How to Invest in the Stock Market Long Term From Zero

TL;DR

Long-term investing here means holding a position for a minimum of one year, and the entry method is built on sequences of highs and lows, abbreviated as SAB. You draw a horizontal level at the last low, wait for the price to break it and then confirm by breaking again, and exit when the opposite sequence confirms a reversal. Risk stays at a maximum of 2% of the account, ideally 1% or 0.5%.

Transcript

Greetings to all! Welcome to a new live of Código Trading. On this occasion, as you can see on the screen, the option chosen by you in the survey has won, as we always do the third option, which is to invest in the stock market in the long term starting from scratch, so what I am going to teach you is precisely to invest in the long term. starting ... Read More

Key Insights

• Long-term investing is defined by intention and duration: the position is meant to last years, and the minimum horizon discussed is one year. A trade entered with a five-year plan but closed after a month due to changed market circumstances still counts as long term.
• A sequence of highs and lows, abbreviated SAB, is the core tool of this method. It simplifies a dirty, non-linear chart into alternating low, high, low, high markers, letting you read trend structure without tracking every small movement in between.
• The last SAB point is always the one that matters for identifying a trend change. Earlier points in the sequence stay intact during a healthy trend, so the reversal signal comes only from whether the most recent low or high is pierced.
• Entering at the exact top or bottom of a move is unrealistic because only a fortune teller could know when price will turn. The method targets capturing roughly 70 to 80 percent of a move instead of chasing the full 100 percent.
• Confirmation is what separates a real break from a trap. The market can break a level and then continue rising, so the rule is to wait for price to break again after the first break before taking the entry.
• The trade-off of waiting for confirmation is entering at a worse price on a shorter route. Trying to enter at the extreme every time in anticipation of a trend change instead produces many stops, which is why confirmation is preferred.
• Leverage compensates for the shorter route that confirmation costs you. If the confirmed move is 1,000 pips and the full extreme-to-extreme move is 2,000, multiplying the lot size by 2 earns the same amount from the shorter route.
• Risk per trade is capped at a maximum of 2 percent of the total account, with 1 percent or even 0.5 percent presented as the ideal. Lot size increases must stay moderate rather than becoming reckless.
• Gold is used as the working example because it is a traditional long-term asset. Some assets are highly speculative and attract short-term traders, while gold is the typical instrument people hold over long horizons.
• A free demo account on MetaTrader is the practical starting point for replicating the method. The link to open one is shared in the chat and on screen, and a video tutorial walks through the creation steps.

Questions & Answers

Q: What counts as long-term investing in the stock market?

Long-term investing means an investment made thinking years ahead, with a minimum horizon of one year. The defining factor is intention: the idea behind the account is that the position lasts for years. If someone enters today planning to hold for five years but closes the trade after a month because market circumstances changed, that operation is still considered long term, because the intention when entering was to go long term and only the changing market cut it short.

Q: What is a sequence of highs and lows in trading?

A sequence of highs and lows, abbreviated SAB, is a way of simplifying a price chart by marking the alternating extremes: a low, then a high, then another low, then another high. Real price movement is dirty and never travels in a straight line from one extreme to the next, so the sequence strips away the noise. Reading it requires training your eye to draw the simplest possible line from one end of a move to the other.

Q: How do you know when a trend has changed?

The trend change is identified through the last point in the sequence of highs and lows. During an uptrend the sequence rises and never breaks earlier points, so the signal comes from the most recent low. You draw a horizontal level right at that last low, and the break of that level is the first sign. A valid point must have generated a low below the previous one; a movement that failed to do that does not count.

Q: Why should you wait for confirmation before entering a trade?

Waiting for confirmation avoids traps. Price can pierce the last low and then simply continue rising, which makes analysts believe the trend is reversing when it is not. Entering on that first break means being caught by the trap. Confirmation is the second break of the level, and requiring it means entering at a lower price but at a point where the move is more established. Without it you take many stops trying to catch every possible reversal.

Q: How much of a market move can this method realistically capture?

The method targets roughly 70 to 80 percent of a move rather than the full route from one extreme to the other. Capturing 100 percent would require buying at the exact low and selling at the exact high, and only a fortune teller could do that because nobody knows the moment price will turn around. The approach is not always right and sometimes loses, but it captures interesting trends many times.

Q: How does leverage make up for a shorter trade route?

Leverage lets a shorter confirmed move produce the same profit as a longer one. If the confirmed route is 1,000 pips and the full move from one extreme to the other is 2,000 pips, multiplying the lot size by 2 earns the same amount on the shorter route. This is the advantage trading offers over waiting to catch the entire move, and it is what makes the more conservative confirmed entry viable.

Q: How much of your account should you risk on a single trade?

The rule given is a maximum of 2 percent of the total account at risk, with 1 percent or even 0.5 percent presented as the ideal. Any increase in lot size used to compensate for a shorter route must stay moderate rather than becoming reckless. The point of leveraging up is to match the profit of a longer move, not to take on outsized exposure on a single position.

Q: Why is gold used as an example for long-term investing?

Gold is described as a traditional asset that people use a great deal for long-term investment. Markets contain very speculative assets that attract traders entering for short-term operations, and then assets like gold that suit holding over long horizons. In the demonstration the gold chart is opened in MetaTrader so the sequence of highs and lows can be drawn on a real instrument rather than only on a simplified drawing.

Q: What do you need to start replicating this method?

The main requirement is a trading account, and a demo account can be opened completely free. It is the same MetaTrader setup shown on screen during the session. The link to the website is shared in the live chat and displayed on screen for anyone watching the recording. That page contains a video tutorial plus the link to create the account, so the steps can be followed along to end up with the same chart setup.

Q: What is the difference between a break and a trap on a chart?

A break is when price pierces the horizontal level drawn at the last low or high in the sequence. A trap is when that break happens and price then continues in the original direction instead of reversing, which the market does to make analysts believe a turn is coming. The way to separate the two is confirmation: after the first break, wait for price to break again before acting on the signal.

Q: How do you handle chart movements at different scales?

The same sequence logic is applied at different degrees of detail. Some routes between extremes are so large that a trade can be taken in the middle of them, which means zooming the sequence in a little. Other movements are so small they belong to a different time frame and should be ignored. The judgment is in avoiding both an exaggerated sequence drawn too wide and micro movements drawn too fine.

Summary & Key Takeaways

• Long-term investment is defined as a position held with the intention of lasting years, with a minimum horizon of one year. Even if a trader enters planning to hold five years but closes after a month because market circumstances changed, the operation still counts as long term because the original intention was to hold for years.

• The method simplifies a messy price chart into a sequence of highs and lows, abbreviated SAB. Price never moves in a straight line from one extreme to another, so the skill is training your eye to draw the simplest line from end to end. The last SAB point in a sequence is always the important one for spotting a trend change.

• Entries wait for confirmation rather than trying to catch the exact extreme. When price pierces the last low, a break alone is not enough because the market sets traps where price breaks and then keeps rising. Waiting for a second break confirms the move, which means entering lower but with more certainty and fewer stops.