Buying and selling according to investment trends is so simple that any investor can employ it. The rules are as follows:
1. Buy when a position moves above the 200-day moving average.
2. Sell when a position moves below the 200-day moving average.
3. Leave your emotions at home. If you catch yourself rationalizing your way out of buying or selling when it’s appropriate, stop.
Figure 1 shows the S&P 500 with its 200-day moving average. You can see when you would be in the market (when the S&P is above the trend line) and when you would be out (when the S&P is below the trend line).
Figure 1 S & P 500 Index with 200-day moving average, 1997-2008
When a stock or fund moves above or below its 200-day ...