Traders and investors have the same goals of creating wealth but often go about it with different strategies. For a trader, the best results often come with good timing on trades, being in sync with market rhythm. A trader may take profits very quickly, much sooner than planned if a stock or option trade moves up sharply. In kind, a play that is in a loss may be cut very quickly before it becomes a bigger problem.
Investors care little about time; if anything, they prefer longer time frames to let their investments turn into nicely profitable positions. Catching stocks at the right price point is the key to success, and moments in time are a modest factor. An investor with a consistent pattern of constant investment regardless of price will show some great results over the long term.
Option trading requires a combination of good timing, volume profiling, price levels and some technical analysis. Threading the needle is an art form, poetry in motion. A nicely timed call or put buy can yield spectacular results with good timing and price action. But there is also the chance of loss with these derivatives, and time is the enemy of the option buyer.
Price action is the king of all indicators. We can evaluate a chart simply by paying the most attention to price, which is the only thing that really matters. If a stock is rising, it's bullish. If a stock is not rising or going down, it's bearish. But trying to capture the exact moment a stock is starting to rise or fall can be challenging.
Among those technical tools that are helpful in finding the right moment are stochastic indicators, which show price action hitting overbought and oversold levels at the extremes. A slow stochastic indicator is an ideal indicator to show where the momentum is about to turn. I also use the VWAP, or volume weighted average price. This tells us at what level money is flowing, a critical point to find levels of support and resistance.
Trying to time the market is extremely difficult, but using the available tools can give you an edge to finding the best odds at predicting the price move. It's hardly ever exact, but if you're in the neighborhood your odds are much better for success.
