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Minimalist Lifestyle Blog
  • Buy and Hold OR Time the Stock Market?
  • Tracy Freese
  • Financeminimalist technology
Buy and Hold OR Time the Stock Market?

Stock market timing has to be on of the least understood terms in stock trading. Some people have even thought that stock market timing was illegal. Obviously this was based upon incorrect information.

Whether you are a short-term, intermediate-term, or long-term trader...whether you use fundamental or technical analysis or both you use stock market timing. Unless you buy a stock and hold it until death, you use some form of stock market timing...and even then you may have had to make the decision of the best time to buy the stock.

Stock market timing is simply deciding two things:

1) When to get in a stock

2) When to get out of a stock

That's not to say that the decision process involved is not more complex than that. A trader will use their preferred analysis techniques to time the stock.

The whole purpose of stock trading analysis is stock market timing. If you use fundamental analysis you may see a company that you would like to buy Wal-Mart stock the P/E ratio is more in line with your analysis. In this case you would be using stock market timing because you would be waiting for the time when the P/E ratio was to your satisfaction.

A stock trader using technical analysis might wait until Wal-Mart stock price is greater than a certain moving average before buying the stock. This is an example of stock market timing as well.

Have you heard the saying, "Timing is everything". It is of true of trading stocks as it is of many things in life. That doesn't mean that you have to have some kind of super-human, split-second accurate timing to make money in the stock market. When you trade using stock market timing you are simply trying to maximize the return on your investment. Where would you have rather bought Google, at the $100 a share price or at today's price?*

While most of my readers are not stock analysts, many of you are interested in expanding your grasp of financial literacy. That being said, I ran into a user friendly stock market indicator blog called OBOSS that turns complex stock market analysis into a speedometer graphic that is simple to understand. Take a look at OBOSS the next time you consult your resources to make a stock market trade. It may just be a fun new tool to complement your current strategies!

 

Source: Tony Spann, CFA
  • Tracy Freese
  • Financeminimalist technology