Some people are naturals at making money at investing in the stock market. Some people have a stock market trading system built into their psyche, but they are extraordinary. However, most of us mortals, don’t have this ability. Most of us struggle and make a little money here and there and then lose a massive amount of money on one or two trades.
Investing is counter-intuitive
You cannot win at trading the stock market, based on your emotions. That is how most human beings trade. The professional traders know that you are trading emotionally, and they take advantage of that fact. Believe me, they aren’t trading emotionally.
So what is the average guy, with retirement coming up soon, supposed to do?
You have read many pundits that say that you cannot time the stock market. If you follow a stock market trading and timing system, you CAN time your stock purchases to your advantage.
You need something simple
The market is bullish. Or, the market is likely to go down. Or, who knows? Sell your holdings and wait for a trend to develop.. You have to be on the right side of the market. Never go short a rising market. Never go long a market that is dropping. These principles sound so simple, who would ever disregard these rules? Many people do. I know I have.
The trick is getting in on a trend. You don’t care whether it is an up-trend or a down-trend You have to catch the trend.
Will you get into the trend at the very kickoff of the trend? Almost certainly you will not. But you will get in timely enough to get a good bit of it. Will you get out in advance of the trend changing direction? Perhaps not. But, you won’t be holding, and hoping, as most or all of your profits vanish into some professional trader’s pocket.
When the market is going sideways
Sell everything and mark time – this is very hard for some investors, by the way. Many people are so anxious to make money, that they assume that they have to be in the market most or all of the time. They over-trade, and get a little haircut here and a little buzz cut there, as the market vacillates back and forth. In a short time, if they do this long enough, they end up bald.
Does a good stock market timing system get it right all the time? I have never found one. But there are a number competent stock market trading systems available that make more money than the average person can make.
If you are capable to get the timing services trade dates, you will consider at them and think, “Well, I could have done better than that.” Indeed, you most likely couldn’t – or you wouldn’t be reading this article. You might consider the trades and think, why didn’t they get in there? The market was going up there. They would have made a lot more money if they had gotten in earlier. If you think like that, you are suffering from 20-20 disease. Or, perhaps, you should be renting out your time machine, or crystal ball instead of investing in the stock market.
Some strategies just don’t work
Stock market timing services are not precise. Let’s accept that fact. In fact, market advisers have stipulated that “buy and hold” is the way to invest. Well, let’s look at the last 10-years. You would have lost about 27% if you bought and held. If you had purchased almost any mutual fund, you probably would have lost almost as much. Check out several of our other blog posts that consider these facts.
Perhaps you should just “dollar-cost-average”. That means you buy a fixed dollar amount of stock every month, or every year whether the market is going up or down. That hasn’t worked in the last 10-years either.
How about somehow finding a stock that is going up and keep buying more shares of it as it goes in your direction. Believe me, that doesn’t work either. Does Government Motors bring memories back? Does Broadcom or Cisco do anything for you?
What about following the market pundits?
They are TV all day long. There are countless financial blogs. There are services, I won’t mention any names, that advertise poor, low volume, stocks to buy. If they have multitude of subscribers buying, the stock, that stock will go up. Then, of course, they sell before you do. You are left holding a stock that only the market maker will buy from you.
I’ve got it. Buy a stock that is depressed and is at the bottom and buy it there. If you have been investing for a while, you will have learned this education, too The point at issue is this. Where’s the bottom. Stocks can and do go down lower than you could ever imagine. They can break support and go down in great, gut wrenching strides. If you buy at what you think is the bottom, you might find that you are now a “long-term investor”. You convince yourself that If you hold it long enough, the stock will have to come back up – sometimes it doesn’t come back up.
Money Management Isn’t that what the old Merrill Lynch, advertised as their accounts – money management accounts. I think I had one of those accounts, many years ago. That is not what we are going to talk about, here. If we are going to have a stock market timing & trading system, we need to exercise money management.
We desire to know when to “take the money and run”! We cannot go into all the details in this essay, but to give you the basic principle, you have to take profits as the underlying stock, or broad-based index is moving in your direction. When you have the precise amount of profits, which is defined by the money management system, then, you should pluck them. Sell your holdings and put the money into your account, before the market reverses its direction and takes your profits away.
If you do follow a defined, tested, money management technique, you will find that you don’t have to be racked as much draw-down. Draw-down is defined as how much you are willing to lose from where you got on board, before the investment goes back into the positive direction – or, in many cases, you discontinue the trade. However, if you take the profits when the trend is very likely to end, you will make your accounts fatter.
You wish to gain safety by diversification. You have to have a simple to comprehend stock market trading system that doesn’t take a great deal of your time. You have to have a way of discerning whether the market is bullish, bearish, or should you sell and be out of the market for a while. You need to know when and how to take profits as they show themselves. And, finally, you need to know doesn’t work.
It sounds too good and simple to be true, but it is real. You can make money in the stock market if you exercise a stock market trading and timing system that follows the above mentioned rules. Take a look at our actual trading data using the SPXTimer with its included money-management system. You can trade bullish and bearish markets – even in your