Striking at the right moment: how to develop a trader’s instinct for timing

There are many strategies, tactics and techniques that can be applied when it comes to making investments, and a great deal has been written about the best and most effective. One thing they all seem to have in common is the need for good timing. Picking the perfect moment to commit to an investment, and then the perfect time to leave, is absolutely essential when it comes to making as big a return as possible.

While some people are born with it, developing a trader’s instinct for timing is not easy; it is possible to achieve this however by devoting sufficient energy to studying best practice. Doing so can help you pick the best time to make an investment and get the most for your money, as well as detect when it might be time to get out before something happens to devalue your stake.

Here are some hints and tips for how to develop this kind of essential instinct.

Understand the basics

While investment can be as much an art as a science, there are processes and procedures which the best investors make the time to understand. They do this not just because it is required as a part of their training, but because they know that good insight and knowledge will help them to maximize their investments and make the smartest decisions. Knowing how to read the market calendars, interpret monthly price patterns and reviewing long-term cycles, for example, are all essential skills.

Take inspiration from others

Identify people who have succeeded in the way you wish to succeed and learn from them, their achievements and their mistakes. Harriet Stephens and her husband, Warren, managed to build their company while the financial crisis was taking out competitors. Their company, Stephens Inc., is a full service, privately held investment bank built up from the relatively small family firm which originated in Little Rock, Arkansas. Harriet and Warren saw opportunity in the financial crisis and, taking inspiration from their simple corporate goal “to be in business the next day”, worked hard to benefit from the situation. In doing so, their timing was impeccable.

Control your instincts

Human beings are instinctively risk averse. We have a natural tendency to avoid things which may cause pain and discomfort, and will often take the path of least resistance. This makes sense in many walks of life, but is not always the most effective or profitable approach when it comes to investing. It is important therefore to learn how to control your instincts and even override them when the facts tell you to do so. Basing your timing on sound, logical research rather than a gut feeling is one of the best ways of improving your chances of success.

Be courageous

People often talk about the need to be tough when it comes to making investments and, while this sounds somewhat aggressive, it actually represents the simple truth that it is important to act with conviction, even when that feels less than comfortable. It is of course essential to always behave ethically, while at the same time remembering that survival, and of course success, in any field means making difficult decisions and facing up to reality.

It is impossible to predict the future with one hundred per cent accuracy, but the most successful traders are those who are able to read patterns in the information they have to hand and make predictions based on this. They then time their activity meticulously in order to maximize their investments. Such an approach requires a certain degree of innate skill but, to an extent, it can also be learnt. Putting the effort in to this learning will make all the difference between success and failure.