Market timing is any attempt to use past prices and other market-generated data to accurately forecast or prophesy future prices of securities or indexes, whether long-term or intra-day, consistently and persistently. It is based on various economic or stock market indicators, for deciding when to buy or sell securities. Other words Market timing recommendations are based on a Technical analysis of market data.
Timing Includes asset allocation, technical analysis, charting, momentum investing, and quantitative analysis using neural networks, genetic algorithms, artificial intelligence (AI), fuzzy logic, chaos theory or other non-linear techniques. Precisely because market prices are efficient integrators and anticipators of information relevant to security valuation, they also serve as high-quality inputs for reliable market timing models.
“Market timing has shown itself to be futile in every study ever conducted. The idea of market timing and the reality are night and day. The idea is very compelling. It presupposes you can be on the sidelines when the market goes down and in when it goes up. If you could do that you’d be richer than Warren Buffett. The reality is it leaves most people in the market when it’s going down and not in when it’s going up.”
Forecasting asset prices is a problem that has fascinated investors since the very advent of financial markets. Accurate predictions of the market movements imply fast and substantial capital gains. Attempts to forecast stock prices are numerous.
Timingstrategy provides investors with the opportunity to avoid major market price declines at the same time many argue that using any market-timing tool is a waste of time.
Every investor has his own market timing theory when it comes to making money in the stock market. Many technicians attempt to improve their performance by timing the market and adjusting their portfolio according to predictions about the market or specific sectors. Obviously, if investors can avoid weak periods in the market and participate in the strong, they can also experience superior returns over a buy-and-hold strategy. What is surprising is that studies show that investors can still outperform a buy-and-hold strategy, even if they don’t participate in the strongest times – as long as they escape major market declines.
Very often market timing sounds fine in theory but it seldom works in practice.