Stock Market Timing - Making the Most of Your Money

FinanceTrading / Investing

  • Author Green Smith
  • Published July 31, 2010
  • Word count 406

Even though there are people who will tell you that "buy low and sell high" is the only stock market strategy you'll ever need, it's safe to say that for the beginner, and even this simple adage can seem quite confusing. It's all well and good to say that you're only going to buy stocks that are priced reasonably with the plan of selling them as soon as there's significant growth in value, but how do you know when the moment has arrived? It can be difficult for inexperienced traders to know when the lows and low enough and the highs are high enough if they've never learned about stock market timing.

If you'd like to learn more about stock market timing, and how it can be used to make you a more successful investor, you first have to grasp the fact that the stock market is constantly in flux. While you might thing that these fluctuations are unnerving, and to be weathered with which knuckles, it's important for you to know that these price movements are a natural part of the market's structure, and without them, there wouldn't be any opportunities to make money in the first place. Although they might first appear to be chaotic, these fluctuations are actually following a four part cycle that constantly repeats itself.

There are four basic phases of stock market fluctuation, referred to as accumulation, mark-up, distribution, and mark-down. It's possible to determine which phase of the cycle a stock is currently in, and use that information to determine whether stock market timing would suggest that you purchase, sell, or simply hold onto your stock while the pattern completes itself. Accurately analyzing the market is something that technical analysts strive to do on a daily basis, and it can take years before you're confident in your skills.

Valuations during the accumulation phase are considered to be very attractive, and in general the market is considered to be bearish at this time. The appearance of the mark up phase is signaled by general market stability, coupled with some price growth in the market. The next phase of stock market timing is the distribution phase, and this is when the tide starts to turn away from the buyers and begins to favor the sellers. Next is the mark-down phase, which is when those who didn't sell during distribution realize that they have held on to the stocks for too long.

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