Verifying that what you are about to buy for an investment actually has a great probability of going up and making you money is an important element of stock investing. Of course, the same holds true for buying ETFs or mutual funds. The greater our confidence in our investment selection the more likely it is to be a winner.
I like to follow a three-step plan in making my investment decisions. If an ETF doesn’t pass all three steps I rarely buy it. I say rarely because there is always the exception to the rule, but the exception is just that, an exception, a rare change.
My 3-Step Plan involves:
- Analyze my group for the best ticker symbol
- Verify the group strategy performance is positive
- Verify the selected ticker shows positive indicators
I have followed these steps for many years and they have prevented me from making bad decisions, emotional decisions and most importantly, from losing any substantial amount of money.
Analyzing is the process of evaluating my groups according to a specific means of technical analysis. I normally use Alpha, but you can use any type of analysis such as:
- Alpha
- Relative Strength Momentum
- Return
- And/Or add Standard Deviation to any method
Once your computer has found the best ticker symbol to buy based on analysis you should verify that the symbol chosen is in fact ranked better than the index or benchmark you are using for comparison purposes. If the symbol is not performing better than the benchmark then it is likely going down and you would lose money. So don’t buy it. I also like to see that the particular symbol is ranked near or at the top of the list of all my symbols in the particular group.
Verifying the strategy is important to make sure that the overall strategy with its buy analysis and rules for selling are profitable. Strategies can be profitable some of the time depending upon overall market trends while not productive at other times; this is normal.
I use two charts in particular to verify the effectiveness of my strategies. You can make you own choices, but mine are:
• Moving Average
• Full Stochastic
In the moving average chart, I want to see that the price line for the recommended symbol is above both the slow and the fast moving averages. This would be a buy or hold signal. In between the lines is a maybe or watch me signal, while if the price line is below both of the moving average lines, yes, that is a don’t buy it signal.
Reading the full stochastic chart is a bit trickier. Here I look to see if the stochastic line is above the trigger line. When this occurs in the lower fifth of the chart it is a buy signal; when above the upper fifth, it is a hold and possible buy signal. When the stochastic line cuts down thru the trigger line in the upper fifth of the chart it is a sell or don’t buy signal.
The best buy signal is when both charts are signaling buy, but occasionally one chart will say buy while the other is neutral or maybe and I may buy in this situation depending upon step three.
Verifying the ticker is critical to be sure its movement is positive. I look at the same chart types for the particular selected ticker as I did for the strategy: moving average and full stochastic.
With the ticker, I want to see a buy signal in the charts. Sometimes between the four charts I may have just two or three buy signals. Four is obviously best but with three and with the fourth chart heading towards a buy signal it is usually safe to go with that selection.
Implementing this 3-Step Plan sounds more complicated than it is. I can go through the entire process for a dozen strategies in 15 minutes or less. And actually there is software that now automates this process and shows you the results in just a few moments.
If you are concerned about managing risk, about safe investing and maintaining your cash base through market ups and downs this 3-Step plan or one similar will help you achieve your investment goals.
About The Author:
Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com
Its such as you read my mind! You seem to grasp a lot approximately this, like you
wrote the book in it or something. I believe that you just can do with some p.c.
to pressure the message home a bit, but other than that, that is fantastic blog.
A fantastic read. I will certainly be back.
Everyone loves what you guys tend to be up too.
This sort of clever work and exposure! Keep up the superb works guys I’ve you guys
to my personal blogroll.
Great post but I was wanting to know if you could
write a litte more on this topic? I’d be very thankful
if you could elaborate a little bit further.
Many thanks!
Yes! Finally someone writes about minecraft download free pc.
You really make it appear so easy together with your presentation but
I to find this topic to be actually something that I
believe I’d by no means understand. It sort of feels too complicated and very
large for me. I’m taking a look forward on your next put
up, I’ll try to get the cling of it!
Hello, Neat post. There’s a problem together with your web site in web explorer, may check this?
IE nonetheless is the market chief and a huge portion of other folks will pass over
your fantastic writing due to this problem.
Nice blog here! Additionally your web site loads up very fast!
What web host are you using? Can I get your associate hyperlink in your
host? I desire my website loaded up as quickly as yours lol
Can I simply say what a relief to discover someone that actually knows what they’re discussing
on the net. You certainly realize how to bring a problem to light and make it important.
A lot more people have to read this and understand this side of your story.
I was surprised that you are not more popular given that you definitely have
the gift.
It is not my first time to pay a visit this site,
i am visiting this website dailly and obtain fastidious information from here everyday.
Wonderful blog! I found it while searching on Yahoo News.
Do you have any suggestions on how to get
listed in Yahoo News? I’ve been trying for a while but I never
seem to get there! Many thanks
You actually make it seem so easy with your presentation but I find this matter
to be actually something that I think I would never understand.
It seems too complicated and very broad for me. I’m looking forward for
your next post, I will try to get the hang of it!
Heya this is somewhat of off topic but I was wanting to know if blogs use
WYSIWYG editors or if you have to manually code with HTML.
I’m starting a blog soon but have no coding expertise so
I wanted to get advice from someone with experience. Any help would be
enormously appreciated!
Hello, yup this paragraph is actually good and I have learned lot of things from it concerning blogging.
thanks.
I’m not sure where you’re getting your info, but great topic.
I needs to spend some time learning much more or understanding more.
Thanks for great information I was looking for this
info for my mission.
Greetings! I’ve been reading your web site for some
time now and finally got the bravery to go ahead and give you a shout out from Kingwood Texas!
Just wanted to say keep up the good job!
I’m not sure why but this website is loading very slow for
me. Is anyone else having this problem or is it a problem on my end?
I’ll check back later on and see if the problem still exists.
Heya! I know this is sort of off-topic however I
needed to ask. Does managing a well-established website such as yours take a massive amount work?
I am brand new to running a blog but I do write in my journal
daily. I’d like to start a blog so I will be able to share my experience
and views online. Please let me know if you have any
kind of ideas or tips for new aspiring blog owners. Thankyou!
pof natalielise
Hi, i think that i saw you visited my weblog so i came to “return the favor”.I am attempting to
find things to enhance my website!I suppose its ok to use a few of your ideas!!
Have you ever thought about publishing an e-book or guest authoring on other blogs?
I have a blog centered on the same ideas you discuss and would
love to have you share some stories/information. I know my viewers
would enjoy your work. If you’re even remotely interested, feel free to shoot me an email.
What’s up, yeah this paragraph is truly fastidious and I have learned
lot of things from it concerning blogging. thanks.
I’m excited to uncover this page. I wanted to thank you for your time for this wonderful read!!
I definitely liked every part of it and i also have you bookmarked
to see new information on your site.
I don’t even know the way I stopped up right here,
however I assumed this put up was once good.
I do not recognize who you might be however definitely you are going to a well-known blogger if you are not already.
Cheers!
Hi there, its good paragraph on the topic of media print, we all be familiar with media is a wonderful source of data.