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How To Beat the Stock Market Cycles

By Jason Markum

There are not many things in this life more difficult than stock market investing. Make the wrong decision and years and years of careful savings can evaporate in the blink of an eye. As amateur individual investors, we need all the help we can get in beating the professionals on Wall Street.

One tool that we can use to get a leg up is to understand stock cycles to help time our investments for maximum advantage. If you track the price cycle of your particular stocks then you have a good chance to time them for maximum effect.

The first thing you’re going to want to do is plot a chart that has the 30 week moving averages for stocks in your portfolio. You can use the closing prices of the last day of the week as found in daily newspapers like the Wall Street Journal or online. From this charting process you can usually find four or five stages in each cycle which I’ll describe below.

The first stage is the base stage. You’ll notice that daily prices start to go above the 30 week average in this stage. This usually happens after the stock has been decreasing for a while. You probably shouldn’t buy the stock at this stage though you will really want to at the time!

The second stage is what I like to call the advanced stage. Usually during this time the prices jumps ahead of the 30 week average. This is a pretty good time to buy the stock while the upswing is just getting going. Don’t wait too long though to buy!

The third stage is what some people refer to as the top stage. During this stage the daily prices are no longer consistently going higher than the 30 week average. Instead they usually move inside of a very narrow range above and below the average price. You’re also going to notice a general increase in the trading volume that is steady but sure. Think about selling the stock during this phase.

The fourth stage is called the declining stage. During this stage the stock usually trades below its moving average more and more. You’re going to want to stay away from the stock during this phase as much as possible. Or you may consider selling short during this time if you have experience in this sort of thing. Short selling is only for those who really know what they are doing though.

So there you have for stages of the stock cycle that you can use to time your investment to get the ultimate return at the lowest risk. Use this cycle and you’ll have a leg up over most investors who have never even heard of it!

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