Picking your timing when playing the share market

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The stock market delivers or strips value from shares because traders do not synchronise their views on when to get the best value out of a trade. So, picking the ‘perfect time’ to buy or sell shares will vary among investors, depending on the strategy they choose.

Share traders subscribe to various schools of thought on when to duck in and out of the market. There are:

  • Those who sell, sell, sell when the market is dropping in order to minimise further losses
  • Those who sit tight, riding out the volatility in the belief that value will eventually return, or they will hold because they are in it for the long term
  • Cashed-up types may buy up stocks whose value is plummeting because they see them as bargains that one day will regain their former glory
  • Those who ‘take the profit’; that is, sell when they judge a share price has firmed so much it is unlikely to grow any further.

Short-sellers (those waiting for a stock to go ex-dividend), day traders, chartists and even those relying on computer algorithms to automatically deal in shares will all have their individual method of calculating their timing.

It is virtually impossible if you are not experienced to know exactly when to trade. On its Choosing Shares to Buy web page, the Australian Securities and Investments Commission warns that an understanding of economic and market fluctuations is a key starting point.

Online broking sites may be convenient, but if you are new to trading, it is still worthwhile to subscribe to a formal broking firm whose analysts publish guidance. They read and interpret all sorts of data produced by companies, often have a direct line to their chief executives and a good feel for what economic factors are influencing the market at a given time.

The financial pages of newspapers and many specialist websites publish the opinions of stock market experts and some of them write recommendations for dealing in specific stocks.

Here is a round-up of what some of the most popular investment experts have to say ‘off-the-cuff’ about share market plays:

  • Scott Pape, The Barefoot Investor: You need to ask yourself this question:  “Knowing what I know now, would I buy (these) shares today?” If you wouldn’t, then sell them. If you would, keep them. It’s that simple.
  • Marcus Padley, Marcus Today: Asked by a reader when they should sell shares, he responded: “When you find yourself celebrating the rise, press the button.”
  • Warren Buffett, Berkshire Hathaway: We continue to make more money when snoring than when active. … You simply want to acquire, at a sensible price, a business with excellent economics and able, honest management. Thereafter, you need only monitor whether these qualities are being preserved.
  • Olivia Engel, State Street Global Advisers: An award-winning stock picker, whose  quantitative fund management style relies on computer modelling, Ms Engel  explained: “We do not look into the eyes of company executives and ask ourselves if we believe they can turn the company around, or deliver on their promises … the numbers do not lie … we are simply trying to codify investment intuition into something we can calculate objectively.”

The Australian Securities Exchange runs seasonal share market games throughout the year to teach novice investors some tricks of the trade using virtual money. It is free to play, and outperformers can win cash prizes of up to $2000. To register for the next season, which kicks off in February, visit: game.asx.org.au.

Have you ever made a killing on the share market and, if so, what strategy did you use? Do you believe there is a right or wrong way to play the stock market? Care to share your stock market secrets?

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Written by Olga Galacho

25 Comments

Total Comments: 25
  1. 0
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    You buy when shares are bargains and sell when they are expensive.

    Learn to read the charts and it so much easier to do.

  2. 0
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    Like all decisions in life, 20/20 hindsight makes a difference. If a decision is made with all known facts available then that is the correct decision. Any unknown facts that could not have been accessed are irrelevant. Most people selling shares have a figure which they want to achieve so to sell at that figure is a satisfactory outcome.

    • 0
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      You never know the real facts but if you can read the charts you will know where the smart money is going.

    • 0
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      OM – you miss the part about the big end of town getting in on the ground floor and getting out when the game is almost up. They are well advised, do not panic and make sound decisions.
      Of course sometime the unexpected gets them too. So why do you think Kevin Rudd won the 2007 election and why did Murdoch back him when the GFC came months after the election? Luck?

  3. 0
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    There’s 2 types of money making that I call “the bludger’s profit” ….. (1) property (2) stock market. Both are just gambling.

    Why “bludger’s” profit? Because any profit you make MUST be because other people LOSE money. You’re stealing their money with your gambling. How is that so? I’ll give a simple, basic example (otherwise it would take me 100 pages to fully explain the many intricacies)…… if you buy a property or a stock at a low, bargain price and then 6 months later sell it at an over inflated price it means you are “legally” stealing money from the buyer. You sit on your rear for that 6 months, take a gamble that prices will rise, and when they do you sell to the sucker who is prepared to buy, who in turn is hoping another sucker will buy from him later on…. and eventually along the chain some of the people lose money BIG TIME. This means you are a bludger taking advantage of other peoples’ stupidity.

    This principle is what our financial system is based on; it’s lauded and applauded. Yep, the bludgers in a position to accumulate the bludger’s profit are laughing all the way to the bank. Whereas the people who actually “work” for a living, in other words people who get their money from the drains they dig, the houses they design, the food they sell, the diseases they cure, the scientific discoveries they make, the buses they drive etc etc etc….these people are the “real” workers and contributors to society.

    It would be better if the stock market didn’t exist and it would be better if ALL “residential” properties had their values strictly controlled by government regulation. Then people could get on with the productive activity of actually “working” for a living, instead of trying to rely on the bludger’s profit.

