Easy Way To “Buy Low Sell High”
Buy low sell high, it’s every investors goal. But how do you know when a stock or index is at it’s low, or even at it’s high, so that you can maximize the return on your trade.
In my previous post, “The Real Truth Behind Buy Low And Sell High” I warned of the perils of guessing where the highs and lows are and offered a better strategy for beginners to profit with.
In this post, I’m taking another look at “Buy Low, Sell High” and sharing with you an easy and accurate way to time the markets.
Imagine for a moment you had a crystal ball. A crystal ball that could tell you when the S&P 500 was about to change direction. Imagine the fortunes that could be made. If you knew the S&P was about to fall, you could move all your stocks and Mutual Funds into cash. If you knew the markets were about to rise, you could buy stocks low and sell high when your crystal ball warns you of a market high.
If only such a crystal ball existed. Well, I was never able to find one so 15 years ago I set about a way to create my own proprietary crystal ball.
It took 10 years of research and development to come up with it. I don’t call it a crystal ball, but it sure works like one. What I created was a “Market Timing Indicator”.
Take a look at the chart below. It is a chart of the S&P 500 for the period May 2014 up until September 6 2014. On the chart, I’ve marked the spots where my SHORT-TERM Market Timing Indicator said the S&P 500 would rise, and when it would fall.
Buy Low Sell High With Market Timing Indicators
As you see above, my Market Timing Indicator (or MTI for short) picked the bottom 4 times. Of those 4 times, three of them were right on the nose. The other one hit the bottom two days later.
When it comes to picking market tops, my MTI made three predictions in the last three months. Two of them had the top occur within two days. The third was way off.
In the last three months, my MTI has picked 6 out of 7 which means it’s 85% accurate at picking highs and lows of the S&P so you can buy low sell high. So how can you use this info to make BIG gains?
One way is to trade an ETF that mimics the S&P 500. SPY is one such ETF. However, with 85% accuracy why not use a littler leverage to make bigger gains since risk is low. I choose to trade UPRO, a 3x leveraged ETF that goes up 3x what the S&P rises.
Looking again at the chart above, you see there were 4 times a low was given. Buying UPRO at those times and selling it when the marked high was reached nets a 25.61% gain vs the S&P 500’s 7.20% gain in the same time. Feel free to verify the returns yourself, the dates are given. Just use any financial website to look up the prices of UPRO on the displayed dates.
Had you just bought UPRO on May 20 and just held it, the return would be about 10% less using a “buy and hold” approach. Adding 10% (every three months) to your bottom line by just buying on the lows and selling on the highs will make a big difference over time.
If you would like more information on how to buy low sell high with my Market Timing Indicators, and how you can access them for your trading, subscribe to my Index Trading Strategy.