Market Timing - Making Strategic Decisions in an Uncertain Market

Posted: May 30, 2010 |Comments: 0 |

If you ask an investor how they know when it is a good time to buy or sell a stock, they will probably launch into a detailed explanation about technical or fundamental analysis, stock chart, evaluation, and market pressures. While this discussion will likely overwhelm a new investor, it's just a lot of fancy terminology for determining the best market timing, something that investors have been trying to do through different means for hundreds of years. Experienced investors like to claim that they just know when it is time, it's important to do your best to take the guesswork out of your stock market decision making.

Many market theorists will state that the market is a dynamic entity whose movements will always defy human prediction. It is this fact that leads many people to believe that the market is simply a chaotic place in which you never know whether you're about to make money or lose money on a particular investment. Many others would argue that with knowledge of strategic market timing, you can start to see patterns in the madness, and exploit these reoccurring trends as opportunities to make money on your investment.

Although some are skeptical of market timing, saying that it is a pointless attempt to see into the future of a security, even though you have no idea what the political or economic climate will be three months or three years down the road, others will say that it is sometimes the most sensible theory to help you know when it's a good idea to ride out a trend, or a smart time to pull out your money and save it to invest again another day. Traders that use this concept of timing most successfully are those that have taken the time to fully understand technical analysis, and spend time getting to know the natural ebb and flow of their securities.

Even though some more experienced investors might frown on market timing as a risky practice, the fact is that this is what all investors are trying to in some shape or form. Even the sage advice to "buy low and sell high" means that at time point you have to decide that the time has arrived, and a price has sunk low enough, or risen high enough. If you don't have the time or interest to invest in a lot of chart analysis and market evaluation, it's probably safe to say that you should leave the timing strategies to professional brokers.

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