Market Timing Strategy

Do not rely on seasonal fluctuations in market timing! Many interested parties for optimal market timing strategies rely on pure logic. It means that there would have to be, for example, petroleum prices due to the seasonally fluctuating welfare oil demand a typical rhythm of the courses. But is that the case? A glance at the charts of the Stock Exchange does not confirm this hypothesis.

Above all, a look at the oil prices in the summer months of the year proves the opposite. The early and sweltering summer should have caused oil prices to fall massively, but they did not. What was responsible for the above-average high oil prices? The causes were the ideal economic situation, the OPEC decisions and the sanctions that the president had imposed on other countries. Anyone who had speculated on market timing for lower oil prices in the summer of 2019 was, therefore, on the losing side.

Development of oil prices in dollars

Market timing for investments in shares is just as tricky. A perfect recent example is a Chinese company Huawei. The technology group showed a positive development and would have been the right choice for market timing strategies in spring 2019. But the situation changed abruptly when the US President imposed a ban on cooperation for American companies. In mid-June 2019, a giant phone company officially announced that this would result in a drop in around 30 percent sales compared to 2018. Within a few hours, the value of the company’s shares collapsed significantly.

Investors who wanted to profit from the market timing and did not react quickly enough were faced with massive losses. This example alone shows how risky market timing strategies are. A single political decision can bring about profound changes. Unpredictable events make optimal market timing impossible.

The ideal time to invest in the stock market is usually determined by technical chart analysis. Based on past performance, investors derive the most likely trends for the further development of stock prices. However, such tendencies can change within a few seconds without any sign of change. This makes it so difficult to determine the ideal time of entry and exit for market timing based investment strategies.

This is also very impressively demonstrated by an example from the past. After New York on September 11, 2001, there were “rollercoaster rides” in stock prices and exchange rates on the stock exchanges, which is why trading was even suspended entirely for a short time. Anyone who held US dollars in his or her portfolio at that time suffered severe losses in value. The DAX, which was already in a downward spiral, also suffered heavy losses but recovered quickly.

In the first few hours after it, the index’s collapse caused a loss in market capitalization of around 65 billion. Those who sold their shares in the hours and days after the attacks are likely to have been massively annoyed later on. In the late fall of 2001, the index almost reached the level it had been before the attacks in New York. Here, sticking to the “buy and hold” strategy would have been the much better decision.

Market timing strategies require an immense amount of time.

The range of factors influencing the development of shared values and exchange rates is much more comprehensive. This is the main reason why profits from market timing are associated with an immense expenditure of time. When necessary for the observation and evaluation of all data to the factors of influence, entrepreneurs cannot pursue their actual business activity. This results in a loss of sales and profit in their own company. They often exceed the gains that can be achieved with market timing investment strategies. Therefore they are usually not worthwhile, especially for small investors. Also, fees are payable for each transaction, even though there are now deposit accounts with a flat rate for a certain number of trades.

What political factors influence market timing?

Many types of political decisions make perfect market timing virtually impossible. A subset of the influencing factors is the conclusion and termination of trade agreements. For example, many companies suffered from the punitive tariffs that the leadership imposed on imports to support the U.S. domestic market.