Simple Entry Points
The most important question that needs to be asked when you wanted to invest in stock market is only two things: entry point and exit point. When you should buy the stock and when you should sell the stock. On this post, I will give you a short tip based on my experience on which trade will get your ROI increase the most. Here they are:
The non-technical way
- Buy stock that already down at least 4% on 1 trading day while the index is down less than that number. Of course the company fundamental should stay healty (meaning that the stock price is down because of market sentiment, not because there’s something wrong, fundamentally, with the company).
- Buy stock before its earning announcements. The safest entry point before the announcement is H-5. This way, you already now some rumours from the market whether the company will post a better-than-expected earning or worse. You can then devise your trading plan accordingly (meaning: buying more if the rumours says positif, selling your position if the rumour says negative).
- Buy the stock moments before the big announcement. Be it NFP, inflation, interest rates, CPI, or other kind of official announcement that might affect the stock price (I have a list of this on a book, probably will post it later). H-3 or H-2 is usually a good entry point before this announcement took place. The reasons are already covered on #2.
There are other things that can be used as the entry point catalyst but I won’t dwell further now. This post is meant for novice and it should be easy to be implemented. A more advanced analysis may be posted in the future ;-). Up next, the technical way
The technical way
- Using darvas box, buy the stock (or sell it for that matter) after it breaks the support or resistance line (use software to calculate this). Here’s the example:
- If you are trading on a short-term time-phase (less than a month for example), buy the stock after the EMA 20 and MA 5 has crossed (those two represents 1 month EMA and 1 week MA). Here’s an example: (as you can see, when both EMA and MA lines crossed, the stock price increase)
- And the most easiest (but widely used — and therefore not as accurate) technical analysis used is stochastic. Here’s an example (using ADBE and fast stochastic, doesn’t look like a price graph but believe me, it is):
The one that I circled is when the fast stochastic indicator “crossed”, you can see that the price is hiking. Although you must also be very careful because when they “crossed” it can also mean that the price will fall.
Those are the most often entry point indicators (be it non-technical or technical) that I used as a novice. It’s not really accurate at times but very simple. If you wanted to learn more about when to buy and when to sell, wait for my further post on this subject ;)
[...] Most Novice Traders Focus on when to get in and forget about when to get out. This statement of course doesn’t undermine the importance of a good entry point, both are important (entry and exit points). On the contrary, I believe that novice got confused by both entry points and exit points. You can read my post about entry point. And as for exit point, I will write the post AFTER I learn the correct way to sell my stock (I’m still a novice after all :P). [...]