Jeff Diercks'  Instablog

So what does it mean to be objective? According to Dictionary.com, it means "not being influenced by personal feelings, interpretations, or prejudice; based on facts; unbiased: an objective opinion." So what does this have to do with investing? Simple! You need a plan!

Do you have a plan for investing? If not your subjective analysis will over time make you a loser!

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Let me give you a personal example from my life. When I began short-term trading, I grabbed a Day Trader's book and began to implement their strategies. After all I said to myself, "I have been trading for a long time."

Mistake!

The minute these strategies stopped working, I had nothing to hang on to except doubt.

So what did I do? I began to back-test each strategy to understand when they worked, when they struggled. I ended up massaging each strategy and made them my own, including when to use them or another indicator to confirm them.

The result! Now my short-term trading is doing better. I am calmer, more objective and not dismayed by occasional losing streaks. I have everything about those trading strategies documented and clear in my head.

How long ago did this happen? You might be surprised to know....just last week. That is why I cannot give you some kind of 100% gain type number. However, I am already seeing a difference.

So how does one get a plan? Simple! You decide on an investment style that works for you and you document everything about that strategy. Here are few things to consider:

• When to enter a trade or position.
• How to establish a trade target.
• When to exit a trade or position.
• How to protect capital via risk management such as stop losses.
• How to advance this protection as the position moves up.
• Where to position protection and an acceptable loss.
• The amount of upside vs. downside before you enter a trade.
• Position sizing and diversification.
• Markets or positions to trade.

I am sure there are more, but this is off the top of my head.

This plan should be written and something you refer to frequently.

Here at Stock-Signal.com, we have a plan and it goes something like this:

• Trade liquid broadly diversified ETFs in a portfolio.
• In our sample portfolios, hold at least four (4) indexes on which signals are generated.
• Enter on a trend following buy signal confirmed by multiple signals.
• Sell and enter an inverse (short) ETF on a sell signal confirmed by multiple signals.
• Hold that position till the next signal, no stops.
• Always be fully invested in each position, either long or inverse ETFs.
• Accept that there will be periods of under performance (see 2011) and periods where we hit home runs (e.g. bear markets).
• Be patient and following the signals religiously. Back-test to develop religious comfort.

A trade plan allows you to be objective. Without a plan you will drift like the seas and your investing will suffer. You will also lack anything to hold onto in those inevitable periods where your investment strategy is not working.

Plain and simply, an plan brings peace of mind!

We do all the work for you. If you are time constrained, rely on our work. As a member, we provide you with several model portfolio (see performance updates).

We provide the signals and the training on how to implement this simple system. All you need to do is execute them religiously as delivered on Fridays just before the close.

Why not get a Free Trial today?

Well they got it done! Have you ever seen so much drama, discourse and pure incompetence in all your life? Of course, I am speaking of the President and Congress' dance over the past 60 days that finally ended with a last minute, but late, deal that "saved us" from the so called "fiscal cliff."

As a active trader, I can tell you this whole discourse created havoc over the past two months that made it tough to trade and even tougher to profit. Day after day markets moved up or down based on the news that was mysteriously leaked out from behind closed doors. Both sides worked the financial and non-financial press to paint a picture that they are doing everything they could, but the "other guys" were blocking further progress.

No matter how you slice it, this drama cost us market returns in what has historically been one of the best trading months of the year. And oh by the way, we did have a positive month, but it took an extraordinary day on the last trading day of the year to make it happen.

Here is how we finished up the month: The S&P ended up .71%, the NASDAQ Composite returned .31% and the EAFE Index finished up 3.25% (the clear winner for the month).

Overall our strategies worked pretty well! If you were invested equal in our core four indexes (S&P 500, NASDAQ, EAFE and High Yield indexes), you earned a nice .99%. You would have even felt better about this prior to the last trading day as this portfolio easily (and with less risk) out distanced just buying and holding the S&P 500 index.

If you held a portfolio of all our index stock signals, you faired a bit worse. Our model portfolio (called Global Opportunities) returned .13%. Returns for the portfolio were again negatively impacted by an ongoing consolidation in gold and a monthly loss in the DB Commodities index.

The yearly return for each index and for those sample portfolios are below. Overall, we are very happy with the sample portfolio returns for 2012 versus both the broad indexes and other trend followers. We look forward to 2013 as we believe this will be the "Year of the Trend Follower." More on that later.

As I stated above, this was a very good month for foreign securities. Smart money continued to rotate into international equities and away from the U.S. throughout the month. Both U.S. and International markets now look a bit rich, but its pretty tough to tell what that means right now given macro undercurrents.

We are seeing some possible stabilization in both the commodities and gold indexes. It looks possible that the commodity index will break to the upside and out of its downwardly trending trading channel, although it has not done so yet. It also looks like gold is ready to perk up here as Central Banks continue to print money and national governments continue to formulate bad policy (see fiscal cliff bill as exhibit A).

Here is the performance by index and sample portfolio:

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If you have not seen our 2013 Stock Market Forecast Video, here is a link. Both Wayne and I believe that this fight over revenue increases and spending cuts is far from over! In fact, we think markets will manage to sidestep higher through continued debate on the former and the Congressional debate on increasing the U.S. debt limit, but when May/June comes, we could see traditionally tough market months turn even tougher.

The good news is that trend following strategies like Stock-Signal are not positively correlated to the overall stock markets. In English this means that they do well (after a brief adjustment period0 when markets do poorly.

My suggestion is that you take a look at a video we did on our sister site, InTrust Advisors, called How to Get Rid of Your Investment Worries Once and For All and see how trend following really compliments traditional strategies, like buy and hold.

Remember, we offer a Free 30 day trial. You can cancel at any time without even picking up the phone!

Here is our stab at where markets are headed in 2013.

www.stock-signal.com/2012/12/2013-stock-.../

We believe things will start out well through April or May with markets hitting 1500 on the S&P 500. Thereafter, we believe something happens to make markets break their rising wedges and head lower.

Our estimate for 2013 is the S&P 500 will close the year at 1200.