    • 0
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      What your are really talking about is inflation and the economic concepts of supply and demand. Even those who work take advantage of these. They sell their labour to the highest bidder and get work in areas where that work is wanted. So even workers get your bludger’s profit.

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      I don’t fully agree with you Jim B. Why do people sell property/shares in the first place to allow some “bludger” to sell later at a profit? What did the first seller use the money for? Did the first seller actually lose on the deal? I also dispute the term “over inflated price” as most properties and shares are sold at a market value which is the price that someone is willing to pay as they consider it good value.

      Not all deals generate a profit. I recall a certain deal where Allan Bond had to have Channel Nine and paid $1B to Kerry Packer. It was later sold back to Kerry Packer for $200M. Can you explain how Packer, as the original seller, lost out on the deal?

    • 0
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      By the way, I admit I’m one of the bludgers who received the bludger’s profit.

      I’ve had mortgages on 3 cheap country houses over the past 15 years. Each house was sold for around a 30% profit, and eventually over the years that profit provided me with enough bludge money to fully purchase my current house and a new car.

      I didn’t “work” for or “earn” that money. I did NOTHING except sit on my bum, wait, then sell.

      The difference between me and most others who have made profit this way is that I recognize it as the “bludger’s profit” and I admit I “bludged” my way to home ownership in this way.

    • 0
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      My bludger’s profit pays for everything I need so keeps many people employed. It also saves the government in that it does not have to pay me welfare or any other benefits. In fact I contribute instead of taking like many do at my age. So without it I wold be on welfare like most people of my age.

      Many refers to your bludger’s profit as making money while your sleep or play.

    • 0
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      Your understanding misses a lot of territory Jim and appears to be more sour grapes than reality.
      I agree that the top end are well connected and the rules are in their favour but there are many other folk who make some money out of both shares and property.
      What it takes is the guts to make a call and the fortitude to survive for around 10 years whilst you scrimp, save and deny yourself most pleasures other than work, work and more work. By all means call these folk “bludgers” but the reality is they have achieved something whilst many others have consumed and then find it unfair that they have nix. Horses for courses.

    • 0
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      Mick wrote “What it takes is the guts to make a call and the fortitude to survive” …… that’s correct Mick, it’s called “gambling”. Gambling is not the same thing as “working”.

      If a 30 year old enters into a mortgage for a house, works for the next 30 years to pay off that mortgage, lives in it till retirement, then lives in it till death ……. then that person “worked” for that house.

      If a 60 year old (me) buys 3 houses with a mortgage, sells those 3 houses over 15 years, then uses the “bludger’s profit” from those sales to fully purchase his final 4th house …… then that person (me) did NOT “work” for that house …. I “bludged” my way to home ownership via the “gamble” I took with those 3 initial houses.

      I’m happy to have bludged my way to home ownership.

  4. 0
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    The stock market is continually influenced by micro and macro economic events and as a
    result, individual share price fluctuations frequently adjust ” irrationally ” providing
    opportunistic buying and selling opportunities. As Olga points out, the timing of the buy /
    sell decision is critical – but first of all, an investor has to be convinced that the outcome
    of today’s investment decision will be financially beneficial overall. This is a complex
    process as the timing of benefits may be delayed well into the future, if they eventuate
    at all. What I am saying is that investing is a risky business which requires hardnosed
    decision making…..together with a little luck.

  5. 0
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    Olga: you seem to have a marginal view of shares at best. Better to leave this topic alone.

    Short selling has nothing to do with shares going ex dividend. Short selling is when a trader sells a share he doesn’t own at the current value expecting the price to drop. Then he can buy at a lower price and complete his contract. Long selling is opposite to this.
    In effect both short and long positions are little more than GAMBLING on the future price. The trader does NOT actually own the relevant share at all!

    For the record average folk normally buy at the top and sell at the bottom. That is how the rich get richer. They offload their highly over-valued shares by getting the media to keep publishing stories about what a good deal a particular stock is. It is a well trodden path. Then comes the crash and mums and dads panic and sell their shares for a pittance. The rich now how to milk a stampede they mostly create!

    • 0
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      Mick it’s called broker research. I can’t sell fast enough when I get one of them.

    • 0
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      If you believe what brokers tell you then you are a lost cause. How many times have I seen brokers flogging shares where the rich have made huge gains. Then the small fry get stung. That is how the system is set up.
      I only ever had one good broker but paying 3% for a trade either way was a bit rich so I left. My mistake as I was making money and the broker was keeping me healthy.

    • 0
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      MICK for PM, the brains of the country.

  6. 0
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    Shares – a form of gambling – are a greed-driven scam, and a mechanism whereby everybody is at everyone eles’s throats. Shares drive the fracturing of our society.

  7. 0
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    A few inaccuracies in the article

  8. 0
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    for what it’s worth I believe there are certain similarities between playing the stockmarket
    and playing the horses.

    Success is the product of a sound decision making process which can be implemented with
    precise timing. Any individual prepared to commit funds to these activities also needs to
    take responsibility for outcomes – something of a contradictory stance in a society beset
    with political correctness and “nanny state ” ideology.

    that must be made and to state the obvious


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