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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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  • Can You Predict The Future? 0 comments
    Dec 28, 2013 10:54 AM

    Most investors believe they can predict the future. Or at least, that someone else can. At FibTimer, we rely on the fact that most investors are convinced they can predict the future. This is where most of our profits come from. Their errors.

    In the world of investing, it is prices, not investors, that predict the future.

    Looking For The Holy Grail

    As our subscribers know, Fibtimer identifies and trades trends. We do not use hocus pocus to forecast the market's direction. We identify the trend and go with it.

    Over many years of market timing we have realized that trying to predict the future course of the financial markets is a sure path to losses. But trading trends, which is not predicting but going with the already identified direction of the markets, has produced consistent profits for as long as free markets have existed.

    But this is just too simple an answer for most investors.

    Looking for the Holy Grail, investors spend untold sums of money on analysis software, trading systems, and market gurus. All in order to predict the future.

    However there is no Holy Grail. There never has been and there never will be.

    But this doesn't mean profits, indeed huge profits, cannot be made in the markets.

    They are just not made by most investors.

    True Believers And Greater Fools

    Interestingly, Fibtimer profits because we rely on the fact that most investors and traders believe they can predict (forecast) the future.

    As these investors buy and sell, the "Greater Fool Theory" kicks in.

    Investors buy a stock with the belief someone will pay more for that stock in the future. This continues as a stock is traded up in price. As more investors buy and sell the same share for higher sums, sentiment begins to build that higher prices and profits are almost a certainty.

    As more investors believe they can buy a share and sell it at a higher price (looking for the "Greater Fool"), more and more investors (believers) jump on board. Investor psychology in its most basic form.
    Of course, someone has to wind up holding those shares with no one interested in buying them. This is when the trend changes.

    The "Greater Fools" are holding shares they cannot sell without a loss. As sentiment changes, the markets begin to drop. Eventually the new trend, to the downside this time, builds a head of steam. Investors feel they can (or must) sell shares. They will be able to buy them back at a lower price. (The Greater Fool Theory in reverse).

    Market trends are born of changes in sentiment. Fibtimer trades the trends created by the the tens of thousands of traders and investors who make them.

    Trend After Trend.

    Trend, after trend, after trend. All defined by changes in price. They are rarely forecasted, or there would not be so many investors on the wrong side of trades.

    But trend traders, who understand that investors move with a herd like mentality, can use this information to profit.

    As the herd starts moving in one direction, what changes? Price.

    Using price to determine trend, then jumping on board the trend and riding it till the end, is where true profits lie.

    Don't Let Anyone Tell You

    Do not let anyone tell you they can forecast the future direction of the markets. We will not tell you that we can do it, and we hope you will not let anyone else convince you they can.

    Obviously, if 100 market forecasters make predictions, someone will be right. But consistently being right is another story entirely.

    Following trends, determined by changes in price, is the only consistent path to solid profits. It is not right all the time. Nothing is. But trends usually move much farther than anyone ever expects, and in trading those large trends, huge profits are made.

    Nothing Has Changed

    Change is constant. Because change is constant, uncertainty is constant.

    From uncertainty, trends emerge. Sentiment changes, true believers begin to buy into the new rally, and another trend is born. Over, and over, and over. Month after month and year after year.

    The markets have come a long way in recent years, with instant quotes, trading software, a mind numbing array of technical indicators. But one thing that has not changed is investor's reactions to change. Fear and greed still hold sway.

    FibTimer exploits the reactions of investors. Those reactions are embedded in prices and lead to trends. In this respect, though trading is now done at the speed of light, nothing has changed.

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