Investment strategy

Generally it is said that there should be KISS (KEEP IT SIMPLE STUPID) strategy to be successful. The same works for investments also, anybody with little knowledge of the market has all the chances of making excellent profits if he develops a system and adheres to it irrespective of the market. With little technical analysis the person can be successful and multiply his money with little rise. But in any case the stop loss should be strightly adhered to as the primary motive is to protect you capital. If anybody is not in favor of stop loss then stock market is not for him.

This method which I am indicating is very very simple and can be adhered to by investors so that they keep on multiplying their money over period of times. You might be wondering what the system is which can give consistent gains. The method is 200 day EMA (Exponential Moving Average). We would discuss the method in details below.

Generally it is said that bulls rule above 200 day EMA and bears rule below it. So the method says that when the stock price moves above 200 day EMA then we have to buy and when it moves below it from above then we simply have to sell the stock and shift to other stocks which are above 200 day EMA. Generally the rule is if the stock price is above 200 day EMA the stock continues to move up over a period of time and after a sustained move it might again move below it. if the stock price is below 200 day EMA it continues to move down till the time arrives when it move above it. When an individual buys a stock expecting it to move up so if the bulls are active then the chances are that it has all the chances of moving up, as above 200 day EMA bulls rule odds are in your favor and it makes sense to make an investments. I have seen over a period of years that irrespective of state of the market this systems works. I bull market its give spectacular results if an individual gents into a good stock.

So the question now comes whether all the stocks which move above 200 day EMA are worth a buy? The answer is no. Here fundamentals come into play. You should buy into the stocks which are fundamentally good and or fundamentals are improving.

Now comes the question as how to judge the fundamentals. The company should be in profits for last two years at-least, if they are in increasing trend then in would be better. Its latest quarterly results should show profits, it would be better there is positive increase in quarterly results. The higher the increase the better. If the above conditions are met and the stock moves above 200 day EMA then we can be sure that we might be in the stock which is fundamentally improving and bulls have taken charge and we can expect the price to move further. If the stocks goes on to make a 52 week high post it moves above 200 day EMA then we can be sure that we are into a good stock and we can expect further upsides.

After move above 200 day EMA, the stock moves above and moves above 200 week EMA then it re-affirms the decision buy us and actually we should add to our existing position on movement of weekly MA.

If the stock move above 200 day EMA and you missed the stock to buy the same and after some time it comes down and takes support there and then starts to move up then it is also a good opportunity to get into the stock and also add into the existing position. The support at 200 day EMA is an ample proof that bulls are ruling and confirms our stand.

In all the case the stop loss should be on movement or close below 200 day EMA.

May all be happy and peacefull

M.Mahiidar

Enjoying Life

Trend is Friend.