Getting IN and OUT of MARKET

One of the most confusing things for a stock market beginner is the question on when to get in and out of the market. Well, that is if he is already done grappling with the question on which of the thousands of available stocks in his chosen market to buy.

If an investor already has a bit of understanding about the stock market, he might agree that the most opportune time to get into the market is when everyone is scampering out of it. Not necessarily at the beginning of a market downturn, but at that particular time when most have already dumped their stocks and nobody still want to come back.

But one has to have enough guts, enough understanding of the market movements and a fairly long enough investing horizon to make money – if indeed he choose this time as his entry point.

I mean, why come in at the most depressing time of the market if you are not ready to wait until things finally get better before considering a decision to sell? Unless. Of course, the reason you go in is to short the market.

Things aren’t always as they seem, and this is true especially in the securities market. I said this because it is actually when everybody is scared of entering the market that is the best time to get into the market. And it is when everybody thinks that it is safe to get in that it is rather not easy to decide when to get in.


Hmmm… it would be really nice to buy at the lows, but how come this low portion here was high last time I look?

Why is it not easy to decide when to get in when everybody thinks that it is safe to get in? Because everybody is buying and chances are that the price of the stock that you want to buy has already been pushed beyond its fair value. Of course, there are always those valuation techniques that one can use in determining the present value of stocks.

Not that a beginner would be very comfortable using them in this venture.

There are other indicators like earnings per share (PE), etc., but they are all subject to opinions and interpretations that you cannot really be sure if you are doing the right thing at the right time or not. If that statement is not confusing enough, let’s try to muddle it some more.

We have one stock that has a relatively low PE ratio. One advisor would tell you to buy it because it is relatively cheap, while another advisor will dissuade you from buying it because that stock is probably not a “performer” and therefore it is not cheap. Now, is a low PE good or bad? Come to think of it, somehow, choosing your advisor is like choosing your stocks.

Well, at least, that’s as far as the fundamentals of the markets are concerned.

There is a group of people that do not care about valuations or PE ratios or anything that the fundamentalists care about. These people only care about the movements of the stocks. And they are watching the stock movements using their charts. These are the Technical Analysts.

The technical analysts will not tell you that it is now time to buy, because the prices are low. Instead, they will tell you to act on your “trading system” when they notice that the market is moving in favor of your strategy. That is, if they are your technical analysts.

Please do not ask which of these analysts have the better batting average. They all make good predictions and they all commit mistakes. The best that you can expect from them are educated guesses.

Educated guesses are, of course, better than having no basis whatsoever.

There people who believe that using technical analysis in playing the market is like betting against the odds. And there are people who think that studying the fundamentals of the market is a total waste of time. They argue and argue about whose strategy is better. They enter into some pissing competition and in the end – they still argue on who actually won in the competition.

It might be a good idea though to consider both fundamental and technical analyses before entering the market.


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