At some time in your life you have been on a river in a canoe and hopefully you had a paddle. You know about being up the creek without one.
You quickly learned that paddling up stream is much harder than paddling down stream. The lesson of going with the flow can be applied to many aspects of life and especially to the stock market. In the creek it is easy to know which way the current is flowing, but in the market it is much more difficult. At least that is what Wall Street wants you to think.
On the river there are markers and navigations buoys to help you with your passage, but in the money world there are few such true indicators. Actually it is very easy to determine the flow of funds in the market. Standing on the shore are people (brokers) shouting to go to the right and another next to him screaming to go to the left. "Buy, buy, buy". Very few of them know which way the current is headed. You have to figure this out yourself.
Fundamental analysis is excellent, but it is very poor to let you know when and where to paddle (put you money). There are many technical tools available, but these can be difficult to master for many people and few brokers know or care to learn them. However, there is one very simple method that does work.
That method is too simple for brokers who want you to think that you need their "expertise". They sure don't want you to find out as you won't have to pay them commissions any more. The paddle you need to have to propel in the right direction is called the 200-day Moving Average Paddle and you can get it free if you know where to look. You can make this yourself, but if you have a computer just go to the web site www.bigcharts.com and click on their Interactive chart box and they will do all the work for you. You can do this at the library of you don't have a computer at home.
Using an index such as the SP500 you easily see that when the price (your canoe) is above the 200 line (the current of the river) you should be a buyer of stocks and mutual funds and when the SP500 price is below the 200 line you should be in a money market (even if it only pays 1%). You don't want to be under water. This is a simple way to see the direction the market is flowing and will keep you from losing money when the market starts down.
No one knows when the current will change. And don't try to guess. Let the river (market) tell you the direction of flow.
Get yourself one of those good paddles and learn to steer your own canoe.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
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