A Christmas Gift!!
It's the season of gifting and sharing and I am going to give you a very valuable gift that'll keep benefiting you forever!
What is the gift?
*Drumroll*
I'm going to show you your first strategy ever!!
Yes!
I hope you’ve been following the last few posts, because to make money with this strategy you just need to know three things: trends, indicators and candlestick charts. If you've read all three posts, let's get right to it!!
Once you read this post you'll always remember it. It's that simple.
If it feels a little slow, I want to promise you one thing, you'll be glad you read the whole post. I'm telling you, this is a wonderful gift! In fact, even before reaching the end, you'll be agreeing with me.
(And if you reach the end, there's something extra as well!)
For this strategy, we are going to use an indicator named the simple moving average.
(Please read this post on a laptop, tablet or computer if possible)
What is the Simple Moving Average?
In simple words, the moving average is just an average closing price for the past few days.
For example,
Let's consider a 10 day moving average.
Today on the 24th of December, the moving average price is the average of the last 10 days' closing prices;
That is, the average of all the closing prices from the 14th to the 23rd of December .
The moving average tomorrow, 25th December would be the average of the prices from the 15th to the 24th of December, and so on.
That’s why the name, moving average, it moves ahead everyday.
The Strategy:
If you remember, I told you we would be making money using trends.
This strategy is very basic.
If the current price rises over the average of past prices, it must mean a new rising trend. So we will buy.
Let’s break down the strategy into just 5 simple steps.
I have used screenshots from moneycontrol to explain.
Do these steps with me and you'll understand even better!
Step 1:
Open a daily candlestick chart (Technical Chart) of a stock.
I have selected the stock of Idea Cellular .
Step 2:
On the top menu bar, the first icon stands for indicators, click on it and search and select ‘Simple moving average’.
You should now see a new line across your chart. This is the moving average line.
Step 3:
Now we have to change the period for which the average is calculated and set it to 20 days.
To do this, click on the upper left corner.
Select settings and set period to 20 and then click save.
Step 4:
This is the important part. We must look for a buy indicator.
An uptrend starts when the current stock price(indicated by the candle) is more than the moving average price.
So, we must keep an eye for when the candlestick crosses and rises above the moving average line.
If a candle closes above the line, we buy the stock the very next day.
In the following images, I have shown crosses and also the buy point.
It is a little tough to put this step in words so it is essential that you look at the images to understand this step.
Look how the price continues to rise after that! Amazing isn't it!
Step 5:
The final step,
Our target profit is 3.75%. So we sell when it rises that much.
Don't be too greedy.
Losses can and do happen. We must just not let our losses be bigger than our profits.
So, if after buying, the stock falls by 1.5%, we sell and bear a loss.
That way profit is 3.75% and losses are just 1.5%. (Smart like the casino)
Here’s an example of a loss trade:
That’s it!!🎉
You learnt your first strategy.
Congratulations!!
Here’s a quick summary table for your reference:
It is hard to believe that trading is so simple, isn't it?
But it is really very easy. Don't believe people who say it's tough!
Test out some other stocks. See how amazing trends are.
You just learnt one way to make money trading (using) a trend.
Doesn’t it feel great!
And since it's Christmas, 3 little bonus tips just for you..
Tip1:
I taught you a trading strategy with a 20 day moving average.
Try and experiment with different time periods (Step 3) and see what you find.
My personal favourite is a 9 day MA (Moving Average).
Longer periods are better and more accurate.
Tip 2:
I have explained a strategy but by using daily charts.
If you want to trade during the day, you coould use an hourly chart!
If you prefer to trade less often, you can trade using even monthly charts.
Tip 3:
Which stocks to look at for such crossovers? Good question!
Head over to this page:
You may have realised why I named this website ‘Simple Trading’. No need to wait to see what the company does, where it is, what’s the profit etc.
All you have to do is look at a chart!
Thats all for today, I hope you enjoyed this really simple strategy.
In my future posts, I will be telling you when I make money using this strategy. So keep watching and together we traders will earn our money! 💰💰
Invite your friends to have a look at the ‘Simple Trading’ blog so they also can become traders like you!
You can contact me and ask questions by clicking here and subscribe by clicking here.
Or you can even Follow me on Facebook by clicking here.
See you soon!
Merry Christmas and happy holidays!!