Now you know the importance of Market Timing for getting a good profit.

To evaluate the development or the success of your investment, there are three important variables. They can be used to measure the potential of the investment.

  • peak-to –valley drawdown
  • beta
  • reward/risk (ratio)

As a trader or an investor you must pay greater attention to the factor, measure of risk. It is the calculated stand deviation of the monthly income which is measured against the invested amount over the time intervals in question. This is one of the simplest ways of determining a good market timing system. You can do it using a graph, by just tracing down. If you want to get the amount of risk calculated, it can be measured by the draw down from the highest peak to the valley.

The overall market behavior can be observed through the variable beta. It is the second important indicator for a new investor to check out the success of the business. We can see that the timing system volatility is compared to an index. The betas are tabulated mostly when compared to an index. If the beta index is one the timing volatility of the system is also in the same level. If the beta index is two, you can understand that the system has got a doubled volatility. It is therefore important for you to realize the fact that the volatility index should be in a lower levels for the market to be a good one for you to invest in. Always remember that beta measures risk and for this reason the higher the figure, the higher the amount of risk associated with the market you are looking to invest in.

The third and the last variable that we are going to discuss is reward/risk (ratio) Here the reward is tabulated as compared to the risk. If you want to calculate the figure for a certain year, you will have to find out the average amount of return.

When you want select a stock market system,

you should try to select one which goes together with your personal attitudes and according to your expectations. You must be able to practice tolerance and patience as there is so much risk involved. Besides that it is important for you to try and be vigilant so that you don’t get cheated. As an example, there is a trend timing system which has got 80% of average amount of return but this system has got 35% of risk. So patience and tolerance must be your traits, otherwise you will lose your money right at the beginning.

Of course there are only a handful of market timing methods that are worth checking out. In the event that you are lucky enough to find a system which is more than 5 or 6 years old, it will be a great selection for your investments. However some people do not like to accept the market timing method as a scientific method, and they go on to complain that it a form of a gamble.

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