Three Types of Trading Analysis

Timing is Money

I often read articles stating that there are only two types of trading techniques; one using fundamental analysis and the other using technical analysis, but to be honest with you, I believe that there is third type of trading technique and that is timing analysis. Keep in mind that each type of analysis is completely different from the other and alone, each requires a completely different way of thinking, but timing analysis can bring the other two together.

Timing analysis is what really determines a trade's success or failure. I'm not talking about trying to catch market tops and bottoms, but rather finding the right moment in a stocks movement or pattern to enter or exit your trades. Timing analysis can be a stand alone trading technique just as technical and fundamental analysis can be, but all three techniques are most effective when used together. By using all three techniques, you can be wrong in the short term yet still make a profit so long as your timing is good.

Timing analysis works simply because of the way financial markets move. Efficient-market hypothesis states that financial prices always exhibit random walk behaviour. If you are interested in learning more about what random walk is click here. In short it is an idea that a mathematical path takes random steps (like a zigzag pattern). If you look at any stock chart, it almost never goes up or down in a straight line, THis is what makes timing your entry and exit so important.

Combining technical, fundamental and timing analysis into your trading or investing can generate some very positive results and I believe that it is definitely a viable investment strategy.

Trade well,

Dan