This is a very important question to ask if you have the desire to venture in to the stock business. If you are new to the business it is of great importance for you to do research and to consult wisely on stock buying and selling before you join the business. It’s all about timing when it comes to buying and selling of stocks. Time determines if your investment will be worth it or not. There are different strategies that you can use to determine the perfect time to buy or sell stocks.
What Is Market Timing?
Finding The Best Time To Buy And Sell Stocks
Market timing is a strategy of predicting the future market price movement. Market timing is usually based on the technical or fundamental analysis of the market and the economic conditions. Most investors claim that this strategy doesn’t work hence they prefer the buy and hold strategy, which basically focuses on the buying of stocks and waiting to sell them in the long run. However, the benefits that come with market timing may be overlooked. Market timing concept focuses on selling of stocks when they are at the peak. Most people who use this strategy argue that stocks are predictable and one can predict the stocks using the two forms of analysis; the fundamental and the technical analysis.
Fundamentals And Technical Analysis
The Fundamental analysis focuses on a specific company and its operations, it can be used to find the best time to buy and sell stocks. It analyzes information like financial statements, asset allocation, sales, growth potential and debt structure. This information is vital as it predicts if the company has the potential for growth or not. The technical analysis on the other hand focuses on the historical prices of the stocks of a specific company. You have to compare the information from the technical analysis with other variables so that you can make a decision. Before you can use the market timing strategy to determine when to buy or sell your stock, you have to know that this is merely a prediction and there are other factors that can make a stock go up or down.
Buy Low And Sell High Strategy
This is one of the most used strategies out there in the market in order to find the best time to buy and sell stocks. The problem with this strategy is that it is very difficult to predict when the prices are high and when they are low. It is however important to know when and why stocks go up or down. To determine how the market operates you will have to know about the supply and demand concept. Once the demand goes up the supply goes up and vice versa. When it comes to stocks; when the demand of the stock is high the value will go up and when the demand goes down the value depreciates. So it is advisable for you to observe the stocks and buy or sell at the appropriate times.
Indicators Of Rising Prices
There are some indicators that you may use to know when the prices of the stocks are about to go up or when it is safe to trade;
- When there is an upward trending
- When there is a new high on increasing volume
- Steady increase in stock price
- When there is an outstanding financial performance
- When there are price breakouts.
Is There A Perfect Time Of The Day Or Month For Buying And Selling Stocks?
Most successful business people tend to disagree with the thinking that there is a perfect time of day or a perfect month that one can buy and sell their stocks. Well, there are some reports that say that there is a specific time that you may buy your stocks and profit from it. One report said that there are some hours of the day that are advantageous to you if you bought your stocks then. It reported that the best time to buy stocks is between 10 am and 12 noon and 2pm to 3 pm. The same report advised that people seeking to buy stocks should wait for the first half hour to give room for the overnight stocks to be sorted out.
In regards to the best month of the year, there is no specific month that has been reported to be safe to buy or sell stocks. However there are some investors that recommend buying of stocks during the month of November and selling the in the month of April. Remember this is just a predication and it may not work for you.
Indicators To Use To Determine The Best Time For Trading Stocks
There are some specific indicators that you can use to determine the best time to either buy or sell your stocks.
- Technical indicators; you may use the technical indicators which are designed to look at the price and patterns of a specific stock or an index. The indicators tend to predict the way the stock is trading over a long period.
- Fundamental indicators; these are indicators that determines the market value at a given point in time. The indicators may include unemployment rates, average home prices, commodity prices and many more.
- The other indicator that might be used is Tactical asset allocation although the indicators can be hard to use as they are constantly changing.
Different Types Of Stocks
Before you can decide on the best time to buy or sell the stock, you may find it beneficial if you knew the different types of stocks.
- Common stocks; these stocks are units of ownership that include voting rights at a shareholders meeting. These are the majority of all shares outstanding in a company. These stocks are usually traded under the symbol of the company’s stock.
- Preferred stock; this type of stock does not include any voting right. It has however benefits that can only be enjoyed by the shareholders. The preferred stock is traded differently than the common stock.
Tips For Choosing The Best Time To Buy and Sell
In conclusion, it is important to note that the stocks are unpredictable and it is hard to determine the perfect time to buy or sell the stock.
- Choose to buy the stock during recession; most of the companies trade their shares at a very low price
- Buy stocks from a company that was recently listed in the stock market; the new companies usually sell their stocks at a low price so as to attract buyers.
- Carefully observe the stocks to keep touch of the supply and demand curve.