For many years I have taught traders and investors from all over the world. I always found it more interesting to work with those that were just getting started. The opportunity to plant a seed of confidence and strategy always felt rewarding to me. This came as quite a challenge at times though. Imagine teaching someone to speak your native language. When you speak the words just flow normally and the slang comes as second nature. To teach someone those words requires a more methodical and slow approach.

But where do you start with a new trader? There is so much to learn it is overwhelming. Well over time I was able to simplify an approach that gets a total beginner started. A strategy that allows one to see success enough times to continue to learn, but also provides the opportunity to learn about losses and how to keep them small. Today I share this with you.

Okay, new traders the first thing I want you to do is only use two charts, the weekly chart and the daily chart. Next we are going to start with a simple moving average on both of them. Now, you can choose to erase these in the future but today we will use the 20 period moving average on both charts. The weekly chart will only be used for one piece of information and the daily chart will be where you take action. Understood?

Now when looking at a stock to trade we will always look at the weekly chart first then the daily chart. The weekly chart has one rule. If the price of the stock is trending above the moving average then we will only consider longs. If the price is trending below the moving average then we will only consider shorts, or we will find other stocks to trade.

Once we have completed this we will look to the daily chart to enter. Only when the stock pulls back to the rising moving average will we enter. The goal is to pretend we are at a car dealership. The moving average represents the average price that car buyers paid over the last 20 days. Look back on the chart and see how many times people were able to pay less than the average. Do you see many times where prices traded briefly below the average or were they mostly at average? Now your job is to beat the car dealer at his game and get a price that is better than average. Happy trading!