How to Invest in the Stock Market From a Trend Following Perspective

It is never really all that easy and many ask, How to invest in the Stock Market. I prefer the question How to invest in the Stock Market from a trend followers perspective with a plan. I use simple and robust trading plans that give me the potential to protect capital and benefit & compound money over time. One of these simple robust trading tools that trend followers use is a 200 Exponential moving average. Yesterday the SP 500 or $SPY violated this line. In the past this has led to severe bear markets. One should only consider being long if they are above the 200 EXMA or if they are below, exit all longs or possibly go short. However going short is much harder and less profitable then going long. There is a floor on shorts while longs have the ability to continue for extended periods of time.

If one was to ask the question,How to Invest in the Stock Market From a Trend Following Perspective after yesterdays action they should consider exiting their longs. If we can cross above the 200EXMA this story changes and longs could be approached.

Look for my upcoming book Trend Following Bible published by Wiley books in the Fall.

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