Many investment experts divide the stock market into two types of investor purpose. There are the long-term investors, there looking for companies that gain and lose value on a macro level, and an equally large amount of investors there for short-term bumps, drops, and shifts in value. Both have a common goal – maximizing their returns – but the two groups go about it in very different ways.
The first waits out the market, looking for companies that are likely to innovate in the coming years, either through technology or an innovative business model. They seek out companies with potential for rapid, massive growth, ignoring others. The day-to-day of the stock market doesn’t bother them; it’s not something to be completely ignored, but it’s rarely a complete focus of their trading activity.
The other side, on the other hand, lives for the day-to-day. Their routine, and in fact, all of their big investments, are tied to microscopic drops and increases in value throughout the stock market’s day. It’s an understandably risky way to operate, which is why many of the day traders working using an instant-results model are just as likely to lose money from their trades as they are to make a profit.
However, many smart day traders don’t see their job as a day-in, day-out search for opportunities in small changes. In fact, many of the smartest don’t view it as much of a ‘search’ at all, preferring the idea of a carefully-timed prediction. In many cases, these stock traders build their empires around a stock market timing system, allowing them to better capitalize on short-term changes in the market.
We’re going to look at some of the more popular stock market timing systems, and how they have assisted traders – both high and low-volume – in maximizing their returns from the stock market. From mega-smart ETF market timing services to independent ‘bots’ designed to quickly scan over the major exchanges and report changes in real time, these are the leading stock timing systems.
For the most part, stock market timing systems operate not with the goal of entirely maximizing returns for investors, but beating out the returns offered by either following the market precisely, investing in large ETFs (exchange traded funds) or using other low-risk investments. It’s rare and highly difficult for a timing system to predict every top and bottom – only the big, lucrative ones.
For this reason, it’s not worth investing in a stock market timing system with expectations of it producing big gains on every trade it suggests. Doing so is likely to leave you disappointed, as many of the most successful timing services fail to meet this difficult goal. However, if you are looking for a service that improves your trades exponentially, a timing system is a way to do it.
There are three different trade cues, which are used by almost any market timing system. The first is the well-known ‘buy and hold’ strategy, in which the trader purchases a stock with few intentions of selling it in the near term. This strategy is generally employed when the system discovers stock with long-term potential for growth, or perhaps an ‘undiscovered’ stock that’s undervalued by the market.
The second cue is ‘short’ – a stock market classic that anyone with financial experience will know fairly well. Shorting a stock is thought of as investing against it, rather than the standard methods, which entail investing in a stock. The trader borrows the stock from his brokerage, for a fee, and proceeds to sell it on the market, buying it back when its price is lower and pocketing the margin.
This is a fairly risky strategy, yet one that can pay off massively for a smart trader. Stocks are often valued significantly more highly than they should be, either by over-demand due to exposure, or an overwhelming investment bubble in a company or industry. Savvy investors can capitalize on these moments using the short maneuver – one that’s frequently recommended by timing system software.
Finally, there’s the ‘hold’ cue – one that asks the buyer to relieve all of their stock holdings for any one particular stock, and instead keep their assets in cash. This position is generally taken when an individual stock is unlikely to pan out as an investment, yet isn’t worth shorting due to the limited projected drop in value. In either case, it’s a stock that’s neither worth holding onto or shorting.
This is just a sample of the type of guidance provided by stock market timing systems. Many also offer analysis and opinion beside their cues and instructions, allowing traders to weigh up the best options based on expert analysis. Many more use projected results to simulate where a stock could move in the market, allowing many traders to plan for both the short-term and the looming future.
While stock market timing systems are far from an investment necessity, they’re a useful service for investors that’s rarely a harm to your trading. If you’d like to gain a new insight into the market – an alternative lens, so to speak – it might be a sound idea to invest in one. However, remember that it’s up to you to capitalize on their information and analysis – you remain your only market influence.