TIME YOUR BETS WITH INCREASED PRECISION: Buy when the market is ready to go up. Don’t buy just because it’s done going down. There’s a natural lag time between internal changes in momentum and external changes in prices.
Like dropping a rubber ball, most stock market bottoms bounce a few times before the downward energy has been fully exhausted. Therefore, it’s entirely possible that the lowest price of a stock candidate may not be the ideal point in which to buy it from a timing standpoint. That’s because the market can end up sitting near the lows for several weeks, while tying up your capital and testing your nerves.
Again, the ideal time to buy a stock for trading purposes is when it’s ready to go up in price. This is often a misunderstood concept to amateur stock market players, who try to follow a simple “buy low and sell high” strategy.
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Comment: The actual way that a market finds its way to an eventual bottom has an uncanny way of always appearing slightly different. So don’t get locked in to any set pattern of the way a bottom should look. However, it’s important to know that the internal bottom always precedes the external bottom. The external bottom is the point in which the momentum has waned and the direction is about to turn up.
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“It’s important to distinguish between respect for the market and fear of the market. Whiles it’s essential to respect the market to assure preservation of capital, you can’t win if you’re fearful of losing. Fear will keep you from making correct decisions.”
Howard Seidler ~ Professional trader
Categories: Stock Market Timing Tags: buy low sell high, investing, investments, Investor, market timing, stock market, stock market timing, stock trading, stock trading tips, stocks, time the market, trading, trading tips, wall street, wall street craps, winning
LOOK FOR THE OBVIOUS COVER STORY: Every major stock market bottom has a media story attached to it, which causes the public to panic out of fear or lose all hope. Often this story will appear on the cover of a widely read national publication, such as Time Magazine or Newsweek.
An example of the associated headline might be: “The Recession Is Official!” Since fear and greed are the primary motivating emotions in the stock market, the appearance of such a cover story coincidentally marks the maximum point of investor’s fear and negativity. At this juncture in the market cycle, the selling of stocks has almost entirely been exhausted. Yet a sustainable turnaround to the upside is about to begin.
Remember these classic words credited to Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family: “The time to buy is when there’s blood in the streets.”
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Comment: The news is always negative near the bottom in prices. But at some point, the market will no longer respond to the downside and instead defy the obvious and start moving up. This happens when the last unsophisticated investor or trader has decided to panic out of fear and finally sell.
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“When good news about the stock market hits the front page of the New York Times, sell.”
Bernard Baruch ~ American stock market speculator (1870-1965)
Categories: Stock Market Timing Tags: buy low sell high, investing, investments, Investor, market timing, stock market, stock market timing, stock trading, stock trading tips, stocks, time the market, trading, trading tips, wall street, wall street craps, winning
stock market timing:
1. the process of selecting the best moments to enter and leave a person’s positions in the stock market.
2. the attempt to buy investments when they are about to increase in value and, conversely, to sell investments before they decrease in value.
3. one of the most critical decisions that a player must consistently do well in order to play Wall Street Craps for fast money with less risk.
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“Markets top not because of smart sellers it’s just an absence of buying. And conversely at markets bottom, markets bottom not because of smart buyers it’s an absence of selling. So that’s our whole thesis and that’s our approach to analysis.”
Tom DeMark Interview 1-20-2012 on Bloomberg TV’s “Street Smart”
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LINE UP YOUR CHIPS: Anticipate initial buying when the public sentiment is highly pessimistic and the market has dropped too far for too long. The duration and extent of a market decline will largely determine the degree of negative investor sentiment. Therefore, finding an accurate way to calibrate the degree of investor sentiment is of primary importance to timing the market correctly.
Here are some recognized investment services that can help you determine when investor sentiment indicates that the stock market is ready to rally: the American Association of Individual Investors (AAII), the Market Vane Sentiment Survey, Investor’s Intelligence’s US Advisor’s Sentiment Report, the NAAIM survey of professional market timing oriented money managers, and Sundial Capital Research’s sentimentrader.com advisory service. (Note: Each of these services has a different method for gauging investment sentiment or market psychology. A savvy investor must take a closer look at each of these services in order to determine which ones provide the most accurate clues as to the future direction of stock prices. My personal choice is sentimentrader.com advisory service which is updated after each trading day.)
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Comment: I view sentiment as a key confirmation of technical clues in the stock market. It’s most useful purpose is in locating ideal buy opportunities. But it don’t feel as strongly about its use in locating market tops. Top formations often take more time to develop than bottoms.
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“The worse you feel, usually because the news is bad, the safer the market is. The better you feel, usually because the news is good, the closer you are to a top.”
John Train ~ Author & Head of Train and Smith Investment Counsel
A Savvy Investing Take: A classic stock market axiom advises investors to “buy low and sell high.” But many overly ambitious investors have misinterpreted this message to mean “buy at the exact low and sell at the exact high.” Those who naïvely try to do this will eventually discover that this objective is rarely achieved. When it does occur, there is a huge element of luck involved.
So when it comes to timing your stock purchases, the wiser approach is to buy in a range where the market is: (1) undervalued in price, (2) unpopular to the masses, and (3) starting to make its move upwards. Time your purchases with a well-diversified mix of good stock candidates around these three key criteria, and you will have greatly increased your chances of winning at the stock market game.
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When it comes to buying stocks near cyclical market lows, successful traders must recognize and control their level of fear. Some of the best opportunities to purchase stocks at bargain prices come when the public panics or becomes hopeless after a period of relentless bad news. Become a savvy investor by learning how to separate yourself from the masses, in regards to your emotional response to the stock market’s action. That way, you’ll be ready and willing to buy when weaker players are selling out of fear.
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“He who knows how to be aggressive, and yet remain patient, becomes a receptacle for all of Nature’s lessons.”
Lao Tsu ~ Ancient Chinese philosopher