Trading/Timing the Market

Sally57

I understand professional advisers/investors and experienced investors on this forum always say that 'time in the market' is the best way forward. However, for the past couple of years my husband has started trading with his ISA account and trying his luck at timing the market. We both hold separate ISA accounts in the same funds/IT's with roughly the same value. I have stayed invested throughout but he has sold his portfolio a couple of times during this period when he thought the share price was high. He then went on to re-invest in the last couple of correction periods. It has worked out well for him at this stage because the value of his ISA portfolio is now around 20% more than mine.

I think he should stop trading like this while he is ahead and now stay fully invested but he still thinks there is some reasoning in what he is doing? Anybody have any thoughts on this?

cloud_dog

Sally57 wrote: »

I understand professional advisers/investors and experienced investors on this forum always say that 'time in the market' is the best way forward. However, for the past couple of years my husband has started trading with his ISA account and trying his luck at timing the market. We both hold separate ISA accounts in the same funds/IT's with roughly the same value. I have stayed invested throughout but he has sold his portfolio a couple of times during this period when he thought the share price was high. He then went on to re-invest in the last couple of correction periods. It has worked out well for him at this stage because the value of his ISA portfolio is now around 20% more than mine.

I think he should stop trading like this while he is ahead and now stay fully invested but he still thinks there is some reasoning in what he is doing? Anybody have any thoughts on this?

Yes, he is trading. When trading you are likely to make money and potentially lose money.

On these boards you are not likely to find many who would endorse his activity. I think he is being a little reckless (or selfish) in not considering your position as a whole, i.e. the impact of him losing money is that you both would suffer to a degree.

I enjoy trading (gambling) but I am not a day trader. I have held (mostly) a share for 7 years and traded in and out of it as I felt. I have always retained a core holding though. I do this because investments intrigue me and I have had some success but, I have also always had some losses.

My OH is aware of this activity but it is not undertaken on our longer term investment (repay mortgage / pensions etc).

I would suggest that your finances need to be considered holistically rather than yours and his. Perhaps get him to open another account and agree an amount that he can trade with.

eskbanker

Sally57 wrote: »

trying his luck at timing the market

[...]

he still thinks there is some reasoning in what he is doing

I'd lean towards this being luck rather than reasoning - while it obviously makes sense to buy low and sell high, if it was as easy as that then everyone would do it all the time, and hence the adage about time in the market.

Just because he happens to be ahead at this point doesn't mean that this will continue - what does he believe gives him the edge over the market?

dunstonh

I have stayed invested throughout but he has sold his portfolio a couple of times during this period when he thought the share price was high. He then went on to re-invest in the last couple of correction periods. It has worked out well for him at this stage because the value of his ISA portfolio is now around 20% more than mine.

Past couple of years is too short. There has been one negative period in that time. All he had to do is get out before it and it would have swung in his favour. So, he got his timing lucky once. He now has to repeat that in the majority of cases going forward. Lets see how he does over the economic cycle.

Everyone will be lucky at least once. Being lucky every time isnt going to happen. Sooner or later the trend of coming out too early and going back in too late (or too early) will take its toll.

Ask him what the markets are going to do tomorrow. Next week, next month. If he says he doesnt know then ask him why is he trying to guess something he doesnt know

DrSyn

Sally57 wrote: »

I understand professional advisers/investors and experienced investors on this forum always say that 'time in the market' is the best way forward. However, for the past couple of years my husband has started trading with his ISA account and trying his luck at timing the market. We both hold separate ISA accounts in the same funds/IT's with roughly the same value. I have stayed invested throughout but he has sold his portfolio a couple of times during this period when he thought the share price was high. He then went on to re-invest in the last couple of correction periods. It has worked out well for him at this stage because the value of his ISA portfolio is now around 20% more than mine.

I think he should stop trading like this while he is ahead and now stay fully invested but he still thinks there is some reasoning in what he is doing? Anybody have any thoughts on this?

I am glad he has so far had success in timing the market. He may of course really have the ability to time the market. However from your post, selling & buying correctly twice in two years should not lead him to believe he has that talent.

If you throw a coin in the air ten times,it can come up heads each time. The does not mean you have a special skill in being able to make it come up heads by the way you through the coin.It would be just luck.

I became interested in charting a number of years ago. So I tried timing the market over three years. I bought and sold eleven shares in that time and only made a loss once. My profit was about 18% a year, I then stopped while a I was ahead. I realised all the time it was just down to lady luck.

If your husband enjoys buying and selling, he could taken a small percentage of his portfolio and try his luck with that. If his luck continues, it will increase in size. When his luck runs out, he will have only lost a small amount of his money.

