Trend Following

Home
>
Investing
>
Trend Following

Trend following also called momentum trading is the simplest and safest method of stock market investing. It puts you in stocks and mutual funds that are going up and gets you out when they start down. Properly done there is no guess work.

How many times have you bought a stock or fund because of deep analysis? You have gone to Morningstar and bought their extensive reports ? many of which are months old, but you don't know that. Maybe your broker sent you a bushel of pretty reports about how wonderful is this particular company. Unfortunately each time you bought it the stock or fund either did not go up or went down.

Once you are touted about some equity you can be sure you are not the first and you might be the last one who bought at the top of the move. What can you do to avoid this kind of Wall Street trap?

Where can you find a stock or fund that will actually go up after you buy it? One thing I will say is not to try to pick individual stocks. Leave that to the pros. The best place for your money is in a no load mutual fund (that's no commission) or an ETF, Exchange Traded Fund (a type of mutual fund that trades like a stock). A fund has a professional money manager who should be capable of buying good stocks. He spends his whole life doing this where you have another occupation.

There are many places on the Internet that rank mutual funds by performance such as Yahoo.com, stockcharts.com, barcharts.com and many others. Performance means it is going up more and faster than all other mutual funds. You can also find a listing of funds in Investor's Business Daily or you could subscribe to a service that does all this for you such as NoLoad FundX. Forget Morningstar and their star ratings which are meaningless.

To determine whether to buy or sell you can use a very simple 200-day moving average and you don't have to do the computation. Go to www.bigcharts.com and click on their Interactive charts. In the left column you will find a place to type in 200 and then that line will appear with the fund symbol you entered. When the fund is above the line you want to own it. When it is goes below the line you will want to sell it. Yes, it is that simple.

There is no Holy Grail trading method, but trend following comes about as close to it as the average person will find. A trend follower understands there will be occasional losses, but he also knows that when any major trend starts he will be participating for at least 60% to 70% of the profit of the move. He knows when to buy and more importantly when to sell.

Al Thomas' best selling 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 and receive his market letter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2005

In The News:

Yahoo! News: Top Stories

Dow drops nearly 680 on consumer spending worries (AP)

AP - The reality that the nation is indeed in recession and that the downturn may well be prolonged sent Wall Street plunging Monday, hurtling the Dow Jones industrials down nearly 700 points and wiping out more than half of last week's big gains. All the major indicators fell more than 7 percent, with the Standard & Poor's 500 index down nearly 9 percent.

Obama announces Clinton, Gates for Cabinet (AP)

AP - President-elect Barack Obama picked a national security team headed by former campaign rival Hillary Rodham Clinton and Bush administration holdover Robert Gates on Monday, and said he wants to consult with military commanders before settling on a firm timetable to withdraw U.S. combat troops from Iraq.

It's official: U.S. has been in recession since Dec. '07 (AP)

AP - The U.S. economy has been in a recession since December 2007, the National Bureau of Economic Research said Monday. The NBER a private, nonprofit research organization said its group of academic economists who determine business cycles met and decided that the U.S. recession began last December.

India demands strong action from Pakistan (AP)

AP - India demanded Monday that Pakistan take "strong action" against those behind the deadly Mumbai attacks, and Washington pressured Islamabad to cooperate with the investigation.

Bush uses final 50 days in office to tout legacy (AP)

AP - President George W. Bush says history will judge him, but he is getting his own crack first. Bush is using his final 50 days in office to tout his legacy, hoping to leave a lasting impression of overshadowed progress. On Monday, World AIDS Day, Bush was heralded for his leadership in fighting the disease, a point that even his Democratic critics readily concede.

Parents: Slain anchorwoman was sexually assaulted (AP)

AP - The parents of the television anchorwoman who was beaten to death said Monday there is evidence their daughter also was sexually assaulted, and that she broke her hand fighting her attacker. Five days after a suspect was arrested in the Oct. 20 beating of KATV anchorwoman Anne Pressly, Guy and Patti Cannady said on NBC's "Today" that the family still has many questions about the killing.

Palin implores Ga. Republicans to back Chambliss (AP)

AP - Alaska Gov. Sarah Palin urged Georgia voters to back Sen. Saxby Chambliss in Tuesday's runoff in an election eve appeal that underscored her popularity within the Republican Party and the GOP's efforts to stave off erosion of its shrinking Senate numbers.

1 in 5 young adults has personality disorder (AP)

AP - Almost one in five young American adults has a personality disorder that interferes with everyday life, and even more abuse alcohol or drugs, researchers reported Monday in the most extensive study of its kind.

Man says God ordered him to ram vehicle at 100 mph (AP)

AP - A man who rammed his truck into a woman's vehicle on a highway early Friday told authorities he crashed into her while going more than 100 mph because God told him "she needed to be taken off the road."

NYC police investigating hospital that treated Giants' Burress (AP)

AP - Plaxico Burress was led out of a police precinct in handcuffs Monday after surrendering on a weapons possession charge, and authorities said that teammate Antonio Pierce is being investigated over his role in an accidental shooting at a Manhattan nightclub.

Obama names Clinton, Gates to lead foreign policy (Reuters)

Reuters - U.S. President-elect Barack Obama named former rival Hillary Clinton as secretary of state on Monday and said Robert Gates would remain defense secretary in a national security team charged with recasting America's leadership role in the world.

Stocks slide as economy, Bernanke raise fears (Reuters)

Reuters - Stocks tumbled on Monday as news pointing to the deepening economic slump around the world erased much of last week's sharp gains, with financial services companies and retailers among Wall Street's biggest casualties.

India demands Pakistan act decisively on Mumbai attack (Reuters)

Reuters - India demanded Pakistan take decisive action over deadly attacks in Mumbai it said were carried out by militants from its nuclear-armed rival, while the West urged cooperation to ease tension.

Bush calls flawed Iraq intelligence biggest regret (Reuters)

Reuters - President George W. Bush said the biggest regret of his presidency was flawed intelligence that Iraq had weapons of mass destruction and told ABC "World News" in an interview airing on Monday that he was unprepared for war when he took office.

U.S. in recession as Europe debates spending hikes (Reuters)

Reuters - The U.S. economy has slumped into a recession, the nation's business cycle arbiter declared on Monday, while European leaders clashed over how much public money to spend tackling a deepening downturn.

House to push $500 billion stimulus bill (Reuters)

Reuters - U.S. House of Representatives Speaker Nancy Pelosi met leading governors on Monday to discuss the size and shape of an economic stimulus package that one Democratic aide said was likely to cost around $500 billion.

Thai protesters consolidate hold on airport (Reuters)

Reuters - Thai protesters prepared to end their three-month occupation of the Prime Minister's office on Monday to consolidate their grip on the main airport ahead of a court verdict that could dissolve the elected government.

Alabama mayor arrested on corruption charges (Reuters)

Reuters - Federal authorities arrested the mayor of Birmingham, Alabama, on Monday in a corruption probe surrounding a massive sewer bond debt that has forced Jefferson County to the brink of bankruptcy.

Hawkish Obama names Clinton as top diplomat (AFP)

AFP - Barack Obama on Monday nominated Hillary Clinton to be his "tough," "smart" secretary of state as his former foe vowed to give her all to steer America through a storm of international crises.

Mumbai attacks: India demands Pakistan take 'strong action' (AFP)

AFP - India on Monday formally accused "elements" in Pakistan of being behind the devastating Islamic militant attacks in Mumbai and demanded that Islamabad take "strong action".

Trend Following

Investing Investing