Hidden Pulse

Stock market timing

Stock market timing

Stock Market Timing works if done properly

Many individuals and experts state that market timing is impossible.  The answer to this question is yes and no. We all know there are seasons in a year and we know roughly when winter, summer, fall, and spring will begin.  No one can predict the exact time the one season will transition into the next.  The same rationale applies to market timing.

If you are trying to predict the exact market turning points, then you might get it right once or twice, but overall your record will be dismal, it is an exercise in futility for the most part and best reserved for those who seem to have a deep desire to take on large losses.

market timing

Everyone, in general, knows when winter, fall, spring or summer will roughly begin. However, no one can predict the exact date summer will transition into fall. The same methodology can be applied to timing the markets.  Instead of trying to identify the precise Market top or bottom, we look for signs of bottoming and topping action in the market, which would correlate to spotting changes in the weather. This data, in turn, facilitates the process of determining how close one season is from transitioning to the next. Adopting this approach makes market timing a distinct and achievable feat.

Perhaps the first thing for humans to learn would be simple money management skills. After all, you cannot run without learning to crawl and walk.Researchers have demonstrated that humans are no better than monkey’s when it comes to managing money  (Kahneman, Santos et al.).  Kahneman asserts in his book, Thinking Fast & Slow that monkeys with dart board are actually better than humans trying to manage money on wall street.

 

Interesting quotes from a Stock market Timing Book

“People who spend their time, and earn their living, studying a particular topic produce poorer predictions than dart-throwing monkeys who would have distributed their choices evenly over the options.”

“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained…Our tendency to construct and believe coherent narratives of the past makes it difficult for us to accept the limits of our forecasting ability. Everything makes sense in hindsight; a fact financial pundits exploit every evening as they offer convincing accounts of the day’s events. And we cannot suppress the powerful intuition that what makes sense in hindsight today was predictable yesterday. The illusion that we understand the past fosters overconfidence in our ability to predict the future.”

 

For stock market timing to work, avoid the talking heads

In general, we tend to agree with what he has to say in regards to stock market timing, and it’s, for this reason, we hardly listen to the talking heads.  When one understands that the markets are nothing but a cesspool of emotions, the importance of understanding the mass mindset takes on a new meaning. The most important tool in our opinion is mass psychology as it can help one pinpoint the emotional state of the masses.  The focus should be on identifying what the masses are doing or going to do, and only then should the technical structure of the markets be examined. It is the masses that drive the markets and not the markets that drive the masses.  Understanding what the masses are doing is, therefore, imperative if one hopes to succeed in the markets. History clearly indicates that the masses are always on the wrong side of the equation as they either get in too late or overstay their welcome.

 

Why have so many failed when it comes to timing the Stock markets?

Why have so many failed when it comes to timing the Stock markets?

The reason most individuals fail is that they take a backward approach to the problem.  The stock market is treated as a separate entity. They try to find out what the market is doing, and then they attempt to determine what the crowd is doing or will do. When in fact, what they should be doing is looking at the crowd and then using this information to decide how the stock market will react.

A market soars to new highs or crashes to new lows because of the way the masses are interpreting the situation.  How can you predict something if you are not looking at the source? Human beings are the most illogical of all animals. Despite having the power of reason and logic, they are the only creatures on this planet that will go out of their way to make sure they are in harm’s way.

Technical Analysis (TA) is useful in spotting Symptoms of the Disease

Technical Analysis  alone is not useful when it comes to stock market timing. It is useful in spotting the symptoms of the disease, but it does not identify the cause.  To determine the cause, one needs to deal with the main driving force behind the market; emotions are the main driving forces in the market.

If we had to choose between TA and Mass Psychology, we would accept mass psychology. There is no standalone tool more powerful than understanding Mass behavioural patterns, at least as far as we are concerned.   But we do not have to choose as we have the option of combining the best elements of TA with Mass Psychology.

Mass Psychology the Missing Ingredient to Stock Market Timing

Understanding the Modus Operandi of the masses is key to being a successful trader, and we feel that it is probably the most important piece of knowledge when it comes to investing and trading.

To answer the question we put forward at the beginning; yes we believe that market timing does work when conducted in the proper manner.  Trying to time the exact bottom or top should be out of the equation.

Mass Psychology helps to keep you on the right side of the markets

Utilizing the most fundamental tenets of mass psychology, one could have easily sidestepped the dot.com bubble, the housing bubble, etc. At the same time, one could have jumped into the markets when everyone was panicking, examples are the crash of 1987, 2003, 2007, etc., on each of these occasions, the sentiment was either euphoric or extremely bearish. When feelings move to the extreme zones, the opportunity is usually in the air.

Would you have got out right at the top or opened positions at the absolute bottom? The answer is a resounding no. However, you would have walked away with solid profits and would have had the opportunity to purchase quality stocks at rock bottom prices.   Be wary when the crowd is ecstatic and ecstatic when the crowd panics.

