Comparing market index to a potential stock

[grah33]

i've been exposed to the idea of the need to check e.g. the sector index or the main index such as the all ords or asx 200 b4 you do a trade. that when the main index is going down, it's not advisable to take a long position right. and we should check to make sure it's going up b4 we go long. let me know if i'm wrong. but i'm just not sure how i would practically do this ???? eg. for short term trades should i check that the all ords is also in a short term up trend , or what??

 

[tech/a]

First introduced by Stan
Weinstein as far as I know.

Did a lot of research on it.
Found it had very little benefit.
By the time a sector moves generally the best
movers in the sector (Which moved it) are well out of the gate
and any benefit you would derive from the idea is long gone.

 

[grah33]

i'm talking about something more simple - just checking that the market overall is in an uptrend before going long. that we shouldn't go long if it's in a downtrend. but is that short term or what term , or number of days? a bit of clarification from someone on what i would look for would be helpful . sifting through loads of books can take ages...

 

[tech/a]

There are many who use a 100/200 day ema to filter systems
If trading above the 200 period ema buy into your portfolio
If below go short or sell out of your portfolio
If between the averages don't add any new positions to
Your portfolio.

 

[pixel]

i'm talking about something more simple - just checking that the market overall is in an uptrend before going long. that we shouldn't go long if it's in a downtrend. but is that short term or what term , or number of days? a bit of clarification from someone on what i would look for would be helpful . sifting through loads of books can take ages...

If you have decades to build your portfolio, by all means, pick a time to buy, add, or sell.
If, like many of us, you're in your twilight years, you'll be better off to pick stocks on their merit by their individual swings and cycles. It may involve closer and more regular scrutiny, but even with a long-term planning horizon it's unwise to hold on to losers too long.

If you can find a copy, have a read of Daryl Guppy's "Bear Trading", which suggests some useful strategies. Even in a Bear Market, when most stocks drag the indices down, you can find shares that buck the trend at least for a while.

 

[tech/a]

There are many who use a 100/200 day ema to filter systems
If trading above the 200 period ema buy into your portfolio
If below go short or sell out of your portfolio
If between the averages don't add any new positions to
Your portfolio.

After reading Pixels reply
You only use the above to start/restart or shut down your portfolio.
The portfolio should have it's own buy and sell criteria for individual trades.
So you can trade any timeframe.

 

[grah33]

i'm sorry but i still don't understand what you both are saying. i need more simple explanations, like you get from beginner learner books on share trading. do u mean that for someone who wants to go long and make trades, check that the market index is above the 200 day moving average (means the market is currently trending up longer term) . only then go long for trades (both swing trades and position trading) . and what about the shorter term market trend influence. say a shorter term trendline drawn on the market index is pointing downward but the longer term market is still above 200 m.a. (longer term uptrend, short term down trend)? is it still a good time to go into an upward trending stock or what?

thank you

 

[tech/a]

Sorry
I didn't know you wanted something that fits everything.
Moving Averages aren't your answer.
10-20 yrs experience may well be.

 

[Habakkuk]

Sorry
I didn't know you wanted something that fits everything.
Moving Averages aren't your answer.
10-20 yrs experience may well be.

Tech/a is right, but you are looking for a shortcut.

You still believe that you will find an easy-to-use money-making method in a book.

 

[Wysiwyg]

check that the market index is above the 200 day moving average (means the market is currently trending up longer term) .

Nuh. The market Index above the 200 MA means nothing. The chart below is of the daily Russel 2000 and I have circled the times when the Index crossed above the (not) magic line. You could (and I don't because I believe MA is a wishy washy, lagging indicator) open positions when the Index crosses above the (not) magic line. The down side of this is the Index grinding a range for months to years. MA is one of the better hindsight great entry indicators as the chart shows from July 2009 .

 

[grah33]

thanks for your replies. i don't trust in the books i'm reading. i'm waiting to find out if this is all really true (that it does indeed help make profits). i've been sucked in before when i bought this software package that was supposed to find a 'unique' product to sell on ebay. it's sad but lots of people out there are willing to tell lies to make their money .

i will rephrase my question in another new thread. i think it will help alot more.