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Short-Term Market Timing in the SPDR S&P 500 ETF


An understanding of short-term market patterns can increase your trading profits.

If you found this study interesting, I have posted some supplemental material here. Specifically, we review one additional short-term pattern, and observe what happens when we combine it with the factor mentioned in this article.

How can this information be used?
  • For short-term traders, the concepts outlined here and in our last short-term timing article can be refined into effective trading strategies. Some of the most successful futures trading hedge funds use trading systems that are based upon these same concepts.
  • Many intermediate-term traders have been taught that buying on strength is the best approach to timing trades. While this can work, evidence suggests that over the long run, buying after short-term market dips is most likely to put the odds in your favor.
  • Finally, this information can help investors. Few investors realize that over long periods of time, small adverse decisions compound and can dramatically reduce returns. The "money weighted return" problem is a great example of this, and it is the second point I address in this article.
The good news is that small, seemingly beneficial decisions can have the opposite effect. An investor who tactically times longer-term ideas might be getting the best of both worlds.

Good trading.

Nat Stewart runs the trading-strategy website The site's mission: "Help traders capture explosive moves in the forex, futures, and stock markets."

No positions in stocks mentioned.
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