Stock Market Timing Requires A Market Based Strategy

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Many people romanticize the stock market as though it were a glamorous international casino where iron nerves and intuition make poor men into millionaires. In this version of the fairy tale, striking it rich is all about somehow figuring out what other people don't know, buying low, selling high, and then buying a yacht. People who are new to the trading game will save themselves a lot of time and heartache if they immediately internalize one important fact: try to predict the future and you are bound to lose.

Because the stock market goes up and down based on opinion, it operates separately from any rules of logic. Instead, the market moves because of human perception. Because vast sums are involved, emotion comes into play and logic goes out the window. Investing your savings on a hunch is like betting it at the craps table: the house usually wins. If you need proof, think of it this way: if the market could be predicted, everyone would know exactly when to sell and when to buy, and there would be no stock market.

We have now established that the stock market is unpredictable. Does that mean it is impossible for normal mortals to make money? The answer is no. It is possible to make gains on investments, but instead of making predictions about the unpredictable, the smart investor will base their methods on stock market timing. The crucial point here is that instead of trying to find the next breakout stock before it bursts onto the scene, a higher rate of success will be achieved by investors who use a stock market timing strategy based on market realities.

Gambling on the stock market will usually only lead to second guessing and indigestion. A much more reliable approach is to apply a method to proven stocks like the 30 companies in the Dow Jones Industrial Average. By making calculations based on past performance and automatically buying and selling when certain criteria are met, the stressful guesswork is eliminated from the equation and risk factors drop significantly.

Nowadays, the nature of trading has changed significantly due to computers. The speed and flexibility with which data can be crunched means that automating the process has never been easier. When using computers it is possible to chart existing trends and then calculate what events will signal a change in that trend. An important note here is that not all programs are created equal and effectiveness will depend on what parameters a given program uses.

A good program will use effective calculations to analyze real time stock market information against a predetermined set of data. When certain indicators are discovered, the system already knows what to do. By using stock market timing as a guiding principle, annual returns are much more stable, sometimes as high as 50% or more. Obviously, there are no guarantees, but by removing the guesswork and following a method, investors can forget the antacid tablets and rely on proven science for more reliable returns.
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