Stock market timing

For every investor in the stock market, perhaps the most important thing is ‘stock market timing’. Because correct timing means profits and wrong timing can lead to a huge loss. So how can stock market timing be defined? “It is the strategy of making buying or selling decisions of financial assets or stocks by attempting to predict future market price movements. The prediction may be based on the market outlook, economic and even political conditions. And even a natural calamity can have a huge impact on the market. For example, the tsunami impacted the tourism industry in South and South East Asian countries and had economic impacts across the world.

There are 2 essential elements in stock market timing.

• The Buy signal
• The Sell signal

Simply said, stock market timing means identifying when to buy and when to sell in the market. It also includes deciding when to do nothing and just sit idle and simply watch the market movements. While this may be simply said, but this is no easy task as beginners as well as experts are always trying to make the right decision and take the right action at ‘just’ the appropriate time.

Why is stock market timing important?

If you are buying a stock when its price is going down, then you just have to sit back and see your capital suffer unless you decide to actualize your loss and sell it off. On the other hand, correct stock market timing would be when the stocks price has bottomed off and can only go up. The trick is to identify this phase and come in with your capital and pick up some stocks at low prices. Then when the prices go up, you can sell off to register your margin.

Stock market timing also means when to sell off. It helps you determines after what stage the stock is not likely to go up anymore and can only go southwards. And if you can do this, you will be able to gain the maximum. On the other hand, if you sold off prematurely to book your profit and the stock continued to rise for another couple of months, then you have an ‘opportunity loss’ in your hands.