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29 June 2020
MOMENTUM INVESTING 2

01/07/20

Having established that the price is the sum of all perception we need some tools that will allow us to take advantage of this knowledge and not involve ourselves in the continuous news stream that is a major part of the financial markets.

So, this month try a simple technique which is the 5/20 MA method. With this simple system you buy when the target 5 day MA crosses above a 20 day MA and sell when the reverse occurs.

Again, we are not looking at news flows as we believe that (say) good news will propel prices higher and our Moving Averages will cross whereas negative news will do the opposite.

It is important in this type of trading that you address the problem of Stop Losses ie how much are you prepared to loose to give the market room to allow your trade to work.

We will deal with Stop Losses next month.

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