Timing System

Definition

A “Timing System” is a methodology to try to “time” the markets; the best way to “buy low and sell high”. Timing systems are often marketed by “stock gurus” who claim to know some market secret to making millions; other timing systems are based on strong technical analysis. The unifying factor of timing systems is that they are supposed to be a methodology one can follow to know the high and low points of a stock’s price within a given time frame.

Do They Work?

It is hard to tell if a stock timing system really works, but look at it this way; who is trying to sell it to you? By definition, a stock timing system cannot work if everyone is using it; you cannot “buy low and sell high” if everyone else is trying to buy when you buy, since many buyers and few sellers drives prices up.

Conversely, if one person is trying to buy when everyone else is selling, they will probably get it for a cheaper price. If someone is selling a “stock timing” method, are they profiting more from using their system, or just making money by selling it to other people?

Beginners generally should avoid market timing systems because it is very easy to get “in over your head”; all market timing strategies involve buying and selling at critical moments, which is both the highest possible point for profits AND losses. However, if you are able to build a strong background in technical analysis, the Kansas City Federal Reserve Bank has released a report of examples where market timing systems have worked well. Click Here to view.

Who Uses Timing Systems?

Timing systems are often used by traders who are fluent in technical analysis; analyzing chart patterns, knowing which macroeconomic factors most directly impact one or two stock’s prices, and hopefully make the right trades before the market as a whole. Again, all timing strategies are inherently risky; long-term investors should be more concerned with strong stock fundamentals rather than the specific minute, hour, or day to buy or sell a particular stock.

 

 

Book: Timing The Market: How To Profit In Bull And Bear Markets With Technical Analysts
Book: Spotting Price Swings & Seasonal Patterns: Techniques for Precisely Timing Major Market Moves