Re: Market timing
Hi goode,
I must apologise to you if you perceived my questioning as confrontational, this was not my intended purpose, nor am I interested in your specific methods/rules you use (again this statement is not meant in a derogatory nature). Your initial response only serves to further highlight my initial question. Strong academic evidence published over the last 30 years by numerous investigators has shown that all forms of technical analysis subjected to testing have shown to offer no better returns on investment than a simple buy and hold approach. As I understand it, TA is based on analysing past market/stock movements, yet it has been convincingly shown that past market prices DO NOT influence future price movements (the so called random walk effect). As the weak form of the efficient market hypothesis states – past price movements of a stock do not offer any predictive value over future price movements.
You state that you use a variety of data sources in making your decisions – “Market Timing, Various Tech indicators, trendlines, news, futures, candle patterns, personal knowledge of the stock, history of the stock”. The semi-string version of the EMH states that no publicly available info is of use when attempting to ‘beat the market’. This is because all publicly available info is immediately incorporated into the stocks/markets price (the so-called efficiency of the market). Thus, basing your buy/sell decisions on the info you say you use would offer no advantage over a simple buy and hold strategy, i.e. capitalising on the known long-term upward trend in stock market prices and the dividend returns offered by these stocks.
Of course all this does not mean that in the short term one cant beat the market averages by a goodly sum. But over the long term, just like in poker, the results of any method employed will regress to the mean, and for the techniques you say you use, academic evidence would suggest that the mean is below the result obtainable by a simple buy and hold strategy.
Once again, my intended purpose is only to stimulate debate, not to criticise.
Regards
graeme
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