What is Stock Market Timing?

mar•ket tim•ing (verb)

  1. The art and science of predicting the future direction of the market through the use of technical indicators and economic data.
  2. The practice of switching among asset classes in an attempt to profit from the changes in their market outlook.

Market Timing tells us when to buy and sell

Some investors, especially academics, believe timing the market is a fools game. Active traders on the other hand, believe strongly in timing the market. Ultimately, whether market timing works or not is a matter of opinion. The answer depends on who you ask.

What can be said with absolute certainty is that most people are not successful at market timing over the long haul. The person who doesn't have the time (or desire) to do what it takes to time the market would be well advised to avoid market timing. Not everyone falls in that catagory though.

Market timers ares sometimes called Chartists or Market Technicians. Chartists use technical analysis on almost every type of financial security, but especially on stocks, commodities, forex and exchange traded funds.

Market Technicians, (AKA technical analysts) agree with author John K.Sosnowy: The Secret to Lasting Wealth is a Matter of Timing. A multi-trillion dollar a year industry is focused on convincing us its not even possible. Mutual fund managers base their claim on a market theory called the “efficient market hypothesis” or EMH. The EMH states that's market timing is futile. (Don't tell that to the many successful traders out there who do it all the time) What experts who tout the EMH are really saying is:

They can't time the market!

Just because they can't time the market doesn't mean that you can't time the market!

There is a reason Wallstreet doesn't want us timing the market and it is not because it cannot be done. It can… but if everyone were to time the market, it would make fund managers' life's a living hell. (Stock brokers don't mind it… they get more commissions) It would also increase market volatility and the control freaks in Washington DC can't stand volatility. A fund manager's business demands stability and therefor you the investment “product consumer” must be convinced that the right thing to do with your money is to simply “buy & hold”.

Lets be honest; maybe it is true. Maybe the vast majority of the investing public should just “buy & hold”; either that or leave their investments to someone else. Why? Because even the simplest of market timing stratagies such as those outlined in actor/author Ben Stein's recent book: Yes you can time the market require work and most people are lazy. Why? Because timing the market requires discipline and most people don't have any. Why? Because timing the market is only one piece of a workable trading strategy. Lets be honest, market timing is not for everyone.

Bull market statistics do indicate that, people who time the market or “actively manage” their accounts don't fair as well as those who just leave their investments alone. So why should we even bother trying to time the market? Because market timing has the potential to decrease our risks and increase our rewards.

Knowledge is the key. Most people will never know what you will learn here. I aim to show you the market timing methods that you need to succeed. We've said some people should not try to time the market and that's true. But let me tell you the dirty little secret nobody in Wallstreet wants you to know:

Everybody Times the Market!

Yes you read right… everybody times the market… “Buy & hold” investor think they don't time the market but invariable they do. Here's what happens.

Meet two people Mr. TA and Mr. B&H. Mr. TA uses technical analysis to help guide his investments. Mr. B&H believes the “buy & hold” mantra. One day the market begins a correction (right on time according to Mr. TA's analysis). When the downturn is confirmed, Mr. TA follows his system and lets his “stops” take him out of the market. He's safe on the sidelines sleeping easy at night waiting for the next buy signal. Meanwhile Mr. B&H is biting his fingernails, losing sleep at night all the while trying to reassure himself that: “this is just an ordinary correction”. Time passes… like a bad storm, the sell-off seems as if it will never end. Finally, a bottom gets put in. Mr. B&H breaths a sigh of relief; he will be able to retire after all. Meanwhile Mr. TA is watching for his next buy signal to tell him its time to get back in. It doesn't come. Then, just as quickly as it turned up, market turns down again and soon has taken out the previous bottom. The sell-off continues relentlessly… the air is heavy; the carnage is palpable. TV pundits are saying there is no end in sight. The future looks bleak. One day there is particularly scary drop and Mr. B&H, having watched his retirement savings evaporate, can't take it anymore. He sells. What just happened? Mr. B&H just used the ICTIA or I Can't Take It Anymore method of market timing! The next day the market tests the bottom and a new bull market begins in earnest. Mr. TA's systems give him a green light and he is in again. Meanwhile Mr. B&H is shell-shocked. He misses the bottom and the next move.

Have you seen the above scenario play out? Have you been in Mr. B&H's shoes? Wouldn't you like to be in Mr. TA's shoes the next time? We time the market because we are human and we have emotions. TA helps us control our emotions. Are you ready to take action? Are you ready to learn technical analysis?