You will be able to use price action only to place orders for a decision already made on value and risk.
Every January, Marcus adds S$8,000 to his account, as his returns tab from lesson 1.8, Build the returns tab of your investment workbook, recorded. His investment policy says new money goes to whichever holding sits furthest below its target weight, and this year that's his world equity ETF. The decision is made. What used to happen next was a week of opening the chart, waiting for a dip, watching the price rise, and finally buying higher than he could have on day one, annoyed with himself.
This reading turns that week into a written plan. It's the one job this module gives charts: helping you place orders for a decision already made on value and portfolio rules. Prices are made up.
The order of decisions matters more than any technique. What to own comes from your valuation and quality work in modules 8 and 9, or from your allocation for index funds. How much comes from your portfolio rules, which module 11 writes down. Only then does the question of when and at what price come up, and it's the least important of the three.
If you let the chart into the first two decisions, you're back to treating support levels and indicators as forecasts, which lessons 10.2 and 10.3 showed they're not. A stock "breaking out" doesn't become worth more, and a fund "at resistance" doesn't become a worse home for your long-term savings.
Once the decision is fixed, price data does have a use. The recent trading range shows where buyers and sellers have been meeting, which helps you set a limit price that's likely to fill without paying more than you need to.
Marcus's world ETF trades at a made-up S$10.00. Over the past month it moved between S$9.60 and S$10.30, and over three months between S$9.30 and S$10.40. A limit far below the range, at S$9.00, might never fill. A market order pays whatever the ask is at that moment. A limit near the middle of the recent range, or just below the current price, is a reasonable compromise.
For a busy ETF, the gain from clever limits is small, a few cents a share at most. For a thinly traded stock it can matter more, and the depth and auction habits from lesson 5.2, Order types beyond limit and market, and when each helps, matter more than the chart. A recent support area, from lesson 10.2, Trend, support and resistance as a description of past trading, is a sensible place for a patient limit order on a stock you've already decided to add to, so long as you accept it may not fill.
Splitting a purchase into two or three parts over several weeks is called phasing. It doesn't raise expected returns. Studies comparing lump-sum investing with phased investing, including work published by Vanguard, have generally found that investing at once did better more often than not, because markets have risen more often than they've fallen. Holding cash while you wait has a cost.
What phasing reduces is regret. If the price falls the day after you invest everything, it feels like a mistake, and investors who feel that way tend to make worse decisions next time. Two or three tranches over a few weeks spread that risk, and the cost of waiting is small when the period is short. Behavioural Finance: why you make the money mistakes you make covers why a fall straight after buying stings so much, in lesson 2.2, Losses weigh more than equal gains.
So phase over weeks, not months, and set an end date. A plan that waits indefinitely for the perfect price is market timing by another name.
The plan only works if you write it before looking at the chart again, because every fresh look invites a new opinion. A complete plan answers four questions: what you're buying, how much in each tranche, the limit price for each, and the date by which any unfilled order becomes an order at the current price.
Marcus's plan read: "World ETF, S$8,000, two tranches of S$4,000. First: limit S$9.98 on the first Monday of January, at the open after the first few minutes. Second: limit S$9.80 from the third Monday. If the second hasn't filled by the last Friday of January, cancel and place a limit at the ask that afternoon." He saved it in his workbook's notes and closed the app.
The second tranche didn't fill at S$9.80, and he bought at S$10.12 on the last Friday. On a S$4,000 tranche, the gap against his first tranche's price came to about S$55. Before he had a plan, he'd have spent a week watching the screen to lose about the same.
Pick one position you intend to add to, whether new money for a fund or an addition to a stock you've valued, and have your target amount and the deadline for the money ready before you write your plan.
Write an entry plan for one position you intend to add, with the limit prices and dates, before checking the chart.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).