The shortest distance between two points may be a straight line, but every investor knows that markets rarely move linearly. Each trend contains advances and pullbacks, driven by news, events, fundamentals, technicals, order flow, sentiment and emotion. Market timing seeks to navigate the risks and the opportunities these variables create.
Conventional financial market analysis is useful in determining the general direction of an asset’s trend but is often limited by the trailing nature of the underlying data. As a result, trends are typically confirmed well after key reversals have occurred.
Market timing, on the other hand, uses a variety of methodologies to uncover these areas of potential inflection in real time so as to optimize buys and sells and maximize investment performance. In essence, the former route is trend confirming while the latter is trend anticipatory.