Many people think invest in stock market is too risky. Yes, some stock may go down in price, some time, the entire market may go down for months. However, do you know that the study shows for the past 100 years, stock market tend to go up 2 out of every 3 days? The logic is simple, population and new company keep on growing...
Few years ago, there was a little popular book, the title is "Who Moved my Cheese?" It's about the story of 4 little mice, with 4 different character. One day, they noticed that the cheese which they discovered earlier was no longer there...
Do you prepared if one day, you noticed your cheese disappear? (it can be you lost your job or relationship) Would you able to move some where and look for new cheese again? The cheese can be a good job, a loving relationship, money, a possession, health or spiritual peace of mind.
Sometimes, I like to relate stock market as cheese. Today, if you find a good taste cheese, don't take for granted tomorrow the cheese would be there. Stock market is where you can find a lot of changes everyday, one need to adapt to the change quickly and be ready to change quickly, again and again.
Stock market is a good place for us to build wealth. You may find cheese here and there everyday, but don't forget to built an "asset" or a machine that can produce cheese (or I call it dividend machine). That is a lot better than searching for cheese everyday.
The stock price change every second, there's nothing to worry or fear, enjoy the change and adapt to the change quickly. What you need is, be prepared before someone move your cheese away!
Friday, April 10, 2015
There are still many so call "trader" still do not understand why we need to plot Moving Average line in a chat. That come to my surprise when I have a conversation with a client.
When is the time we use Moving Average? To answer the question, first we need to understand what's moving average represent. In the older day, if Mr A is a rich guy, he can buy a lot of X stock then record down the price everyday. Say the first day, he buy a lot at $1, second day buy at $1.10, third day buy at $0.95.... After buying for 10 days, he can sum up all the money and divide by 10 lot to get the 10 day average price. Then plot a dot to a chat to represent this, after few days doing the same thing, he can draw a line to connect all these dots.... and this line we call it "10 days moving average".
Today, we can use computer to help us plot the different type of "moving average" line, it can be 10 days or 5 days, with just a click, all the line would be displayed on the screen. After plot the line, we can know, Mr A's average price for X stock. If current stock price is above Mr A's average price, we can say the stock is on the uptrend and he is making profit. (be it paper gain or real gain, doesn't matter) If the current stock price is below Mr A's average price, we can tell that he is losing the money.
So, now the question come, should we buy X stock when Mr A making profit (when a sock is up trend) or when Mr A making loses (when the stock is down trend)?
If Mr A keep on buying for the last 10 weeks, we only need to plot a chat of 10 weeks moving average to know his average price. In this case, the smart way to buy this stock is when Mr A start to make money (the break even point).