The importance of market timing: MSTR stock case study

The MSTR chart is a perfect example of the importance of market timing.

The MSTR stock did nothing for almost two decades! Imagine investing in it early and waiting 20 years to get a return.

If you want to have conviction in your ideas, you need to know what moves your stocks and position for that change.

In the book “The New Market Wizards”, Stanley Druckenmiller said this in response to the question of how he evaluates stocks:

“When I first started out, I did very thorough papers covering every aspect of a stock or industry. Before I could make the presentation to the stock selection committee, I first had to submit the paper to the research director.”

“I particularly remember the time I gave him my paper on the banking industry. I felt very proud of my work. However, he read through it and said, This is useless. What makes the stock go up and down? That comment acted as a spur.”

“Thereafter, I focused my analysis on seeking to identify the factors that were strongly correlated to a stock’s price movement as opposed to looking at all the fundamentals. Frankly, even today, many analysts still don’t know what makes their particular stocks go up and down.”

His number one advice? Do not invest in the present. The present does not move stock prices. Change moves them.

MicroStrategy is basically a Bitcoin play, so you just need to know where Bitcoin is going to trade MSTR stock. No valuation analysis needed.

The catalyst for the latest rally? Trump’s victory.

This is why waiting for the right catalysts is paramount. Not only does it tell you WHEN to trade, but it also gives you an IMMEDIATE feedback on whether you are right or
wrong.

That helps with knowing when to bet more and when to get out to keep your drawdown low.

This article was written by Giuseppe Dellamotta at www.forexlive.com.