| After the last few years of wide swings in the | | | | (to imitate the popular 200 day moving average) |
| stock market, oil, gold, etc, a simple investment | | | | and 50 weeks are both good first choices. For the |
| strategy that works is at the top of many | | | | short average, try 4 or 5 weeks. |
| investors' wish list. Many retired individuals have | | | | The investment strategy is very simple. Enter the |
| seen 20 to 40 percent losses in their retirement | | | | market (buy) when the short term average |
| funds. The ideal investment strategy would keep | | | | crosses above the long term average. Stay fully |
| portfolios invested during all major up market | | | | invested until the short term average crosses |
| moves and be on the sidelines during major down | | | | below the long term average. When this happens, |
| moves. Any strategy used should also avoid over | | | | get out of the market (sell). |
| trading. Too much in and out trading can be both | | | | One refinement used to avoid being whipsawed is |
| psychologically and financially harmful. The | | | | choose some small buffer, e.g., some number |
| understanding and use of simple moving averages | | | | between a half and one percent and only act on a |
| will accomplish this. | | | | buy or sell when the short term average |
| Get several years of weekly historical prices for | | | | penetrates the long term average by this much. |
| your chosen investment. Yahoo Finance is good | | | | Test your system against historical data. For |
| for this. To get used to this method, start with | | | | example, over 50 years of data is available for |
| the S & P 500, a weighted average of 500 large | | | | the S & P 500. See how your parameters would |
| corporate stocks. Search for yahoo finance and | | | | have performed in major market moves of the |
| GSPC. This index has the added advantage that | | | | past. This system by its design will lag behind |
| there are many low expense, no load mutual | | | | major market tops and bottoms. Be sure you are |
| funds and exchange traded funds that track it. | | | | are comfortable with this. |
| Enter the price data in a spreadsheet. Add two | | | | Back test, back test, back test. Check your |
| more columns to the spreadsheet,a long term | | | | parameters against a lot of historical data. Try it |
| average and a short term average. The long | | | | on markets you haven't used, the Nasdaq, sector |
| term average will show the underlying trend of | | | | indices,foreign markets. Some adjustment in the |
| the market and the short term average will be | | | | length of the long term moving average may |
| used to smooth random movements and | | | | improve results for slower or faster moving |
| eliminate most short in and out moves. 40 weeks | | | | markets. |