 

Posted courtesy of TacticalInvestor.com

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AAPL

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date#NAME?        AAPL
IBM230120C00170000
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Market Update Stocks (Current price updated every 15 minutes)
SymbolEntry DateEntry PriceCurent PricePositionComments
HTLDJun 201917.1116.33Open1/3rd of a position 17.401/3rd at 18.90 and 1/3rd at 15.05
HAMar 202120.0513.62Open1/3rd of a position 24.90 and 1/3rd at 15.20.
CRSMar 202138.1741.87Open1/3rd at 38.34 and 1/3rd at 38.00.
FISVMay 2021106.73100.35Open1/3Rd of a position at 114.20 and 1/3rd at 99.27
BWXTMay 202158.4960.79Open1/3rd of a position 64.20, 1/3rd at 58.45 & 1/6th 47.10
AYXJul 202168.4240.44Open1/3rd 83.87, 1/3rd at 68.60 and 1/3rd at 52.80
LDOSAug 202190.33109.49Open1/3rd of a position at 96, and 1/3rd at 84.65. Sold half in may at 110.75 for a gain of 22%. Place a stop at 90.00
COUPAug 2021167.1361.15Open1/3rd at 249 and 1/3rd at 219.45, 1/3rd at 110.00 and 1/3rd at 90.10
TFSLOct 202116.8413.79Open1/3rd at 19.74, 1/3rd at 16.79 and 1/3rd 14.01
MGNIOct 202121.0310.68Open1/3rd of a position 26.04 1/3rd at 20.70 and 1/3rd at 16.35
KMBDec 2021131.2136.01Open1/3rd of a position
RGLDJan 202298.55110.67Open¼ of a position. Sold half at 144.30 in Mar for a gain of 46%.
KJan 20226273.07Open¼ at 63.10 and ¼ at 60.90. Place a stop at 60.00. Sold half at 73.50 in May for a gain of 18.5%
AMDFeb 2022107.6670.27Open¼ at 114, ¼ at 108 and ¼ at 101.
CPBFeb 20224352.99Open¼ of a position.
MSFTFeb 2022272.91245.12Open¼ at 300.60, ¼ at 281.05, ¼ at 257 and ¼ at 253
ASANFeb 20224513.51Open¼ at 57.00, ¼ at 43.20 & ¼ at 34.80
FIVNFeb 202289.164.43Open¼ at 96 and ¼ at 82.20
VALEApr 202214.3716.76Open¼ of a position at 15.84 and ¼ at 12.90
WMTMay 2022128.75149.89Open¼ at 133 & ¼ at 124.50
HALOJul 202244.0456.38Open¼ of a position
APDJul 2022237312.1Open¼ of a position
CFFNFeb 202111.68.29Open1/3rd at 12.40, 1/3rd at 11.22& 1/3rd at 11.19
BHEMar 202127.0228.09Open1/3rd at 28.98 and 1/3rd at 25.05.
TRIPMay 202136.9719.02Open1/3rd of a position 43.80, 1/3rd at 39.06 and 1/3rd at 28.05
MOMOAug 20217.95.74Open1/3rd of a position 12.80, 1/3rd, 9.60,1/3rd at 4.90 and 1/3rd at 4.40
CHPTDec 202116.3610.89Open1/3rd at 20.40, 1/3rd at 16.80, and 1/3rd at 11.90
GPNFeb 202212797.65Open¼ 136.90, ¼ at 126.00 & ¼ at119
HIMXFeb 202210.116.96Open¼ 10.27 and ¼ 9.96
GBTCMar 202223.18.76Open¼ 25.80 and ¼ 20.40
ETHEMar 202214.26.47Open¼ at 19.10 and ¼ 9.30
MJMar 202118.955.67Open1/3rd 20.55 and 1/3rd at 17.35.
TLTAug 2021130.85106.95Open1/3rd 145.80, 1/3rd at 131.20, 1/6th at 115 and 1/6th at 116.10
SAAAug 202126.5522.4Open1/3rd at 27.60 and 1/3rd at 25.50
TMFSep 202121.79.59Open1/3rd at 27.06, 1/6th at 17.10 and 1/6th at 15.60
ULOct 202153.151.17Open1/3rd of a position.
AFRMNov 202190.611.97Open1/3rd at 122.40, 1/3rd at 98.40 and 1/3rd at 51.00
WTWNov 2021224.16246.8Open1/3rd at 232.50, 1/3rd at 224 and 1/3rd at 216.00
XRTDec 202178.3264.93Open1/3rd at 91.50, 1/3rd at 83.25 and 1/3rd at 61.50
FINXJan 202226.819.45Open1/4th at 31.50, ¼ at 28.50 and ¼ at 20.40.
SGOLJan 202217.1116.97Open¼ of a position
TQQQFeb 202242.1520.82Open¼ at 56.10, ¼ at 45.00, ¼ at 41.50 and ¼ at 26.00
DEAFeb 202219.2515.24Open¼ at 20.20 and ¼ at 18
VZMar 202248.5736.89Open¼ at 51.55 and ¼ at 45.60
URAMar 202221.3719.49Open¼ position 23.30 and ¼ at 19.45
XBIJul 202273.580.59Open¼ position
BIBJul 20224859.35Open1/5th of a position
  Market Update Options (Current price updated on Mondays and Fridays)
SymbolEntry DateEntry PriceCurent PricePositionComments
IBM230120C00170000Mar 20212.80.19Open1/3rd of a position 4.50 and 1/3rd at 1.11. Sold half at 2.10 for a loss of 25%
KMB240119C00120000Jun 202217.721.63Open¼ of a position
VALE240119C00013000Jul 20222.93.45Open¼ of a position at 15.84 and ¼ at 12.90
QCOM240119C00125000Jul 202225.422.27Open¼ of a position
AAL230120P00010000Apr 20215.10.12Open1/3rd of a position
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Market Psychology: How the crowd always loses in the stock market?

Stock Market Psychology for Dummies: If you have common sense then Mass Psychology is easy to grasp If you understand how the mass mindset operates it provides you with an…
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