eventually you will get the index if you have over 32 stocks. At about 32 stocks you start getting the S&P 500 index unless you are careful. So if you own 100 stocks why not just invest in the index and go out and play golf and not fretting about individual stock picks. Of course this depends on how much money you have. I usually invest in 7 stocks.
- Do not invest to get rich – OK here is my one spiritual side to investing. Be actively indifferent towards making money. St. Ignatius wrote about this active indifference better than I can so if you want to read more you know where you can.
- Use the 12 month moving average to predict the stock market – I will describe this process in the rest of this article. This is the one and only real secret to prognosticating the stock marketing.
Stock market forecaster strategy for investing
Study and meditate on the image above until it sinks in. Let this be your guide, not me. Lets cut the variables and look at one indicator. Take the S&P 500 index and graph is using MSN money’s 12 month moving average. When the market is above the moving average be in the market. When it is below the moving average be in something safe like cash. Try various interactions of this over the life of the who stock market. You will see from the beginning you will earn above average returns. You will beat the experts and geniuses.
- Find the ticker symbol $spx this is the S&P 500 index on on MSN money’s
- Go to Historical charts and the 12 month moving average
- Choose any time line you want and look at the results and yield to the logic of the evidence
Some people like Stan Weinstein recommend drilling down to the industry and stock level. I do not recommend this. I recommend simply looking at the index and on the 12 month average not the 200 day moving average. I also recommend a broad index like the S&P. The once this is a green single then choose investments wisely and conservatively based on dynamic companies you personally would make a buy from and value. That is it.
Want proof that this investment tactic works? And why the buy and hold investment strategy does not work. Read the following article by an Indian stock market econometric expert guru. He will give a little more robustness to this financial strategy in his article about how to make money in stocks. Look at his study of this technique and it is proved statistically that it works like the eight wonder of the world. But if you are curious about it back test it yourself. I simply use it. Invest with a market timing based the 12 month moving average of the market.
Capital market trading made simple
Remember, all the geniuses on Wall Street only look good when the market is up. All boats go up in a rising tide. Even fools look good when the market is raising. However, have a real strategy for investing, not just after the crowd consider the one mentioned above and let me know what you think.
This is how you can make money in stocks and predict the stock market with this market indicator. The simple reveals itself after the complex has been exhausted.