What is Market Timing?

Market timing is an attempt to predict the possibility of a future trend development of a tradable security. In technical analysis market timing uses past price behavior, past volume activity and other market-generated data to forecast and predict future prices movement of securities or indexes with certain degree of accuracy. Market timing is involved in all types of trading starting from long-term and finishing by intra-day scalping. In case of fundamental analysis market timing involves analysis of various economic and stock market reports and indicators to make a decision whether to buy or to sell securities. In general, market timing predictions and recommendations are based on analysis of market data and this analysis could be fundamental or technical or combination of both.

Currently there is a big variety of the market timing models which could be based on the analysis ofasset allocation, on technical analysis that may involve charting or it could be solely based on the processing the data. I may use quantitative analysis using neural networks, artificial intelligence (AI), chaos theory, fuzzy logic, and or other  techniques. Volume and price data are the most important factor in any type of analysis because they directly reflect trend, liquidity and volatility. Timing models that involves volume and price analysis (at least partially) may help to build a reliable trading system.

When building a market timing system you should be careful as with the possibility of reward (profit) comes the risk of loosing and the greater the possible profit the greater the risk is. It is not an easy task to time the market - if it would be easy then everybody would be a winner. You have to consider a stock market as a battlefield where you are alone in the dark and trying to find you way. Those who win on this battlefield at the end will take money from those who lost. So, do your research and be patient. The more time you spend studding and polishing your timing system the bigger chances are you will become a successful trader.

Forecasting prices is a question that has attracted investors since the very beginning of financial markets. The more accurate your predictions of the price movements are the faster you may achieve your financial goals. Every trader has his own way to forecast a possible future trend. Every successful trader has his own trading strategy which was developed over years of studying and testing.

Well developed timing strategy provides traders with the opportunity to avoid major losses, to protect the investments and at the same to provide stable (not necessary big) stream of additional income.