What is a Market Timer?

Market timers are financial professionals who have a strong faith in their ability to accurately project further movements of a given market. A market timer who is sure of his or her ability to read indicators properly and determine how the market will perform in the short-term as well as the long-term will usually act on their findings. This includes advising clients on what to buy, what to sell, and what investments to hold for the moment.

While any type of financial or investing professional could be considered a market timer, the term is closely associated with money managers. As part of their responsibilities, these managers seek to identify ways to help strengthen the financial stability of their clients. Along with advising clients on simple money management and budgeting strategies, the market timer will also address and evaluate possible investments and offer advice on the best trades to make in order to maximize returns.

There is no one method that a market timer will utilize in order to evaluate a market and develop a workable investment strategy. Some favor what is known as a fundamental analysis. This approach focuses on assessing the value of a given security by looking closely at the financial condition and operation of the company that issues the stock. This includes data such as sales activity, earnings reported on quarterly reports to shareholders, current levels of debt and assets held by the company, and the anticipated growth of the company, either with existing products or recently announced plans for new product lines.

A second approach that a market timer may use is known as technical analysis. Here the focus is less on the condition and prospects of the company issuing the security, and more on the market itself. With this strategy, the market timer looks closely at current market prices, the volume of trading that is taking place consistently, and the open interest associated with the market.

The market timer also sometimes relies on instincts as well as facts and figures. This is especially true when the available data is inconclusive. For example, the timer may be aware of the potential impact an upcoming political election and change in government could have on the future performance of a particular stock option. This will create a situation where the timer must project several different possible outcomes, and finally settle on the one that he or she thinks is most likely.

It is important to keep in mind that a true market timer is not simply a speculator who makes predictions that have no basis in fact. The typical timer looks closely at all available data, attempts to determine how each bit of information impacts the rest, and come to conclusions that are logical and well-grounded in facts. While instinct does come into play in many situations, that element only appears after the timer has identified all relevant data, and in some cases will play a very small role in determining that recommendations are made to the client.