Set Investment Parameters
Open the Stock Price Analysis Module
- Set your Required Return %, if uncertain use 10%. When using Value to compare stocks the actual Required Return % used has no impact on Value order. It is important when considering alternative investment options and should be adjusted in line with alternative investment returns.
- Set your Target %, if uncertain use 10%. This should be revised after initial analysis. Targets should be set considering underlying trends and resistance levels.
- Set your Stop Loss %, if uncertain use 5%. This should be revised after initial analysis. Targets should be set considering underlying trends and support levels.
Identify Fundamental Value Stocks
Apply Fundamental analysis to determine Fair Value and rank stocks by Value.
- Add a Stock Code to analyze to the Stock Price Analysis Module
- Input a Buy price as the current stock price.
- Input a EPS value for 1 or more years.
- Repeat for other stocks of interest.
- Sort Stocks by Value, click the analysis table Value heading.
- Stocks with the higher Value offer greater potential.
Add Market Indexes for Analysis
Market Indexes can be used in an overall market forecast.
- Input an Index Code as the Stock Code value and Add the Index Code to the Stock Price Analysis Module. Leave the Exchange value empty when adding Index Codes.
- For the Dow Jones Industrial Average input ^DJI as the Stock Code.
- For the Volatility Index input ^VIX as the Stock Code.
- Also add the Index Code for the market on which you are trading.
Consider Market Volatility and the Economic Clock
Market Volatility is indicated by the Volatility Index VIX.
- Increasing volatility (VIX) indicates a falling market.
- Decreasing volatility (VIX) indicates a rising market.
- A reversal in volatility levels from a high is a potential market bottom signal.
As volatility increases and the Economic Clock moves towards Share Market Peak (12:00) apply increased caution and ensure Stop Losses are in place.
As volatility decreases and the Economic Clock moves away from Recession (6:00) opportunities maybe increasing.
Apply Technical Analysis to Determine Timing
For indexes and stocks of interest exhibiting high Value review the Technical Analysis Charts.
Buy indicators include:
- Price crossing and moving above the Moving Average. Indicating reversal from underlying down to up trend.
- Price below the bottom Bollinger Band. Indicating over sold.
- %K on the Slow Stochastic Oscillator moving upwards from below 20% and crossing above %D. Indicating over sold.
- A Money Flow Index trending up from below 20%. Indicating over sold with potential reversal.
Sell indicators include:
- Price crossing and moving below the Moving Average. Indicating reversal from underlying down to up trend.
- Price above the top Bollinger Band. Indicating over brought.
- %K on the Slow Stochastic Oscillator moving downwards from above 80% and crossing below %D. Indicating over brought.
- A Money Flow Index trending down from above 80%. Indicating over brought with potential reversal.
If you are comfortable with the market, the stock and worst case scenario ...
- Buy stocks offering high Value when Technical Analysis provides buy support.
- Once stocks have been brought adjust the applicable Buy price value in the Stock Price Analysis Module to the actual buy price.
- Review the Target and Stop Loss prices for the purchased stock. Consider underlying trends, resistance and support levels.
Limit Losses and Lock in Profits
Manage your stock investments to enhance returns ...
- If the stock price drops below Stop Loss price the stock should be sold to limit losses.
- If the stock price rises above the Target price the stock can be sold to realize profits.
- Alternatively if Technical analysis supports continued price rises and you wish to keep the stock set the Buy price in the Stock Price Analysis Module to the current Target price to reset Target and Stop Loss prices and partially lock in profits. This approach can be repeated indefinitely but if the stock drops to the Stop Loss price it should be sold or locked in profits are at risk.
Review, Adjust and Repeat
The market is dynamic and stock positions and your trading plan should be continually reviewed and adjusted.