- 1). Gather the mutual fund's chart by inputting the ticker symbol into a charting website. Examine this chart for the past five years. This will give the investor a feel for where the mutual fund has come over the medium term.
- 2). Input the required data for examining the 12-month time period. This information will be vitally important for immediate decision-making.
- 3). Input the moving average trend lines. Analyze the most popular moving averages, which include the 100-day and 200-day for long-term trends, and the 10-day and 20-day for short-term trends.
- 4). Sell if the 100-day average crosses below the 200-day, known as the death cross. This suggests that future trends will continue downward. While this process does not allow the investor to sell at the highest point, it usually protects the principal investment from 80 percent to 90 percent of the potential downside.
- 5). Buy if the 100-day average rises above the 200-day, known as the golden cross. This trend indicates that future strength will continue. This process normally does not allow the investor to purchase shares at the absolute bottom; however, it provides trends analysis that can garner the majority of the upside potential.
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