Market timing are the two most dangerous words in investing – especially when practiced by novice traders.
Market timing is the strategy of attempting to predict future price movements through use of various fundamental and technical analysis tools – and when used to predict trending moves, ends in disaster, and losses.
Many investors feel that market timing is the same as trend following and the two go hand in hand, they dont.
Trend Following and Market Timing
Trend Followers REACT to market movement and act on these moves when they occur.
Traders who believe in Market Timing think they can PREDICT turning points in advance and buy at a low or sell at a high.
This is impossible to do; no one can predict the market.
Market timing advocates buy low and sell high but this is not the way to make money from trend following.
The Real aim of Trend Following
To increase your chances of success in trend following you need to wait for confirmation of a move and for a trend to develop.
You are going to miss the start of the trend and not buy the bottom or sell the top, but this is hindsight.
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