If you just starting to built your portfolio or all of your holding have
stopped out during a stock market correction, then this page will help
you to get into the game with little risk. First, here are some rules
I use:
- Start with swing trades (swing trade positions we hold and
sell frequently) to test the market.
- Buy swing trades when the market is in an up-trend even
though it trades below the 20-day exponential moving average (EMA).
- Buy long positions (investments we hold and manage) only when
the equity you want to buy trades and closes above the 20-day EMA
for a few days.
- Buy long positions only after you have tested the market with
positions trades and have a profit.
- Select equities (ETF index funds) for your portfolio and then
priorities which one you will buy first.
- Buy the equities on a dip and trading close to the 20-day EMA. Avoid trending down days.
- Buy 2 to 4 position at a time, depending on your size of your
portfolio.
- Buy position in increments a few days apart,
otherwise you could get whipsawed.
- Don't be afraid to take profit while building your portfolio,
especially when the market is going sideways.
- Use your swing trades to take profit first before investing
in long positions, especially when the CBOE Volatility Index (VIX)
is above 22.
- Place tight stops (Stop/Limit Order) as soon the market starts
going against you - I prefer not to use trailing
stops, especially in a volatile market conditions.
Your first step should be to download the
activity log spread sheet. Review the
index funds and determine how many ETFs you want to use for your portfolio.
Determine the initial value of the portfolio. Then you can enter the
number of share you want to buy for the position trade. Always keep
notes. Each buy order should be at least $1,500 to keep the commission
down. Large equity positions can be purchased in 3 increments instead
of 2 increments. When using 3 increments, they are divided into
a swing trade, a long position and the 3rd position is divided
between these two.
Review the above rules often (or adjust them to meet your trading
preference), it will help you to overcome trading anxiety. |
