Is the ability to time the markets more of a data-driven science or a 'gut - feeling' art?

Even among those who don't aspire to be the perfect market timer, many think they can call a top and act accordingly. It's at these times when investors choose to sit on the sidelines and wait for a 'perceived' better opportunity to invest in the market.

Missed investing opportunities by exiting at the first sign of trouble is a common pattern among many self-directed investors. Case in point: How many investors have missed huge opportunities waiting for the Basic Materials stocks listed below to correct, only to see them reach new highs, climb higher and drive the bull market to record levels: Balchem Corporation (BCPC), Arconic Inc. (ARNC), Mercer International Inc. (MERC), Trecora Resources (TREC), US Gold Corp (USAU)

Dread and exuberance regularly propel investors into merely 'reacting' to market volatility, rather than envisioning market trends.

Successful market timing requires three key ingredients: 1) A reliable signal to tell you when to get in and out of stocks (or bonds, gold or other types of investments). 2) The ability to interpret the signal correctly. 3) The discipline to act on it.

Market timing is commonly perceived as the ability to guess the exact market top or bottom and make moves accordingly. However, there is a less common, rather straightforward market timing strategy that has been utilized effectively by insightful financial specialists like Warren Buffet for a considerable length of time.

Rule 1: Never attempt and time tops and bottoms.

Abandoning the objective to time the tops and bottoms conclusively gives you the flexibility to profit, and extends your chance to benefit from the equity markets over the long-term whether your specific market timing calls are right or wrong.

Rule 2: Don't sell during minor crashes - instead, have the patience to weather the storm, or even better, milk the opportunity to buy low.

Warren Buffett has made a great part of his fortune due to this simple rule. He warns not to sell during small crashes, and weather the storm by focusing on the long term.

There is a noteworthy distinction between a complete market meltdown and a common 10% market correction. The theory is that if you like and bought a stock at a previous valuation prior to the correction, you should love the opportunity to this same at a steep discount since the underlying fundamentals are most likely still intact. Warren Buffett takes this idea further by frequently going on purchasing binges when the markets turn, basically purchasing extra shares of his top stock picks at a major markdown and doubling - down on his very own recommendations.