How to Time the Stock Market
How You Can Actually Lose Money in the Perfect Stock:
Consider the following scenario: you do your research and find the perfect stock. You know it is about to skyrocket and can't wait to get in for the ride. So you buy some shares and wait.
As you wait, the stock takes a little dip and you lose money, think you may have been wrong, and sell your shares. Then the stock skyrockets. You did everything right except time the market.
You jumped in premature and not only did it cause you to lose money, but it also caused you to miss out on the profits. So how do you time the market?
Technical analysis.
Technical analysis is the study of charts and psychological factors that greatly influence price movement. You can use price action and volume as an x-ray into a stock. The following examples will give you a general idea about how these concepts work, but keep in mind that you must analyze much more to get a clear picture of what the stock chart is really telling you.
One of these concepts alone is not enough to draw a conclusion, but lets get into some examples anyways: if a stock is making an upward move as its volume is drying up, then it is clear that the demand could be weakening (not in all cases). If a stock is making an upward move as volume is increasing, then one can say the demand is increasing.
If a stock is going down as volume goes up, then there is a lot of selling pressure. If a stock goes down as volume dries up then you can conclude that selling pressure is easing up. These are just very basic, general concepts and may or may not be true in all situations.
Each situation is unique and calls for unique analysis, but in general these concepts hold true. For a much more detailed description of all of the aspects of technical analysis and how to take advantage and profit from them, I must direct you to the books on the left or click on the "All Resources" tab at the top of this page.
Also, the best online tools available for technical AND fundamental analysis can be found at IBD. With their online newspaper, they provide you with the top performing stocks, stock ratings, analysis, research tools, stock screening, top industry groups, stocks being bought by Wall Street firms, stocks building bases, and even stocks that are currently breaking out of bases and headed upwards.
IBD is by far the best and most complete investing system available to the individual investor. Don't give your money to the Wall Street "pros" who created a financial crisis and don't even care about you as an individual. Get educated on the market and take charge of your financial future. You can beat Wall Street.
Knowledge is power. Read investment books from the greatest traders of all time.