22 Jul Using a Moving Average for Big Wins
Using a Moving Average for Big Wins
July 22, 2022
This week we’re a possible once-in-a-decade opportunity in the stock market.
The last time we saw something like this was 2008. If we miss this one, we may not see another chance for a while.
In our last Newsletter, we talked about using a simple system on the Weekly chart. We wait for a close above a traditional moving average (MA) and then ride the momentum. For Apple (AAPL) in 2009, this led to a hypothetical 97% win:
And here are the details on that simple system.
Long-Term Championship MA System
Long Entry: When price closes above the 30-period simple moving average (SMA) for 4 weeks in a row. (Enter at the Open of the 5th week.)
Long Exit: When price closes below the 30-period SMA. (Exit at Open of next bar.)
I named this “Championship” because it uses the same principles that traders have used to win major Trading Contest titles.
Why not enter on the first close about the SMA? You can. But by waiting for 4 weeks, we make sure it’s not a weak cross that immediately goes back below the moving average. Plus, it absolutely takes the pressure off. Once the cross happens, we have four weeks to notice and take action.
Skeptical about such a simple system? I would be, too. But here’s Amazon (AMZN) in 2009 after the Bear Market finally turned around. (Sound familiar?)
That’s a 100% winner. How about Netflix (NFLX)?
NFLX had a 36% winner in January 2009 and then a 370% winner in October 2009.
Even if you don’t trust your stock picking skills, you could have traded QQQ coming out of the 2008 Bear Market. Trading that ETF would have gotten you a 34.4% win–and another win after that– which is massive for an ETF.
Some people say there’s always a bull market somewhere, which, of course, isn’t true. We’re in a Bear Market.
But after a Bear Market–which we haven’t had in a long time–is an unbelievable time to be a trader.
And that’s where we are right now.
In our next Newsletter, we’ll talk about some trades that might be coming to a chart near us.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.