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Frank started market timing in 1982 when the Federal Reserve cut interest rates and sparked the 1980’s bull rally. Realizing that this rally could have been forecasted, he began to search for indicators which had similar forecasting ability. Within a year, his first newsletter was launched,... More
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  • The Forever Strategy 0 comments
    Mar 15, 2013 7:30 PM

    As trend timers, we would not have developed our timing strategies without first researching not only the strategies, but the history of the financial markets.

    What we found, was that market trends are much more pervasive than most would think. In fact, trends could have been traded just as profitably 200 years ago, as they are today.

    Looking back at price data for 100 and 200 years, the very same trending markets existed. They endured short times of sideways (non-trending) movement just as today, and long periods of strong advancing and declining trends. Yesterday, just as today, trading trends would be profitable.

    There are several important guidelines to successful trend timing that become easily apparent. Again, whether used 200 years ago or today, they are just as important. And they will be just as important tomorrow, ten years from now, or any time in the future, as long as free markets are traded.

    Highly Disciplined Trading Plans

    Successful trend timing strategies use highly disciplined trading plans.

    In the short term, the markets are run by the majority who are reacting to the emotions of fear and greed. It is "comforting" to be moving along with the crowd. That is why the majority do it. But it is NOT profitable.

    The "majority" do not profit.

    Executing a trading plan using unemotional buy and sell signals, designed to capture the majority move of all major trends whether up or down, removes destructive emotions from the equation.

    A market timer may feel the pressure to disobey the plan. He may be swayed by advice from friends, current events, or the extremely powerful emotions of fear and/or greed. But by sticking to a trading plan that NEVER misses a trend, you will profit over time.

    If a trend fails, the trading plan will quickly reverse. If the trend becomes a long term highly profitable one, the plan keeps you fully invested and does not allow you to exit in times of emotional corrections when the crowd is exiting in droves.

    Ignoring Short Term Volatility

    Successful trend timing strategies ignore short term volatility in the attempt to realize superior profits during major trending markets.

    Trends can last months, and even years. During those profitable trends there will be corrections to the trend. Exiting at every correction leaves a trend timer on the outside looking in. Reacting to counter trend corrections usually results in losses. This is why FibTimer stands steady during such corrections.

    The is an almost overwhelming desire to "act" in the face of an adverse market move.

    Often it is labelled "avoiding volatility" with the assumption being that volatility is bad.

    But avoiding volatility often inhibits the ability to stay with the current long term trend. The desire to have close stops, and to preserve "open trade" profits has enormous costs over time.

    Long term timing strategies do not avoid volatility. They patiently sit though it. This reduces the chances of being forced out of a position in the middle of a long term move.

    Finally, a successful Trend Timing strategy, never allows losses to accumulate. Trend timers are protected from large losses by their strategy which never allows a failed trend to hurt capital. Trendless and/or volatile markets are inevitable. But a good timing strategy protects capital.

    You cannot avoid the occasional failed trend and you cannot avoid the occasional trendless market. We had both in the first half of 2004. But a good timing strategy will not allow losses to accumulate. Capital is kept intact so when the next profitable trend begins, we are ready to jump on board and ride it to the end.

    Conclusion

    At FibTimer we do offer weekly analysis to prepare subscribers for what is "likely" to come. Better to be prepared than to be hit with surprises.

    But we never presuppose that we are so smart we can tell, unerringly, what the markets will do next.

    Trend timers do not try to anticipate reversals or breakouts. They respond to them.

    Trend timers are not prognosticators. We just identify and follow trends.

    Trend timers believe the markets are smarter than any of us. We make it our business not to try to figure out why the markets are going up or down, or even where they are going to stop.

    Successful trend timers identify trends, and patiently allow them to play out.

    We will now make a prediction, even though we say predictions are a fools game. This is a prediction (we predict) that will stand the test of time.

    Prediction: Stocks will never go up forever because trends always reverse themselves. Stocks will never go down forever because trends eventually reverse themselves. At FibTimer, we will "always" be on board all major and profitable trends. During sideways non-trending markets, we may not profit, but we will always preserve capital. And lastly, over any fair time frame (2-3 years) FibTimer will always profit and successfully "beat" the markets.

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