How I invest (Mechanically) during a market correction and it works

Just last week, as major market indices dipped into the correction zones, I finally had the chance to open up my war chest and deployed first tranche of cash into the market. This is all thanks to the current US President, whom has made decisions to roll out policies that is causing uncertainty to the US and world economy. And Mr Market hates uncertainty, and thus the sell off follows. 

In the past few weeks, I've seen financial youtuber and analyst telling investors to buy the dip. Some of them said when the indexes correct to 10%, they will start buying, some use certain economic indicators to determine when to start buying. But none shared the step by step method to show how to buy during a market correction. In this post, I will be sharing the method that I am using and why I started buying last week.

Before I share the method, let me also share what triggered the decision to do a lump sum add on to the ETF now. Below are the 2 charts from AAII investor sentiment survey and CNN Fear and Greed Index, both are showing extreme fear in the market, and the survey from AAII indicated that investors today are even more bearish as compared to the historical average. This is not the first time we are presented with such pessimism and it certainly wont be the last time, remember the recent pandemic sell off and the Great Financial crisis some time ago.

As market presents a discount, we should be happy.

Here we go;

1. This method only applies on broadbased ETF, eg. S&P500, World Index, QQQ. Does not apply to individual stocks.
2. When market corrects 10% or there is extreme pessimism in market as presented in the 2 charts above, start opening up war chest slowly and divide the amount into 6 portions. 
3. Use monthly moving average (MA), 10, 20, 50.
4. When index price close below monthly 10 MA, start monthly dollar cost average (DCA) and add a lump sum (from 1/6).
5. When index price close below monthly 20 MA, add another lump sum (from 2/6).
6. When index price close below monthly 50 MA, add another lump sum (from 3/6).
7. When index price close above monthly 10 MA, add another lump sum (from 4/6).
8. When index price close above monthly 20 MA, add another lump sum (from 5/6).
9. When index price close above monthly 50 MA, add the last lump sum (from 6/6).
10. Bullets finished by now, get on with life, and let market do it's magic.

I was thinking should I also include when to stop the DCA in this post, but this one gets abit technical, will probably write in future post. When the market turns and it is above the initial first lump sum (point 4), it also means market is on up trend and more and more investors will also want to get into the market. This is also the time, at some juncture, one needs to adjust or stop the DCA and save up the bullets into the war chest to be used for the next down cycle again.

Happy holiday guys.