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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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  • Money And Emotions 0 comments
    Jul 20, 2013 10:08 AM

    Possibly the most difficult aspect of successful market timing is dealing with our emotions. Like oil and water, money and emotions do NOT mix.

    There is nothing wrong with emotions of course. A good love story can fill the eyes with tears. Injustice can fill your heart with anger, and a job well done can fill your soul with feelings of well being.

    But when it comes to dealing with your money, emotions can be your worst enemy.

    The same emotions which fill us with elation during times of joy, can also cause us to buy at market tops, to hold onto positions long after they become losers, and to give up when filled with despair, usually right at market bottoms.

    Take a look at a chart of the stock market. It is easy to see the emotional bottoms when everyone is selling at the same time.

    It is also easy to see the emotional tops, when everyone is buying at the same time. Huge spikes up on extremely high volume.

    Most of those sellers, and most of those buyers, will lose their money.

    Living In The Past

    Although there are literally thousands of books written about emotions and trading, the biggest problem market timers face can be easily summarized in four words;

    "Living in the past."

    Because we are all emotional about our money, taking a trading loss, or worse yet taking a big loss, has an effect on every future timing decision we make.

    What is the old saying? "Once burned, twice shy."

    But if you carry the emotional baggage of a losing trade (or several losing trades) around your neck, every decision you make going forward will be affected by it.

    You will enter trades too late, to make sure they are not going to become losers. You will exit trades too early, to make sure they do not reverse on you. The end result? Losses and even heavier emotional baggage.

    The Current Trade Is The Only Trade

    The most effective and successful market timers live only in the present. The current trade is their only trade.

    What happened last year, last month, or last week has no emotional bearing on their current trade. The trade is based on a successful strategy, and it will take care of itself. So why spend useless time worrying about it, and potentially sabotaging it?

    In other words, yesterday's trades are "out of sight and out of mind."

    Successful market timers look at those selling climaxes on the charts, and the buying frenzies, and see them for what they are.

    Emotional responses to fear and greed!

    Successful market timers ignore those emotional responses and instead trade the charts. They ignore the big ups and downs. They ignore the daily news and they especially ignore their know-it-all friend, who says "he/she" is absolutely right, and "you" are absolutely wrong.

    It's not about ego... it's about making money.

    Trade The Plan

    Trade the strategy. Trade the plan. Expect the markets to throw tons of darts at you, but stick to it anyway.

    Remember.... at emotional market tops and at emotional market bottoms, "everyone is right!"

    But a month or two later, although they may not admit it, better than 80% of those buyers and sellers will have lost a good deal of money.

    Sticking to a trading strategy helps combat those emotional feelings. The strategy says when to buy. The strategy says when to sell.

    Trading by emotions however, is doomed to failure from the very first emotional high.

    That is why we stick to our strategies here at FibTimer. It is not always easy. Even after 30 years of timing the markets we feel the emotions everyone else does. But we follow the plan because experience has taught us it is the "only" way to ensure profits over time.

    Look at our various trade history pages. They show many large gains... but also small losses (though never big losses). Those who emotionally give up after a loss will never realize those profits. But those who "trade the plan" do!

    Because our timing signals are created "by" changes in the market, and because the only sure thing in the markets "is" change, trading the plan will always succeed over time.

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