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Simple Market Timing Strategies That Work - November 01, 2019

Zacks Equity Research

Being that unique investor who has the power to constantly time the market and continually make a profit is the dream for most traders and investors.

Indeed, even among those investors who don't try to consistently time the markets, many think they can still call a top and act opportunistically. It's at these times when an investor who speculates often sits on the sidelines and looks for better opportunities to put money into the market.

Lost chances by those who attempt to time the market is a common mistake among those who trade their own accounts. How many traders have lost investing opportunities by choosing to wait for the Industrial Products stocks to correct or reach attractive entry levels? Only for them to continue to move higher and achieve new all-time highs: Alcoa Corp. (AA), ABB Ltd (ABB), Hickok Inc. (CRAWA), Barnes Group, Inc. (B), Albany International Corporation (AIN)

Fear and greed often lead investors into behavioral traps since most investors are followers who react, rather than anticipate market moves.

Productive market timing requires three key parts: 1) A dependable sign for when to get in and out of stocks. 2) The ability to follow up on the sign rapidly and precisely. 3) The ability to be completely unemotional and trust in the signal no matter the current market environment.

Many investors think of market timing success as a win or lose proposition. But there is a less notable, rather straightforward, successful market timing approach that has been utilized effectively time after time by astute investors like Warren Buffet.

Rule 1: Never attempt and time tops and bottoms.

Surrendering the objective to time the tops and bottoms gives you the adaptability to benefit and increase your odds to secure profits over the long-term, even if your calls aren't always right.

Rule 2: Don't sell during small crashes - ride the storm out, or better yet, take advantage of the opportunity.

Warren Buffett has made an incredible piece of his fortune because of this basic standard. He benefits by focusing on the long - term and buying high quality stocks at a discount during large market corrections to profit down the road.

There is a key distinction between a small correction and a market crash. No matter what happens in the stock market, chances are that the stocks you own will eventually come back to their pre - crash value; hanging on to your original positions, or opportunistically averaging down, during market downs can be the shrew distraction to take. Warren Buffett takes this idea further by frequently going on purchasing binges when the markets turn, basically purchasing extra shares of his top stock picks at a major markdown and doubling - down on his very own recommendations.

A Risk Adjusted Trading Strategy Should be Followed for Your Retirement Assets

It's only human that many succumb to greed and try and game the system by timing the market. But, think about this: Nobel Laureate William Sharpe found in 1975 that a market timer would need to be precise 74% of the time to beat a passive portfolio. Even a slight outperformance probably wouldn't be worth the energy - and given that even the experts generally fail at it, market timing shouldn't be your exclusive investing strategy of choice, especially using assets earmarked for your retirement.

Actively trading for alpha, outsized, short - term gains through market timing and other high - risk trading strategies is fine with a small portion of your investable assets, but for your longer - term retirement assets, a "risk -adjusted focused" investment solution generally makes more sense.

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Alcoa Corp. (AA) : Free Stock Analysis Report
 
ABB Ltd (ABB) : Free Stock Analysis Report
 
Barnes Group, Inc. (B) : Free Stock Analysis Report
 
Albany International Corporation (AIN) : Free Stock Analysis Report
 
Hickok Inc. (CRAWA) : Free Stock Analysis Report
 
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