The 3 Timing Indicators I Use to Decide When to Buy Stocks
Deciding when to buy stocks is truly difficult.
When prices are rising, I get scared, wondering if it's okay to buy now, and when they are falling, I can't bring myself to act, fearing they might drop even further.
To reduce such hesitation, I have created my own set of 'buying rules'.
These are the following three indicators.
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1. VIX Index at 30 or higher
The VIX (commonly known as the 'fear index') quantifies market anxiety.
The higher the number, the more 'spooked' the market is; while it is usually around 20, exceeding 30 signals that we have entered a state of high alert.
This timing, when 'everyone is afraid,' often presents opportunities to pick up stocks at a bargain.
When the VIX exceeds 30, I actually turn my attention to the market and actively look for buying candidates.
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2. 25-day Advance-Decline Ratio below 70%
The Advance-Decline Ratio is an indicator that measures market overheating or overselling based on the ratio of advancing stocks to declining stocks.
Generally, 100% is neutral, and falling below 70% is considered an 'oversold' level.
When it reaches this level, I judge that 'excessive pessimism has spread throughout the market' and carefully look for a buying opportunity.
Personally, I tend to think, 'If the Advance-Decline Ratio is below 70%, it might be time to take some risks.'
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3. Check individual stocks with an RSI of 30 or lower
RSI (Relative Strength Index) is a technical indicator used to judge whether an individual stock is 'oversold' or 'overbought'.
Falling below 30 is considered oversold, increasing the possibility of a rebound.
However, it is dangerous to judge based on RSI alone, so this is strictly 'one of the signals'.
I combine it with the VIX and the Advance-Decline Ratio, watching with the mindset of, 'If all three align, is it finally time to act?'
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Conclusion: A simple personal rule is the most consistent
Since I started paying attention to these three indicators, I have hesitated less when deciding whether or not to buy.
No matter how good a stock is, it is difficult to make a profit if the 'timing' is bad.
Conversely, if you have your own rules, even simple ones, you can avoid being swayed by unnecessary emotions.
No one knows what the correct answer is, but I intend to continue trusting these rules and moving forward calmly.
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