What Is Stock Market Timing And How It Can Help You Trade Stocks?

Stock market timing has to be on of the least understood terms in stock trading. Some people have even thought that stock market timing was illegal. Obviously this was based upon incorrect information.

Whether you are a short-term, intermediate-term, or long-term trader…whether you use fundamental or technical analysis or both you use stock market timing. Unless you buy a stock and hold it until death, you use some form of stock market timing…and even then you may have had to make the decision of the best time to buy the stock.

Stock market timing is simply deciding two things:

1) When to get in a stock

2) When to get out of a stock

That’s not to say that the decision process involved is not more complex than that. A trader will use their preferred analysis techniques to time the stock.

The whole purpose of stock trading analysis is stock market timing. If you use fundamental analysis you may see a company that you would like to buy Wal-Mart stock the P/E ratio is more in line with your analysis. In this case you would be using stock market timing because you would be waiting for the time when the P/E ratio was to your satisfaction.

A stock trader using technical analysis might wait until Wal-Mart stock price is greater than a certain moving average before buying the stock. This is an example of stock market timing as well.

Have you heard the saying, “Timing is everything”. It is of true of trading stocks as it is of many things in life. That doesn’t mean that you have to have some kind of super-human, split-second accurate timing to make money in the stock market. When you trade using stock market timing you are simply trying to maximize the return on your investment. Where would you have rather bought Google, at the $100 a share price or at today’s price?
So as you see stock market timing is a way for you to seek out greater than average returns when trading in the stock market.

Stock market timing is not some skill you learn overnight. Like any skill worth having it is important to study your craft and hone your skills. The most important stock market timing tip of all is to become as knowledgeable as you can before you actually trade stock.