MITIGATE the RISKS of long-term INVESTING!

Hi everyone and welcome to this new video. Today I want to discuss something that is very important and is a follow up from the video that I made a few weeks ago where I was saying that I will stop doing trading and I will focus on investing. So in a longer term strategy where I have to spend less time. And what I want to say today is that even though I move into an investing strategy, doesn't mean that we need to throw out everything we learn with trading. Because some of the tools we have been using there can also be used effectively when we do investing. And today I want to discuss one of them. That is the moving averages. Because what happens usually is that when you are trading, moving averages can be used as a signal to tell you when to enter, when to exit. We want to use more or less the same idea to, to know when we have to invest. So when we have to buy shares of. In this case, I'm showing you the S&P 500 ETF. But this apply also to other long term strategies. So what is the idea here? In the past we discussed this strategy called dca. That is the dollar cost averaging, meaning every, for example month we invest the same amount of money, like for example, thousand dollars, 500, whatever it is, every month or every three months, whatever is the time frame that you choose. Now the idea is that, for example, if you invest every, let's say month, what can happen is, for example, you buy here, right? And then you buy here. But when you are in a downtrend, for example here, you may buy here, and then here, and then down here, here, right? It can happen that when you have a long downtrend, so imagine this one is going down more and more. You keep buying at a lower and lower price and eventually, eventually what happens if the downtrend is lasting for a long time? You may need some time to recover. Okay? So you may suffer a paper loss, what is called a paper loss. So some people are not really confident with that and they would like to buy but don't want to see the price keep going down. That we cannot really avoid 100%, but something we can do to mitigate. This is a strategy that I want to show you today. So how does it work? You see here we are using three moving averages. Okay? The 50 moving average, the 150 moving average and the 20 exponential moving average. The exponential moving average is a little faster to react than the other. So what is the strategy here? Basically we do this. Whenever the 50 is above the 150, we can buy as usual. Okay? So if our strategy is buy every month when it's time to buy, for example, we are here in September, we see that the price here at this stage we have the 50, the blue line is above the 150, so we buy, okay? Now in October we are here and the situation is the same. So we also buy because you see the 50 is above the 150. But what happens if the 50 is below? For example, let's say here in December, right? You see that the 50 is below the 150, the blue is below the green. So in that case what happens is that we may be in a downtrend, okay? So if we are in a downtrend, we only want to buy. Whenever we see a reversion, we see the price is bouncing back. Okay, so what do we do if the 50 is below the 150? We only buy if the price is above the 20. EMA, meaning to say, if the 50, if the blue is below the green and the price is still above the red, then we buy, okay? So in this case we would have bought here. We will not have both because we are below the red. And what is the idea? If you don't buy, you keep the money there and as soon as you see that the price is going above, then you buy again. So you don't buy here, you wait, wait, and when you see the price is closing above the red like here, then you can buy again. So again, this strategy is for mitigating this effect that for some people is really hard to manage of buying. And you see that the price keep going down and you keep buying and you see the price keep going down. That in a long term perspective is not bad because you say, hey, I'm buying at a discount, so if I'm confident that the price will go up eventually, then I'm happy. But in some cases, either because the downtrend can keep going down and down, or. Or maybe because you never know, especially for companies, not for single ETFs, but for companies, they may go down more than what you would like to see and they may not even recover. There may be some news, something that you don't know, such that at some point the company will not be so great, as you told before. So this strategy will help you avoid losing more money in that case, because if you don't see a recovery, basically you hold, you don't buy anymore. Okay? So in this case with the etf, this strategy is implemented like that. Okay, Remember you use these three indicators. 50 moving average 150 moving average and 20 exponential moving average. And all of them are available in all the trading software. And what you have to do is only apply these two rules, that's all. Every time that you need to buy from. For example, if you are using again this DCA strategy instead of using the classical DCA I.e. i buy regardless of like every month I buy and I don't care, you can use this one again. Rule number one is if the 50 is above the 150, you buy because it means the trend, the long term trend. Okay, so this is the long term trend is up. Okay? So for example, if you are here, right you see that here the, the blue is above the green. So from here you can keep buying as usual. But when you have a downtrend, right? So in this area when the blue is below, right, when the blue is below the green, you only buy when the the candle are above the red. So you will avoid this days here and you will just start to buy here because you see the candles, the price is above the red, okay, Here not really, but then it's just a few candles. So when I say the price, usually I mean the closing price. Okay, the closing price. And if you don't know the closing price for the candles, I made a video explaining the meaning of the different candles settings that you can have. But, but usually for the green candles the closing price is this level, right? The top level, not the week, but usually is represented by the upper limit of the body and for the red is the bottom side of the body. Okay, so if you're not familiar with that, just watch my video on the candlestick. How to understand the candlesticks. But this is basically the strategy that I suggest you. I'm also using this one. As I said, I'm moving to a more long term investing kind of strategy. But I'm still using what I learned in technical analysis and in trading to help me time. I will not say time the market because I don't think you can really time the market, but at least you can avoid some of the drawbacks of for example having a downtrend that is lasting more than what you would like. And again, this strategy I want to stress is even more useful when you are not tracking an etf, but companies where in theory they are good. You do your fundamental analysis, you do whatever it is, but anything can happen. You never know if a company that is great today is great in six months. Okay, you can do all the analysis you want. You can never be sure. So at least with this strategy you can mitigate some of the risks because remember, the important thing in investing is not really about making money, but is about applying some rules that help you avoid costly mistakes. Okay? Because the reason why usually you lose money is not because you take profit too early, it's because you don't cut too early the losses or because you keep buying something that is going to zero. Right? So with this strategy I hope that you can at least improve some of your results. If you had troubles on for example knowing where to buy for a long term strategy, you can also apply this one and I think is a good way to mitigate the risks I just mentioned. So thank you for watching the video. If you have any questions about what I mentioned or how to set up this this is tradingviews by the way is a free website, but if you have any troubles about Moving averages or Candlestick. Of course I have videos in my channel explaining that, but you can also write me a comment, put a like if you like the videos and if you have not yet subscribed, do it so you will be notified when I upload a new video. With that I thank you again and see you next time.