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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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  • Fear, Greed And Trading 0 comments
    Apr 11, 2014 3:45 PM

    What good is a plan, if you can not, or do not, execute it?

    Fear and Trading

    How do you make decisions when those decisions affect something you hold dearly?

    Meaning, your money!

    First, fear doesn't form in a vacuum. It is a learned response. In the case of market timing, when you have a buy or sell signal that goes bad, the regret and frustration can carry over into the NEXT buy or sell. Or worse, the fear is so consuming, that you don't even enter your next trade.

    Of course, Murphy's Law dictates that the buy or sell signal you don't enter is the one you should have entered, which only compounds the fear and frustration.

    This particular problem is made much worse if you enter every buy or sell with the "expectation" that it must be profitable.

    If you believe that, then here is an important piece of information for you - "not every buy or sell will be profitable!"

    Greed and Trading

    Greed creates the opposite problem.

    After several winning trades, the feeling of invincibility supersedes being logical. This will ultimately lead you ignore a successful timing strategy and into trades that you normally would not have entered.

    Successful market timing is only accomplished by sticking to a proven timing strategy. But entering losing trades, and ignoring your trading plan, seems to get much easier after a couple of winning trades.

    Never mistake genius for profits derived from your trading strategy.

    -- Genius loses money.

    -- Trading plans make money.

    We All Want To Be Bullish

    The difference between being "emotional" and being "blinded" by fear and greed is indeed critical to success.

    Experienced market timers know this.

    A strategy can go for years making profit after profit, and then the markets do what they do best. They frustrate us. We enter a volatile sideways market that is virtually untradable.

    It happens. But it "always" ends. And most importantly, if we don't take the trade that hits the jackpot, it will only re enforce our fears.

    Every trade MUST be taken. If aggressive trading is taking it's toll on you emotionally, use a strategy that works in all markets, like our Conservative S&P Timer.

    But keep trading. The only way to market timing success is to make the trades.

    -- Fear blinds us to opportunity.

    -- Greed blinds us to danger.

    It's important to recognize your emotions, and more importantly, how they affect your investing approach. In general, we all want to be bullish, and are eager to see any upward market movement as a rally, even when it's not.

    Conclusion

    Are fear and greed driving your investment decisions right now? If you are trading the aggressive Bull & Bear Pro Timer strategy, but in reality you are just looking for a timing strategy to keep you invested during advancing trends, and protected from bear markets, then you are in the wrong strategy!

    Aggressive market timing is for "aggressive" timers. Those trying to wring as much profit out of the market as they can, and willing to accept short term losses as the price for achieving above average long term profits.

    Aggressive timers are unfazed by the ups and downs of an aggressive timing strategy.

    If you're not sure, or you are concerned about frequent trading, I'd recommend using the Conservative S&P Timer, or possibly our Diversified Timing Strategy, which has some aggressive and some conservative positions, is the answer for you.

    Whatever you do, whichever strategy is right for you, stick to the plan!

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