PS. Has he taken all the dealing costs into account before calculating the profit?

Alexland

I make modest shifts in my asset allocation and regular contribution profile to reflect my view on if equity valuations are looking attractive or hard to justify. It has given me some gain from the volatility. Still I might have got the same return over the long term by just sitting entirely in equities.

coastline

Shares themselves aren't that easy to trade due to volatility and surprises such as profits warnings but it can be done. It's a bit easier with funds especially ETF's and Investment Trusts as they are less volatile and quoted "live" daily.
I've looked at charts for years and used various indicators to find short term extremes which could play out. The lower indicators on charts can give decent signals but they won't work all of the time otherwise everyone would use them.
Hopefully the chart works as I'm going to attempt to show some entry and exit points. What should show is a 1 year chart of the FTSE 100 plotted with daily movements. The moving average is set at default and is used for a guide. The two indicators below are Slow Stochastic and MACD. What we are looking for is momentum and is my way of using these and not the text book.
When MACD is positive the blue and red are above the 0 this is a decent point to be in the market .Mid April FTSE 7000 was a buy and stayed that way until July 7600. MACD stayed negative for most of the year despite several attempts cross above the 0 centre line. Late January this year the other indicator , Slow Stochastic , was in the oversold region and MACD was on the 0. This kind of set up gives room for the Stochastic to rise and MACD get well into positive territory. We have just seen that happen from FTSE 6700 to 7200 this week but now the Stochastic is overbought and chances are there will be a sell off. I'll be watching to see what happens next and if MACD stays positive when Stochastic is oversold again I'd say momentum was improving.
No doubt anybody reading this will think its rubbish but investors in the FTSE would have survived the recent fall in the market.

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Index&symb=uk%3Aukx&time=8&startdate=1%2F4%2F1999&enddate=1%2F28%2F2019&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=1&maval=9&uf=0&lf=4&lf2=32&lf3=0&type=2&style=320&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=10&x=37&y=19

coastline

The system is better shown on a 6 month daily chart and just to give another example here is the choice of many investors VWRL.
You can see negative MACD in September-October around 6600 which gives a sell. As posted earlier the best set up is 0 on the MACD and oversold on the Stochastic. Late January we had that point at 6000 after selling at 6600 months ago. Again we have Stochastic overbought at 6300 within weeks and MACD is barely above the zero. We need a shallow correction to keep momentum going so lets see how this plays out.?
I've got nothing in the market as of Wednesday this week.

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=uk%3Avwrl&time=7&startdate=1%2F4%2F1999&enddate=1%2F28%2F2019&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=1&maval=9&uf=0&lf=4&lf2=32&lf3=0&type=2&style=320&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=8&x=44&y=15

Thrugelmir

Sally57 wrote: »

he has sold his portfolio a couple of times during this period when he thought the share price was high.

And if the market hadn't dipped by 20%? But continued to rise.........

Someone will always have a better story to tell. Statistically though the odds are against you as an individual. More people would make the wrong call rather than the right one.

David_Evans

I think it is possible to make general observations about the market.
eg 2009-10 was an obvious low point to buy equities.

Likewise the peak of the gold price and then the Bitcoin nonsense.

I reduced my US equities in 2017 because the FAANGs looked expensive.

Since oil dropped, I've bought oil stocks.

If I owned palladium right now, I'd sell some and buy silver and platinum.

Generally, when people say things are over-valued and they look expensive on a historical chart, then they are right.

The two recent stock market drops (Feb 18 and Oct 18) were widely predicted.

The problem is over-trading, incurring costs and not sticking to regular investments etc.

And just because something looks expensive - doesn't mean you need to sell it all!
Just sell a bit and buy something that looks cheaper.

John_G_Jones

coastline wrote: »

Shares themselves aren't that easy to trade due to volatility and surprises such as profits warnings but it can be done. It's a bit easier with funds especially ETF's and Investment Trusts as they are less volatile and quoted "live" daily.
I've looked at charts for years and used various indicators to find short term extremes which could play out.

For anyone unfamiliar with the weasel words of technical analysts, the “could” in the final sentence above is all that you need to know.

Read back the statements of people in this field, analyse them, and they contain literally no information.

What possible use is a “could” or a “might”?

If the subject had any validity at all it would be filled with statements such as “this stock has a 20% higher chance of going up by 10% than down by 10% over the next five business days as shown by this pattern. Here is the detailed analysis that shows the frequency that that pattern has occurred over all assets in the last decade and the distribution that prices took afterwards.”

The icing on the cake for it being rubbish in this particular case is that the meaning,ses statement is followed by a cherry-picked single example where it would have been the right thing to do.

And yes, I do work in the markets and no, I do not use technical analysis.