Copywritten by Equitrend, Inc. in 2006.
Many books and articles have been written about the pros and cons of active stock trading, also called "market timing."
Most pundits and so-called "experts" will tell you that timing the stock market doesn't work and is dangerous, and that the best and only way to invest is to "buy and hold."
But it's clear that this common belief is wrong. Here are the facts, based on my research and a lot of real-life experience.
If you want to time the stock market well, you need three important things:
A system that really does work.
- The patience to stick with the system long enough to make it work for you.
- The discipline to stick to the plan.
It's hard to do all three at once.
This is why:
Most ways to time the market don't work. Or, they don't work often enough to be true. Some will work when the market is moving, but they will get killed when the market is flat. The majority of systems don't work in every market.
Investors don't have the discipline to stick to a system that works. Once an investor finds a good plan, he or she needs the self-control to stick to it. Some people either can't or won't do that, which is sad. When they use their own judgement or gut feelings, they don't get the results they want or would have gotten if they had just followed the buy and sell signals.
Investors don't have enough patience to stick to their plan. Many investors are always looking for the Holy Grail, which is a trading programme that never loses. The truth is that no method will win every trade, and investors who don't have patience will end up jumping from advisor to advisor without any gains.
But there are a number of tried-and-true systems that can avoid these mistakes and time the market to make huge profits year after year. You shouldn't believe anything you hear or read to the contrary. Wall Street has a reason to fight against stock market timing because it threatens their business.
Investors can do one of two things. They can follow the common advice to "buy and hold" and hope for the best, or a modern investor can educate himself and find a timing system that works for him to protect and grow his wealth. There are a few tried-and-true options, but the worst thing you can do is listen to the experts who say that "timing the stock market" doesn't work.
