Market Timing Facts vs. Market Timing Fiction
The phrase "market timing" has been terribly misused, and misunderstood, by market commentators, analysts, traders and investors.
A stock, mutual fund, commodity, is purchased with the expectation it will be value additional over "time." It is sold when the expectation is that its worth will decrease over "time." Any analysis supposed to make a profitable come on investing, is a type of market timing.
The actual fact is, nobody buys a stock expecting it can be price less over time. They choose a "time" to shop for it, primarily based on basic or technical analysis, and expect that over "time" it will be value more.
Market timers typically use index mutual funds covering a number of of the many doable markets. They can time the S&P five hundred, the Nasdaq a hundred, Gold, little caps, bonds, U.S. dollar, etc.
Timers purchase the index fund with the expectation that it can increase in value. They sell the index fund when they expect it will decrease in value.
Just concerning everybody trading the financial markets is, in one manner or another, a market timer.
At FibTimer, we tend to focus on trading index funds, as well as sector funds, exchange traded funds, and even selected stocks which tend to trend well and work profitably with our timing strategies.
Tell Us Another Story
At FibTimer, we tend to believe that a number of the worst advice, that is given to the vast majority of investors, is to pick out an index fund, set up an automatic deposit program to form monthly deposits into it, and then do nothing till you retire. At that point, so the logic goes, you'll be made from the massive profits derived from your investments.
Get-and-hold say the experts. Obtain-and-hold say the advisors who profit from your investment purchases though commissions. Purchase-and-hold say most mutual fund firms who exploit load fees thus various in variety it would take too much space to list all of them here. Buy-and-hold say TV commentators and newsletter publishers who's purchasers already own the stock.
Imagine for an instant an investor, following such a buy-and-hold strategy, who planned to retire in 2002.
Depending on the index fund, the value of his or her retirement funds would be value fifty% to 80% less after the 2000-2002 bear market. They're probably still operating, postponing retirement and hoping the markets can come back to to their pre-bear market highs. For his or her sakes, we have a tendency to hope another bear market will not devastate them again.
Years when that bear market, most index funds are still far below where they were.
But those mutual fund traders who spent a very little time watching the markets, who used even a straightforward two hundred day moving average to determine that their fund investments were now not performing well and exited to cash, avoided most of the losses and created money in money market funds.
Market timing doesn't work? Positive, tell us another story.
Modification Is Inevitable
Market timing relies on the "truth" that eighty% of stocks can follow the direction of the broad market. It is based mostly on the "fact" that the markets trend over time, are doing therefore since the beginning of freely traded markets.
It's based on the "truth" that modification within the financial markets is that the one factor we tend to can count on to continuously happen.
Simply said, the markets can continuously go up and down, and the majority of stocks in the market will follow the present trend. Change is inevitable!
And here is that the key.
Whereas over the short term, monetary markets will appear terribly chaotic. Intensifying in some unspecified time in the future and down the next, seemingly with no rhyme or reason. Over time, they trend in huge up and down moves, simply seen on historical charts. And those future moves "will" be traded profitably. Trend timers (trend traders) are doing it for years. Quietly creating huge sums of money while most investors, following the emotional dictates of concern and greed, lose.
Either Take Action, Or Go Along For The Ride
The simplest tools for creating entry and exit choices, in order to profit throughout upward trends and safeguard capital throughout downward trends, are technical analysis tools. Basic analysis does not take into consideration whether a stock is in an exceedingly down trend or up trend. It is of little use to promote timers. What counts is price. Is price rising or falling? Is it trending? Technical analysis will give us the answer.
As mentioned on top of, a simple 200 day moving average would have kept mutual fund investors (and most individual stock investors) from losing their shirts in the 2000-2002 bear market. It also would have moved them back and had them totally invested in the subsequent advancing markets. Moving averages are terribly straightforward technical analysis tools.
Obviously there are higher tools than the two hundred day moving average. Not everyone desires to wait till a mutual fund has dropped below its two hundred day average and already taken a loss. Abundant depends on a traders time frame. Are they aggressive, conservative, or active? Their emotional ability to handle losses is also a factor.
Gains can additionally be enhanced by aggressive traders who are willing to use bear funds throughout declines. In the case of the 2000-2002 bear market, bear index funds created over one hundred% with FibTimer strategies.
But irrespective of a traders selection of funds, whether or not or not they're aggressive, conservative, or just don't want to lose their shirts when the markets tank, market timing is the sole answer. You either use a methodology that takes you out of declining markets, or you tank right together with the declining markets (along with all the other purchase-and-hold investors).
There's very little choice. Either take action or go along for the ride.
We are market timers here at FibTimer and have been for a very long time. We have a tendency to have realized the profits, and have additionally been through the ups and downs of many market cycles; bull, bear and sideways.
Exceptional results are made by following solid, tested, non-discretionary timing methods for long periods of time. Poor results are the consolidation prize for those that follow conventional knowledge, park their brains on hold for decades, and let the markets decide whether or not they retire made, or unfortunately, poor.
Author Resource:
Jerry Nichols has been writing articles online for nearly 2 years now. Not only does this author specialize in Marketing, you can also check out latest website about
![[Valid RSS feed]](http://www.look4articles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
![[Valid RSS feed]](http://www.look4articles.com/images/rss.jpg "XML Feed For RSS")