Effects of Market Timing on Stock Trading


Timing is very important to make the right decisions on the stock exchange or any other market, it is practically impossible to systematically place the right transaction at the best time. And there are risks if the timing of the markets doesn’t work or goes against you. In this case, the investor chooses to exit the market too early.

A 2020 BlackRock report, an investment management The BlackRock company shows a $ 100,000 stake in the S&P 500 from 2000 to 2019, and the variance of returns on investment when invested over the entire period rather than snagging a few positive days in the market. While investment returns may have been lower during recessions, staying on track has helped investments rebound as the market rallied while continuing to grow and compete.

If they are trying to get ahead of the market, traders should constantly monitor market trends to find the most profitable trades. In addition to being laborious, an active trading strategy could result in higher trading costs and greater tax consequences for investors.

Control your emotions

If you are not able to time the market accurately the right way, there may be other reasons why investors cannot take advantage of good times in the market, or do not act and trade ” buy low, sell high ”.

Throughout the year, the market fluctuates between high and low. It is common for investors to experience various downturns, whether it is a 3-5% drop, which occurs several times a year, or even a significant market correction characterized by a 10 to 20%. percentage decrease from recent market peak. The best stocks and isa uk stocks where the win rate is around 87 percent.

As the market collapses, investors are eager to see the value of their portfolio drop and decide to sell it and convert it to cash. At the end of the day, investors are doing exactly what they wanted to sell at a low price. Once they leave the market, they sit in the sand until they are confident to return to the market, usually when the market has already recovered, which means they are buying high.

For once, a stock has traded at a lower price than it was originally purchased and investors fall victim to the risk of investing, resulting in loss of capital.

Stay focused

All investors want to get the best possible return on their investment portfolio. Some might be drawn to the idea of ​​timing the market to achieve this goal. Being able to withstand the fluctuations that occur in the markets can be difficult to manage during times of turbulence. However, there are strategies for keeping investors calm, focused and focused.

Making sure your portfolio has the right asset allocation is key to reducing the risk associated with investing. Asset allocation refers to the allocation of your invested money among different asset classes or investment categories, including bonds, stocks, cash, stocks, based on your goals and tolerance. risk, as well as the time horizon.

The market is constantly changing and the asset class that performs the best this year may be the worst next year. By investing in various types of assets, investors often benefit from protection against market volatility. Being well diversified will also reduce risk as there is less chance that a single investment will ruin your entire investment. wallet.

Understanding why you have supported your portfolio through diversification and asset allocation will give you peace of mind and help reduce the need to be emotional and the need to try to synchronize the market.

Use the average dollar cost method

Investors can also get lower prices when investing by using strategies such as dollar cost averaging which involves spreading their purchases of funds or stocks over time and buying the same amount of money over time. regular intervals. If the market changes and changes, you will be able to buy larger stocks when prices fall and less when prices rise, which will help smooth the purchase price over time.

Another alternative is to rely on the expertise of a qualified financial advisor. Financial advisers can help you make plans to meet your financial goals, advise you on the right investments, and provide you with regular investment advice. Or you can learn more about online trading through different platforms. Social media is one of the best ways to earn free income.

Final words

Just like any other trading stock trade, you need to focus and concentrate fully. If you don’t give it proper time, you’ll never win. Plan well, educate yourself about trading if you are new to trading.


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