How dumb is market timing?

This is a discussion on How dumb is market timing? within the First Steps forums, part of the Reception category; I've had some recent success with market timing. With all the volitility I just pick some solid good dividend paying ...

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Old Nov 8, 2008, 7:40am   #1
 
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How dumb is market timing?

I've had some recent success with market timing. With all the volitility I just pick some solid good dividend paying stocks and put an order in to buy when the market tanks 15-20 percent. Then I immediatly put an order in to sell when the price goes back up 15 percent. I know I'm out the 5 bucks a trade commission but I'm making $ and I really don't see the buy and hold strategy working so well for at least the next couple of years. Maybe the next couple of decades. I'm trading on volitility. Somebody please tell my why this is dumb and I've just been lucky so far. Usually only own about 5 stocks at a time.
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Old Nov 8, 2008, 8:16am   #2
 
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On what logic do you base the statement of the buy and hold not working for perhaps the next couple of decades? That's a long shot at soothsaying.

Why do you buy when the market has tanked 15-20 percent? Would selling the retrace not make more sense and be less risky?
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Old Nov 8, 2008, 8:37am   #3
 
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Originally Posted by westernforce View Post
On what logic do you base the statement of the buy and hold not working for perhaps the next couple of decades? That's a long shot at soothsaying.

Why do you buy when the market has tanked 15-20 percent? Would selling the retrace not make more sense and be less risky?
Assuming we are in a global recession that will last a couple of years I kinda count on lots of ups and downs and sideways angling but not significant long-term movement up or down. We might be in a secular bear market as opposed to a cyclical one. In this forbiding case, we may see a 12-20 year sideways crawl with a war here and there to make things interesting but very little sustained movement up or down. I really would not be surprised to see us treading around 10,000 DOW in 2018. Or so my crystal ball tells me.

I'm new at this trading thing. I've read a lot and have been in a 401k for 12 years and even bought and sold a few stocks over the years but this is the first time I've done some really active trading. All the conservative investing stuff I've read says market timing is a fools game but I like the environment for it right now. The fact that I have no idea what a 'retrace' is should let you know just how green I am. I'll google it now.

Last edited by donj; Nov 8, 2008 at 8:47am.
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Old Nov 8, 2008, 8:54am   #4
 
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Originally Posted by donj View Post
I've had some recent success with market timing. With all the volitility I just pick some solid good dividend paying stocks and put an order in to buy when the market tanks 15-20 percent. Then I immediatly put an order in to sell when the price goes back up 15 percent. I know I'm out the 5 bucks a trade commission but I'm making $ and I really don't see the buy and hold strategy working so well for at least the next couple of years. Maybe the next couple of decades. I'm trading on volitility. Somebody please tell my why this is dumb and I've just been lucky so far. Usually only own about 5 stocks at a time.
So, you would have bought when the Dow was around 11073 and waited until it went back up to 12734, which it never did. Then, you would have bought again around 9973 (while still holding your 1st lot at a 10% loss) and will sell when it hits 11468. You would have bought another lot at 8477 by this time. It is now at 8943. What will you do next?
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Old Nov 8, 2008, 10:25am   #5
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@ donj Friend I have found myself in similar conditions . I can really put my feet in your shoes. I am only learning to better understand the market timings.
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Old Nov 9, 2008, 5:50am   #6
 
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Yeah, I'm lucky...

