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Although when the s&p dropped 20% in a few days in March 2020 — that was clearly a buy signal. And when tech stocks dropped by 70-90% in Nov 2022. Those stocks

Although when the s&p dropped 20% in a few days in March 2020 — that was clearly a buy signal. And when tech stocks dropped by 70-90% in Nov 2022. Those stocks are now up 2x/3x from bottom. Sure, long term it probably doesn’t work out to time the market but sometimes it’s pretty obvious what’s happening.

vikingerik 3y ago
The March 2020 drop was from the pandemic lockdowns. In that moment, nobody knew that was a buy signal. Nobody knew then when economic activity would recover, if the pandemic would pass in two weeks or several months or many years.
- herval 3y ago
  "nobody knew" doesn't mean nobody acted. The rational actors that act only on information "everybody knows" are usually late to the game
  - thakoppno 3y ago
    You’re correct and the parent comment is too. Timing the market to some requires complete prescience. To others it may not.
- corey_moncure 3y ago
  For every sell, there is a buy
lend000 3y ago
The difficult part was knowing where to sell so you could have money on the sidelines before the market dropped. Was it right when lockdowns started? In that case, you already lost a fair amount from the top. I do believe that markets can be beat, but by definition, you need to be "smarter" than the average capital, where more than half of the capital in the market on a given day is controlled by somewhat sophisticated investors. I don't think it's worthwhile for a retail trader to try their hand unless they are putting considerable effort into developing their alpha and either have automation skills or exceptional discipline.
- kqr 3y ago
  > where more than half of the capital in the market on a given day is controlled by somewhat sophisticated investors. It's worse than that! The average estimation performs on the level of superforecasters, thanks to the wisdom of the crowd. The priced-in evaluation beats even most sophisticated investors! ("How is that mathematically possible?" About half of the investors are on the lucky side, but not consistently.)
idontwantthis 3y ago
But the problem is that if you are waiting now, is that massive buy signal going to come next year or in 10 years? And if you keep cash for 10 years and then buy at the right time, is that going to be better than having been invested for the whole ten years already?
mr_mitm 3y ago
I bought when it dropped 5% because I thought it was "a clear buy signal". Then it dropped even more and I couldn't spare any cash to buy more. How could you have known at the time that 20% was the bottom?
- roland35 3y ago
  Exactly the problem! When talking about market timing you can't just be correct in the direction but also be close to exact on the time!
- fauigerzigerk 3y ago
  I don't believe in buy signals. You never know whether any particular level is the bottom. But that doesn't mean the opportunity is the same when the market is down 5%, 20%, 40% and 60% respectively. Of course a massive crash is a greater opportunity than a small correction regardless of how much further prices fall. But the real question is whether it makes sense to keep cash on the side in order to wait for one of these relatively rare crashes. The answer is probably no.
- shrimpx 3y ago
  Anything on the way down in a steep selloff is a good buy, so you did good. Also WRT the pandemic it was pretty clear that there was going to be panic selling, as soon as a pandemic was announced. What wasn’t clear was where the bottom was and how long the recovery would be. Some waited for a deeper bottom and missed out on the vertical recovery.
  - jatins 3y ago
    > Also WRT the pandemic it was pretty clear that there was going to be panic selling, as soon as a pandemic was announced. If you were this sure, did you take a short position when pandemic was announced? Hindsight is 20/20. Also not sure what you meant by when pandemic was "announced" but I guess you are referring to March 2020 broadly
    - shrimpx 3y ago

vikingerik 3y ago

The March 2020 drop was from the pandemic lockdowns. In that moment, nobody knew that was a buy signal. Nobody knew then when economic activity would recover, if the pandemic would pass in two weeks or several months or many years.

herval 3y ago
"nobody knew" doesn't mean nobody acted. The rational actors that act only on information "everybody knows" are usually late to the game
- thakoppno 3y ago
  You’re correct and the parent comment is too. Timing the market to some requires complete prescience. To others it may not.
corey_moncure 3y ago
For every sell, there is a buy

lend000 3y ago

The difficult part was knowing where to sell so you could have money on the sidelines before the market dropped. Was it right when lockdowns started? In that case, you already lost a fair amount from the top. I do believe that markets can be beat, but by definition, you need to be "smarter" than the average capital, where more than half of the capital in the market on a given day is controlled by somewhat sophisticated investors. I don't think it's worthwhile for a retail trader to try their hand unless they are putting considerable effort into developing their alpha and either have automation skills or exceptional discipline.

kqr 3y ago
> where more than half of the capital in the market on a given day is controlled by somewhat sophisticated investors. It's worse than that! The average estimation performs on the level of superforecasters, thanks to the wisdom of the crowd. The priced-in evaluation beats even most sophisticated investors! ("How is that mathematically possible?" About half of the investors are on the lucky side, but not consistently.)

idontwantthis 3y ago

But the problem is that if you are waiting now, is that massive buy signal going to come next year or in 10 years? And if you keep cash for 10 years and then buy at the right time, is that going to be better than having been invested for the whole ten years already?

mr_mitm 3y ago

I bought when it dropped 5% because I thought it was "a clear buy signal". Then it dropped even more and I couldn't spare any cash to buy more. How could you have known at the time that 20% was the bottom?

roland35 3y ago
Exactly the problem! When talking about market timing you can't just be correct in the direction but also be close to exact on the time!
fauigerzigerk 3y ago
I don't believe in buy signals. You never know whether any particular level is the bottom. But that doesn't mean the opportunity is the same when the market is down 5%, 20%, 40% and 60% respectively. Of course a massive crash is a greater opportunity than a small correction regardless of how much further prices fall. But the real question is whether it makes sense to keep cash on the side in order to wait for one of these relatively rare crashes. The answer is probably no.
shrimpx 3y ago
Anything on the way down in a steep selloff is a good buy, so you did good. Also WRT the pandemic it was pretty clear that there was going to be panic selling, as soon as a pandemic was announced. What wasn’t clear was where the bottom was and how long the recovery would be. Some waited for a deeper bottom and missed out on the vertical recovery.
- jatins 3y ago
  > Also WRT the pandemic it was pretty clear that there was going to be panic selling, as soon as a pandemic was announced. If you were this sure, did you take a short position when pandemic was announced? Hindsight is 20/20. Also not sure what you meant by when pandemic was "announced" but I guess you are referring to March 2020 broadly
  - shrimpx 3y ago