MARKET TIMING
TRADING & INVESTING TERMS
What is Market Timing?
It is a strategy in which traders predict the future market movements and make buying and selling decisions based on that prediction. Professional traders use economic data, technical indicators, and fundamental analysis to calculate the direction of the market. It is not definite that the market would move in the direction of prediction. This technique is used usually by day or swing traders. Market timing calculations are performed for both buying and selling. One of the key strategies used in market timing prediction is Supply & Demand Strategy. We will discuss this in detail in another section.
How do big institutions trade?
Financial institutions buy and sell in markets the same way buying and selling goes on in other businesses. The only difference is the product. They buy Stocks, Bonds, and other financial assets at wholesale prices, then mark them up and sell them at retail prices. Just like Costco buys their inventory at wholesale prices and sells them to the public at retail prices. Financial institutions do the same thing. Again, the biggest difference is the product. When a financial institution is hired to take a company public (IPO), they are often paid in shares of stock which they receive at deep discount prices. They then offer those shares to the public at higher prices.
How do Novice Traders trade?
Novice traders and investors typically make two key mistakes and there is a reason for it. They ‘think’ the markets backwards and don’t understand that how you make money buying and selling anything (buy at wholesale and sell at retail) is exactly how you make money buying and selling in the financial markets. Therefore, the two mistakes they make are as follows; 1 – They buy after a rally in price. 2 – They buy at retail prices where supply exceeds demand.
Learn to Trade like a Professional:
Professional traders and investors like banks and financial institutions focus on price when deciding to buy and sell in markets. Learning to trade like a professional means learning to identify when a market is on sale and when it is overpriced. Specifically, when price is at wholesale levels where professionals buy and when price is at retail levels which is where professionals sell. Wholesale price is where Demand exceeds Supply. Retail price is where Supply exceeds Demand. Learning to trade like a pro means learning to identify Supply and Demand on a price chart in any market and for any financial purpose.
