Why Market Timing

By Ahmad Hassam

If you have the penchant for watching CNBC daily, you will know that opportunity keeps on shifting from one market to another. What is market timing? Market timing is entering one market at the most opportune time and getting out when your profit targets have been met. There is always a bull market somewhere if you look hard. In other words if you look around you will always be able to find a market that is trending up or down that you can use to make money. Market timing maybe the trading method of the 21st century!

The world is moving from a North American and Eurocentric world view to one that includes Asia, South America especially China, India, Brazil and Russia. Power and influence is spreading to more places around the world.

This is enough to create opportunity for market timing. Internet has ushered in a revolution in the global financial system. Money gets transferred around the globe at the speed of light.

This is the new world where the ability to move faster in and out of trading positions and to trade markets that are rising or falling profitably is becoming increasing important to the long term investors. Dont forget the hedge funds when we talk of long term investors. Hedge funds have the skills and resources for market timing around the globe. The buy and hold investing strategy is losing its appeal. Does buy and hold work in todays market? Most say it does not.

Market timing is the act of entering or exiting trades at the most opportune times in any market whether it is stocks, options, futures, bonds, commodities or currencies around the globe.

Now if you can make money when the market is going up and when the market is going down, you have twice the opportunity to make money. Your goal in using market timing is to maximize your profit potential.

Market timing is about recognizing opportunities early on in any market. Moving into positions with well planned strategies and monitoring the progress on a frequent basis. Market timing is not day trading. Many people try to confuse market timing with day trading.

Market timing is about seeing the intermediate term trend which lasts for weeks or months. Market timing is close to swing trading and position trading. It can last as long as the trend continues in the market and getting out when your profit targets have been met.

In order to be good at market timing, you need to know how to trade in different markets. The good thing, most of the techniques are common. So if you know how to trade stocks, you can easily learn how to trade currencies or futures. Investors who can adapt to this new world are the ones who will have the best chances of success. What makes market timing one of the useful trading methods is that you can use the techniques to time stocks, bonds, mutual funds, futures, options, currencies, commodities or exchange traded funds!

Market timing requires knowledge of fundamental and technical analysis. With market timing, you can diversify your investment opportunities. Market timing is as much a state of mind as it is a combination of trading methods.

With market timing, you want to stay with the dominant trend. You want to swim with the tide by buying stocks in a rising market and selling or shorting in a falling market. Market timing also helps you decrease your exposure to risk. - 29866

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