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Long Term Stock Trends for Big Pay Days

Long term stock trends

Long term stock trends

There are many traders who make their money fretting over the smallest daily movements of certain stocks and futures markets. While many of them make a considerable income, the big money is made by investors who are able to catch the long term stock trends to capture those 500%+ investments. Here’s how:

Macro Analysis

When it comes to finding long term stock trends there is no substitute for doing some macro analysis into the big picture issues affecting the markets; The outlook for interest rates for example or the potential influence of big market players such as Central Banks or the IMF. These are critical issues that have widespread implications for markets.

It’s also useful to consider world history when assessing the current environment. Has this situation ever occurred before? What happened then that could happen now and what makes this situation different?

One principle of basic economics is that most things like unemployment, recessions and economic growth run in cycles. It’s a similar thing with the stock market so identifying the current cycle makes it easier to project what might happen next. Recessions typically occur every 4-6 years – something to bear in mind when considering the current valuation of the U.S. stock market.

Get in Cheap

One way to get on board a long term stock trends for big pay days is to get into the stock market when it is distressed and extremely cheap on a valuation basis. The best time to invest is often when there is ‘blood in the streets’ and ‘panic rules’. The stock market in March 2009 was one such time when seemingly no one wanted to invest, yet it set in motion a four year bull market. There are a number of ways to find something that looks cheap. One method is to use PE valuations and look for stocks that are low on an historical basis. Another is simply to eyeball a few charts and find one that looks like its hit a long term bottom. Markets move in cycles so if you can identify those patterns you might find a winning trade.

Moving Averages

Long term stock trends

Long term stock trends

Anyone can draw a trend line on to a chart and say where the market is headed next but trend lines can be too subjective to offer real value. Moving averages on the other hand offer a calculated way to see when a market is trending. When a faster moving average crosses over a slower one it signals that an upward trend has formed and these signals can be used to join long term trends in any market.

A popular combination used by some professionals is to buy the market when the 50 day EMA crosses the 200 day EMA (known as a Golden Cross). Buying the market on a golden cross will have got you on board most long term stock trends – The big bull market in the Dow during the 90’s for example and the recent run up of gold. You won’t catch it right at the bottom or get out at the top but you will catch a big chunk of the middle.


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