how do you buy stock cheaply how do you
get in at a low price before it gets
expensive many people like to buy as
soon as the price falls they'll wait for
us doctor dropped ten twenty or thirty
percent and they'll rush in to buy but
doing this could be a big mistake in
this video I'm going to tell you two key
strategies I use for buying a stock I
use these strategies to identify when
conditions are in my favour and I'll
show you how they help me avoid stocks
that have further to fall now just a
quick reminder if you're new to my
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notifications of when I release new
videos you know everyone loves a bargain
it could be the half-yearly clearance of
a humble garage sale a big discount is
hard to resist the prospect of nabbing a
bargain well it's irresistible people
want to buy as soon as a price drops but
should you approach stocks the same way
you'd be familiar with the words buy low
sell high it's probably the most famous
stock market saying of all time a few
other phrases have as much cut through
the tricky part is defining what's low
and what's high many people believe that
buying low means to buy straight after a
big fall they say that this is how you
get a bargain their overriding aim is to
lock in a big discount before prices
rise others a little more patient rather
than pre-empting the low point these
people wait for early signs of strength
often it only takes one or two days of
rising prices to get their interests
they'll then buy at the first
opportunity
but rationing can be risky you see
stocks in a downtrend also experienced
periods of rising prices and sometimes
these railings can be very strong many
people mistake these for the start of a
new uptrend but often it's a trap you
see stocks don't just fall in a straight
line a declining market will usually
include a series of strong
rallies and it sees periodic uplifts
that often provide a false sense of hope
for prices once again turn lower now
this is true for both individual stocks
and the market as a whole while every
investor wants to buy a bargain they
need to be careful not to buy a bargain
that quickly gets a lot cheaper here's
what I mean this is your lure daenerys
during the global financial crisis
it shows the market at both its peak and
the eventual low now I've marked some of
the key rises and falls within the
decline have a look at the rallies up to
16 percent 18 percent 9 percent 10
percent 16 percent and 17 percent any of
these could have been the real thing but
they weren't and that's what makes these
periods so hard while a bear market
rally may look and feel like the real
thing it's not the market eventually
gets back all the gains and that's why
rushing in at the first sign of strength
is risky so how do you put the odds in
your favor how do you avoid a bad case
of buyer's remorse well I'll tell you
what I do I use two primary indicators
for identifying when to buy now these
don't get me in at the low but they do
the next best thing they help me get in
at a low price and when the odds of
further gains are on my side so what are
those indicators well here they are
they're the the 50 and 100 day moving
averages and the 70 day price high the
aim is to identify when a stock is in a
sustainable rising trend if either these
indicators are negative well I won't buy
and that's because the risk of buying
into a bear market rally is too high
yes I want to make money but it's even
more important to protect capital when
the odds aren't on my side
well I stay on the sidelines now I won't
go into detail about the mechanics of
these strategies today the point is to
make you aware of them to get you
thinking about when you should consider
buying but I will say this I use
indicators that react slowly to price
Changez and this is a key to avoiding
bear market rallies a few sessions of
rising or falling prices have only a
small impact let me give you an example
this graph shows two hypothetical trades
in Commonwealth Bank it covers a similar
period to the previous chart of the All
Ordinaries during the global financial
crisis
now you'll see label for trade one this
is an exit from an earlier trade CBA
hits its trailing exit point after the
market turns lower the exit protects
capital from further share price Falls
now have a look at the moving averages
at the top of the shaded area they cross
and turn lower this means there can't be
any buy signals now do you remember all
those bear market rallies on the
previous chart you know the ones up 16
18 17 percent and so on
well they occurred during the shaded
area on the graph if you're using my
moving average and seventy day high
approach for entries you wouldn't have
been a buyer during this period have a
look at all CBO's rallies throughout the
decline there were many buyers at every
surge higher some are likely thinking
that a major low was in place and that
CBA was a bargain and for a few days or
maybe even weeks prices rose but the
ultimate result was a new low and that's
the risk of buying early and this brings
us to the key part of the story how do
you buy CB o cheaply and in doing so
lower the risk of buying a bargain that
quickly gets cheaper as I said before I
have two key entry requirements the
moving averages must be positive and a
stock needs to be at a 70 day high now
this approach will never catch the low
it's just not possible but what a can do
is help you avoid many of the false
starts here's another chart for CBN this
time I've highlighted the entry you can
see the final low on the chart the rally
initially looks like another bear market
advance prices push high
and then begin to roll over again it's a
pattern that's been playing out for
months but this time is different rather
making a new low the shares rally and
this starts to feed through to the
moving averages that begin to turn
upwards indicating that a potential
trend change is occurring and with the
shares then hitting a 70 day high I get
a signal to buy now
some people will say this approach gets
in late if I point out that CBA was well
off its lows when the entry signal
occurs and they'll add that getting in
sooner is more profitable but you know
these people miss the point it's not
about picking the absolute low you see
successful investors are also good risk
managers they understand that the trying
to bite the lowest price is risky
instead they'll happily give up some of
the upside in exchange from more
favorable setup if you'd like to learn
more about my strategies I'm hosting a
free skills accelerator course I'll be
teaching five key tactics for
identifying managing and exiting high
potential stocks you'll find all the
details and my website motion trader
comm that I you and as always if you
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notifications thanks for watching
I'm Jason McIntosh and let's find some
trends this week