We invest in the stock market by buying at a low price and selling at a high price. But we all know a simple truth. Why do so many people lose money in the stock market? Because the price of the stock moves up and down every day over time. Without systematic knowledge and long-term experience, it is difficult to judge whether the stock price is high or low at a certain point in time. Therefore, the choice of time point is crucial in stock investment. This paper will introduce 2 basic methods and principles of stock timing.
One method is to analyze stocks along the timeline. This method is to find the patterns from the historical year and month. Some investors must have heard of the words “ten-year form”, “four-year phenomenon,” and “October effect”. This is a rule discovered by stock investment experts through analyzing the two hundred years history of the US stock market. The underlying reason for this rule may be the implied economic cycle, monetary policy, or political cycle, which is still uncertain. But what experts can confirm is that this law repeatedly appears in the stock market. With such a time curve to choose the investment point of the stock, you will at least have a higher probability of avoiding the significant risk in the investment. In particular, professional stock investors can significantly improve their investment efficiency by diversifying their investment and catching the correct time points.
For ordinary stock investors, the first method is easier to understand and master. For professional investors with rich investment experience, the second timing method is essential. The combination of the 2 ways can make your investment more rational, less differentiated, and more profitable.Another kind of timing method is to use some indicators to determine the timing of entering the stock market. There are many kinds of technical indicators about stocks, including dividend yield, yield forecast through bonds, stock market financing balance, zero short-selling ratio, investment adviser bullish ratio, etc. The principles behind these indicators are different. Some measure the value of stocks, some measure investor sentiment, and some monitor whether there are sufficient over-the-counter funds. However, these indicators are supported by statistical tests to verify the effectiveness of these indicators. The difficulty of this analysis method lies in the complexity of index types. Some indexes need investors to master certain theoretical basis of finance and accounting to understand.