Basic Assumptions:
A solid companies stock will always generally go up
You can't just buy any stock at any price and expect to make profit
The best time to buy a stock is during the beginning phase of its recovery
The hardest part of picking stocks is picking the right time to buy
There are generally 2 types of stocks. They can be ranked/classed based in volatility:
High Volatility stocks tend to behave more like currencies alot of penny stocks fit into this category
Low volatility stocks, These tend to be blue chip stocks.
We measure the volatility of a stock by how often it changes direction on the higher time frames. Below are some examples of high and low volatility stocks.
Something that could be considered a high volatility stock
This is the weekly timeframe. The circle represent what I consider to be changes in directions of price. Here over the past two years price has changed direction 6 times. Lets compare that to another company like Meta/Facebook.
Which over a 3 year period has only really changed direction twice.
Here we will make some more basic assumptions. These will dictate our approach to buying stock over the long term:
It is better to try predict when a stock will recover than when it will fall.
The more volatile the stock the easier it is to predict good entries
Stocks are best held over the long term. For example If you bought Meta stock using the risk to reward ratio shown above over two years you would have made 10%. If you were investing with $1,000,000 you would have made just under 10% in just under 16 months.
That's around $46,000 per year. If you have 5 of these stock picks a year that could equate to over $200,000. This is all quiet passive. By the time you've purchased the stock you all your work is done, All that needs to be done is to occasionally monitor its performance.
The basic strategy:
The basic strategy is to identify stocks that are in recovery and invest in those.
The stock series is dedicated to refining and sharpening this strategy so that the average person can profit from the machine that is the stock market.
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