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So, you would have bought when the Dow was around 11073 and waited until it went back up to 12734, which it never did. Then, you would have bought again around 9973 (while still holding your 1st lot at a 10% loss) and will sell when it hits 11468. You would have bought another lot at 8477 by this time. It is now at 8943. What will you do next?
Um, no. I made it pretty clear that I've made some money. I didn't
specify when I bought back in but it was much closer to 9500. The
stock I chose first was DO and it dropped to my bid on October 8th. I
sold it 5 days later at a hefty profit. Very encouraging and a bit
lucky, don't you think? The next stock I bought was BP on Oct. 24th.
Sold on the 29th for, yet again, a hefty profit. I'm now rolling in
dough. On 11/4(Obama Day) I transfered a huge wad of cash to my
trading company from my checking account(been hiding since Kramer said
he didn't know any rich people that had ANY money in the market) and
put orders in to buy 5 different stocks at around 15 to 20 percent
lower then what they were when I placed the order.(not sure exactly
when that was but I know I picked up 4 stocks on 11/6 at good prices.
These where MEE, HPQ, NOK and GE. The GE play is treading water but
the dividend is so nice I can live with it. If they ever stop dealing
with terrorists and stop embarrassing themselves with NBC New's
unbalanced reporting this one may really take off. The P/E is
awesome. MEE is so cheap right now I couldn't resist. The Prez.
elect can badmouth coal all he wants but it doesn't stop the fact we
need it. I expect this one to really pay off in the future after
their legal troubles get taken care of. There's your HOT TIP of the
day youngster. NOK has a sweet dividend and HPQ makes a good product
and has a nice P/E ratio as well. Their computers will start selling
even better if MSFT ever fixes Vista. That operating system is a pain
in the ass and is the best advertisement for the Mac I have ever had
the displeasure of dealing with. I will unload these as soon as I can
make a 20% profit. The orders are placed. I wouldn't be at all
surprised if it happens Monday on a couple of them.

That's more detail then my question warranted but since you seemed
interested I figured I'd be more specific. Are you going to offer
some constructive criticism or are you going to continue to ridicule
my unscientific but highly effective(so far) strategy? My question
wasn't about how to pick stocks. I think I know that pretty well. My
question only dealt with strategy of utilizing the volatility and
selling at the top and buying at the low. Market Timing. Very dumb
according to the experts. I'm laughing all the way to the bank so
far, Jr. How's your portfolio?

dj
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Old Nov 9, 2008, 6:06am   #7
 
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1) there's nothing stupid about market timing
2) your sample size is too small to mean anything
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Old Nov 9, 2008, 6:44am   #8
 
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1) there's nothing stupid about market timing
2) your sample size is too small to mean anything
Thanks for the succinct input. I agree. This luck can not be sustained. If most of you guys are day traders then of course you don't think market timing is dumb. I don't have the time, interest or energy to keep track of more then 5 stocks at a time. I easily spend 2 hours a day researching what I have and monitoring the news. If an article comes out in the WSJ about one of my stocks or the industry it belongs to I get an email to my Blackjack pronto. Makes a little dinging noise every time. It's like gambling without the free drinks and cute cocktail waitresses. Ya'll know your addicts, right?
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Old Nov 9, 2008, 11:29am   #9
 
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Quote:
My
question only dealt with strategy of utilizing the volatility and
selling at the top and buying at the low. Market Timing. Very dumb
according to the experts. I'm laughing all the way to the bank so
far, Jr. How's your portfolio?
Ok, let me clarify. Your philosophy isn’t dumb (ie-getting the timing right) it is your (lack of) methodology which is dumb.
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Old Nov 9, 2008, 4:34pm   #10
 
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Ok, let me clarify. Your philosophy isnít dumb (ie-getting the timing right) it is your (lack of) methodology which is dumb.
Fair enough. Of course, I do keep track of what's going on and have reserves to sweeten the pot or stop loss if things get hairy. The criticism I hoped for and haven't gotten is a rebuke on the tax implications of so much trading combined with the gambling nature of what it is I'm doing. The little I've read so far about trend trading and different 'systems' or 'methodologies' basically comes down to guessing what other people are going to do before they do it and getting ahead of them with appropriate trades. When you have cases where the people 'in the know'(hedge fund managers) are dealing with billions of dollars instead of my measly 10's of thousands, it kind of negates my chances of success. Current political and economic turmoil combined with our instant information sharing system that is the www seem to have the market in uncharted waters. This implies to me that whatever system or methodology might have worked in the past probably no longer will. At least not for a while. Even BRKA has taken a hit and there is no one I have more respect for as a trader then Buffet. Maybe Bill Gross.

While this is fun I certainly wouldn't risk the amount of money I would need to to earn a living at it. I'll keep my day job. If you fellas have researched the history and success of your average day trader i guess you know that 90% of you are going to fail. You have to so all those rich hedge fund managers can pay off their rich clients. Good luck anyway. Regards, dj
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