Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

1.10. TIMING THE MARKET: WHEN TO BE IN, WHEN TO BE OUT

From the O'Neil/Livermore perspective, waiting for the "pivotal point," or the exact right time to enter the markets means only being in the market when it is ripe for making money. Wait for the trend to develop and then jump on. A line with which we are all familiar came from something Jesse Livermore wrote in How to Trade in Stocks, "Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend" (Greenville: Traders Press, 1991, 69).

O'Neil and Livermore both maintain that there is a time to be in the market and a time to be out of the market, even though common investment wisdom dictates that one cannot time the market and therefore should always be fully invested in the market so as not to miss a bull phase and fail to keep up with the market indexes. O'Neil vigorously disagrees with such mindless orthodoxy when he writes, "Don't ever let anyone tell you that you can't time the market. This is a giant myth passed on mainly by Wall Street, the media, and those who have never been able to do it, so they think it's impossible." According to O'Neil, "The erroneous belief that you can't time the market—that it's simply impossible, that no one can do it—evolved more than 40 years ago after a few mutual fund managers tried it unsuccessfully. They relied on personal judgments and feelings to determine when the market finally hit bottom and turned up for real. At the bottom, the news ...