Understanding Market Timing And How To Profit From It

There is money to be made in the stock market. How you go about investing, however, is totally up to you. Some investors are buy and hold types. This means they buy a stock, mutual fund or ETF and hold it for the long term. Other investors believe in market timing.

Their goal is to capitalize on the short-term swings of the stock market and make money over a shorter period of time.

Neither approach is wrong, but you do hear a lot of experts claim that market timing is a bad idea and you can’t make money over the long term by going with this investment philosophy. While the odds might be stacked against you to make serious money by market timing, you can make money.

In this post, I will walk you through how to time the market and make money in the stock market.

What Is Market Timing?

Before I get into how to make money by timing the market, we first need to have a clear understanding of what market timing is.

Market timing is moving in and out of the market using technical analysis. This could mean you study charts of certain companies and make investment decisions based on the movement of the stock.

Or it could mean you look at economics, like housing starts, consumer spending, or gross domestic product to make your investment decisions.

Whatever method you choose isn’t important. What is important is that you are constantly moving in and out of the market, trying to earn a profit.

Can You Time The Market?

Now that we understand what market timing is, let’s look at a few of the reasons why experts say it cannot be done successfully.

The reason most often cited is that the average investor doesn’t have the skill or the time to commit to timing the market. As a result, the odds of successfully doing this over the long term are slim.

I would agree with the reason. Most investors don’t have the time to devote to a successful active trading strategy. You need to be watching the market all day, every day if you want to make money long-term going this route. It is not something you do here and there for a few minutes.