Today I received an email from an investor with the following question:

Markus, right now the Dow Jones Index is at 11,600.
What do you think: Where will the Dow Jones be at the end of the year?

I thought I'd share my answer with you. Here's what I wrote:

Raj, to be honest: Predicting the Dow for the end of the year is like throwing a dart.

Most traders would be happy if they could predict the Dow for a couple of minutes or a couple of hours.

I assume you're asking this question because you need this information for your investment decisions.

Keep it simple:

1.) Buy when the market is going up and sell when the market is going
down.

I know that this sounds very simple, but many investors do not
follow this simple advice. They fall for concepts like "Dollar Cost
Averaging" where you actually BUY a stock even though it is falling!
You only make money if you own a stock and it is going up. When it is
going sideways, or maybe even going down, get out and invest in another
stock. Every day there are stocks that go up!

2.) Know when to exit.

Most traders stay too long in the market. Either
they fail to take profits or they let their losses run too far. Both
mistakes can be disastrous. You should know when to exit a trade even
before you enter it. As soon as you are in a trade, place a stop loss
order and a profit taking order. Good traders use a stop loss, great
traders use a profit target!

3.) Trade the right stock, and the right stock is the one that is going
up.

Easier said that done, right? Use simple filters and determine
stocks that bounced back from an absolute or relative bottom. Do not
try to pick bottoms or tops - it's next to impossible. But if you look
for stocks that went down or sideways and are now moving up, then you
have a chance to catch a small move. Don't be greedy: You can make 25%
per year by making 5% on five different stocks. And believe me: It's
easier to make 5% on a stock than 25%.

How do you eat an elephant? - One bite at a time!

First learn to identify the direction of a stock, THEN learn when to
exit a stock and THEN try to come up with a good filter to find the
right stock. Don't try to do everything at once.

Trading is not easy, but it can be simple. Don't make it more
complicated than it is. Plan your education, and take one step at a
time. Learn something new every day, and you will be amazed how much
you can learn in month.

Good luck!