What Is Market Timing?
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What Is Market Timing?
The goal of market timing is to avoid major drops in market prices and enhance an investment account’s value. Market timing attempts to gain higher returns than other investments with similar risks. It examines the directions of the markets and the forces affecting market changes.
Things To Know
- Market timing tries to predict the best times to buy or sell.
How to time the market
Market timing tries to predict the best times to buy into the market, be out of the market completely, or to sell short. If you buy shares because you think they will increase in value, you are taking a long position. When the market looks like it will decline, a market timer will transfer capital from stock positions into a risk-free interest-bearing account, or try to profit by selling short. Selling short is selling borrowed stocks, buying them back later (hopefully at a lower price than you sold them for), and returning them. Using market timing, investors hope to buy shares at lower prices than they sell them for, leading to a profit.
Use technical analysis
Market timing uses technical analysis to predict market changes. Technical analysis looks at price chart patterns and trading volumes to help investors decide when to buy or sell short.
