Traders and timing in the share market

It is important to remember when time to market is to have the right twice: when you buy, and when you sell. If you trade frequently, you should be right twice every time. It is not easy and that’s why market timing is usually left to professionals.

Most financial advisors advise market timing, fans tend to make mistakes and get burned buying a high, shrieking when they see a drop in stock prices and then selling low. In fact, time to market is very much looking at the financial support of “savvy” and be considered along with day trading, to be almost akin to the four – letter word.

But if the market timing of such a stupid thing to do, why do so many educated, intelligent professionals do it? And why stock trading firms make buckets of money?

Normal day traders enter and exit the market based on educated guesses to where he headed equity prices. They use sophisticated tools for this, including many technical indicators, calls, puts, shorts and other financial instruments.

I’m going to share two of these instruments market timing with you: technical indicator Chamber of Commerce and “stop limit”, so it is easy to understand and easy to use.

Chamber of Commerce index of commodity channel indicator, or Chamber of Commerce, is designed to determine the price cycles in commodity prices. It is based on the assumption that commodities move in cycles, with ups and downs, the next interval.

Without going into the math behind this, suffice it to say that when you use this parameter to track specific actions, is considered the top of the pricing cycle, when the Chamber of Commerce is above 100 and the bottom of the cycle when it is below -100. In other words, Chamber of Commerce’s 100 shares is considered “overbought” (forthcoming fall in price) and the Chamber of Commerce -100 it is “oversold” (forthcoming height).

If you’re like me, it can be nerve wracking. Yes, you bought shares in its stock price was lower Chamber of Commerce -100 and intellectually you know that you need to wait until he leads the Chamber of Commerce 100, but who can say that I will keep?

Maybe she’ll go back down, then dives (which may happen by the way). Maybe she’ll go “sideways” (not really rise or fall, but was limping along in a very narrow range). Yes, eventually it will probably be able to rise above the Chamber of Commerce 100, but how long will it take?

Stop Limit One way to protect you against a sudden drop in share price is to set up a “stop limit”. It’s actually two things: the “stop” and “limit”.

I think that the stop as a way to stop you from losing money stocks decline in value. Stopping set included, the price at which you want to sell your shares should decline in value stocks.

You then set a limit that is included in the price at which you want your feet to become inactive stocks should fall in value below the stop price. Restriction is necessary because sometimes the stocks are very fast in price so quickly that your shares can not be sold at the stop price.

In this case, is that your shares will be sold as soon as the stock price reaches a level where you can find buyers, and this can sometimes be significantly lower than the stop price so low, in fact, that you can lose a significant part of your investment.

Let me give you an example to illustrate the stop limit. I once bought shares in DBA (exchange traded fund that tracks the prices of agricultural commodities) at $ 36 apiece. Subsequently, it has exceeded $ 37 and I was nervous, he can get back to set the stop at $ 36.50.

Due to the sharp decline in prices, and my shares, receipt of traded below what I bought them I set my limit price of $ 36.10. If the administrator has fallen below that level, my shares are not sold to obtain.