Editor’s Note: Before we get to today’s issue, I want to make sure you’re signed up to receive Tom Gentile’s next Million Dollar Masterclass. This month, he’ll be sharing the secret to harnessing the fastest-growing moneymaker in the world… with just 4 ½ minutes per week. You don’t want to miss it.
As we continue to see, the market is constantly changing.
And it’s easy to get caught up in the fluctuations, especially when it’s your money on the line.
The truth is, you don’t have to spend every waking hour in front of a screen worrying where your trades will go next.
But here’s the thing – waiting idly beside your computer is the last thing you have to do to score major profits.
And this simple strategy is all you need to score your next big profit.
The “10/30 Strategy” That Brings Profits and No Stress – Each and Every Time
Earlier this week, I sent you a video about the 10/30 crossover. But today I really want to get into the nitty-gritty of it.
Now, what’s exceptional about this system is that it works more often than it doesn’t, winners are bigger than losers, it makes money… and it’s incredibly simple.
Before I get into the details, let’s get clear on what moving averages are and why they are useful.
A moving average, as the name implies, is the average closing price of a stock over a period of time. These averages are plotted as a line on the stock chart giving us a view of how the stock is performing relative to is average. This is important because knowing if a stock is above or below its average price is very useful, but it doesn’t stop there.
You can also adjust the timeframe in which you’re looking at the moving average. Adjusting the time-frame allows you to unharness their true power. To illustrate, here is a chart of Home Depot (HD) showing the two most popular moving averages: the 50-day MA and the 200-day MA.
These moving averages are great predictors of support and resistance, as you can see in the chart. Stocks often “bounce” off these lines and go back the other way… These “bounces” will show you a good time to buy or sell stock/options. When stocks break through them coupled with high volume, they often keep on going which is another good time to buy and sell stocks/options.
Shorter-term moving averages like the 5-day, 10-day and 30-day moving averages more closely follow the price movement of stocks and are useful as timing indicators when they cross.
And that’s where the 10/30 Moving Average (MA) Crossover System steps in.
So, let’s start with the basics:
- If the 10-day MA crosses ABOVE the 30-day MA, enter bullish trade (or exit bearish).
- If the 10-day MA crosses BELOW the 30-day MA, enter bearish trade (or exit bullish).
It can’t get much simpler than that and that’s what makes this strategy so great!
Let’s take a look at an example.
The chart below shows a 10-day and 30-day MAs. Shorter term MAs move around more than longer-term MA – so, in other words, they squiggle more. If you look below, The purple line (10-day MA) squiggles more than the brown line (30-day MA).
Applying the rules above, the buy signal on this Home Depot (HD) trade occurred when the 10-day MA crossed above the 30-day MA. About halfway through the trade, it bounced off the 30-day MA illustrating it’s usefulness as support. The exit signal occurred when the 10-day MA crossed back below the 30-day MA.
The result was over an $18 profit per share for this trade! That’s a 10% profit on the stock. An option trade would have netted you about 10-times that – which is why I always advocate for options.
This set up also works for bearish trades as well. All you have to do is switch the entry and exit signals.
Now, this strategy works best on stocks that move around a lot.
For example some great volatile stocks are: Home Depot (HD), D.R. Horton (DHI), Wal-Mart Stores (WMT), U.S. Oil Fund (USO), Occidental Petroleum Corp (OXY), Amazon.com Inc. (AMZN), Morgan Stanley (MS), and International Business Machines (IBM) – and these are just a handful of examples.
As always, with any system it’s important to manage losses in the worst case scenario. You may wish to use trailing stops and profit stops to keep losses minimal and your profits in your pocket.
Or, you could use what my colleague calls a “fail-safe switch”. It’s a mechanism that’s been embedded into most major trading accounts, and requires a very simple set of commands.
More importantly, it’s helped lead to quite an impressive series of winning closeouts, including 11.18% on 19 days, and massive, record-breaking 560.40% in 19 days. But here’s the kicker… the “fail-safe” switch is only activated if you execute a move on the markets after hours and it starts up.
Here is more information for you on that right here, including how you can get into the next recommendation tonight.
Good trading,
Tom Gentile
America’s #1 Pattern Trader
