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Stock Market Timing
"
Stock Market timing is one of the best ways to control risk. It's not the
only way, but it's one strategy that's followed by a lot of investors. Too
many investors look at it as a way to beat the market but professionals look
at it as a way to control risk."
- Market
timing is any attempt to use past prices, volume and other market-generated
data to accurately forecast or prophesy future prices of securities or indexes,
whether long-term or intra-day, consistently and persistently.
- Securities timing includes asset allocation,
technical
analysis, charting, momentum investing, and quantitative analysis using
neural networks, genetic algorithms, artificial intelligence (AI), fuzzy
logic, chaos theory or other non-linear techniques.
- Timing is based on various economic or stock market indicators,
for deciding when to buy or sell securities.
- NASDAQ timing,
QQQQ timing
(NASDAQ:
QQQQ),
S&P 500 timing
(AMEX: SPY),
Dow Jones timing
(AMEX: DIA) based on the volume of all index constituents works
very well for timing index shifts.
- During bull markets, timing usually underperforms.
When the market is going up, the only thing timing can do is tell you to
be invested; that doesn’t give you any advantage over buy-and-hold. But
of course no bull market goes up in a straight line for very long. And often
when there’s a downward blip, it causes a sell signal, and you’re out of
the market.
- Every investor has his own stock market theory of timing
when it comes to making money in the stock market.
- Many attempt to improve their performance by timing
the market and adjusting their portfolio according to predictions about
the market or specific sectors.
- Precisely because prices are efficient integrators and
anticipators of information relevant to security valuation, they also serve
as high-quality inputs for reliable technical analysis models.
- Very often market and mutual funds timing based
on the price sounds fine in theory but it seldom works in practice.
- Market stock timing based on the volume of indexes works
in majority of cases.
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