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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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  • Following An Unemotional Trading Plan Equals Profits

    When it comes to making decisions, our minds tend to perceive and react to the information available to us, each in its own particular way. This is not something we think much about. It is a part of each of us. Trying to change this natural process is almost impossible.

    This is usually not of any consequence in our everyday lives, but in the realm of investing, our perceptions and reactions, and the emotions they generate, are very often the opposite of what is needed to be successful.

    How do we start making consistently correct trading and market timing decisions? How do we make decisions without emotions interfering? How do we trade with confidence?

    The answer is simple. We follow an unemotional trading plan which keeps us on the path to profitability.


    Many traders, market timers, investors have no plan at all. They are like the proverbial gunslingers of the old West. A news event causes the market to decline and BANG, they sell. An economic indicator comes in better than expected, the market rises, and POW they buy.

    Trading by emotion, they make trades that seem solid at the time, and they hold that position until it becomes more painful to hold it than to not hold it. They may even make an occasional profit. But that lack of focus...lack of planning, will ultimately lead to poor performance, and to outright losses.

    Why do so many traders sell at bottoms, and buy at tops? It is such a well known fact that it is almost funny, except when "you" are the person at that top or bottom.

    Have you (or someone you know) ever said, "well.. I finally decided to go long (or short), so expect the market to reverse on me... again." Actually expecting "ahead of time" that the trade will be unprofitable.

    You will not hear that from someone following a trading plan. He or she knows that not all trades will be successful, but that following the plan will avoid emotional trading errors, and lead to long term profits.

    Disciplined Trading

    Trading (market timing) requires "discipline" ... Some have it, and others that wish for success must learn it.

    The benefit of of following a proven trading plan is twofold.

    First - if you have a plan, you'll be able to ignore all the data that doesn't affect your trading. The media is rough on traders - at any given time, you could find ten reasons to buy and ten reasons to sell. That emotional roller coaster is a nightmare, but if you are following a plan, you won't talk yourself out of good trades, nor will you keep yourself in bad ones.

    Second - our emotions cannot cause us to make unprofitable decisions. We have a plan! All we need do is follow the plan. Never second guess it. That is allowing your emotions to come back into play.

    Only through following a trading plan will you save yourself a great deal of frustration, and successfully grow your investments.

    Nov 06 1:31 PM | Link | Comment!
  • Making Sense Of The Stock Market

    When a person decides to enter the financial markets, he or she brings years of personal experiences with them. Those experiences are usually a detriment to profiting as they are based on one's life experiences. The financial markets, as well as all freely traded markets from stocks to commodities, from currencies to tulips, behave in a much different manner.

    Typically, when we first learn how to trade, we study the markets and try to develop our own personal theories about how the markets work. Because we don't actually conduct formal experiments though, we fall prey to psychological biases.

    Those same personal experiences, built over a lifetime, which helped us to advance and learn in our world, wind up being the very reason many traders fail to profit.

    False Consensus Effect

    One of these psychological biases is the false consensus effect... we tend to wrongly think that others believe what we believe and do what we will do, but that's only our perspective and it can mislead us.

    Why is it difficult to anticipate what people will do? Part of the problem lies in the fact that we are mere mortals. Humans have a limited capacity for understanding complex information. In some ways, people can process information better than a computer, but in other ways they cannot.

    The false consensus effect is one of those rules of thumb that may bias our decisions. No matter what decision you ask people to make, no matter how important the issue, and no matter what choice is made, social psychologists have demonstrated that people over-estimate the number of others who agree with them.

    There is a natural tendency to believe that our decisions are relatively normal, appropriate and similar to what our colleagues and peers would do in a similar situation.

    We use our decisions as an "anchor" and evaluate what others would do based on what we would do. Decisions based on "our" life's experiences. Our biases. Our interpretation of events and their consequences.

    This decision-making bias can contribute to feelings of over-confidence. Once we make a decision, we tend to be confident that we are correct and that others will agree with us, but had we seen the situations from their perspective, we may see that they would behave quite differently.

    Anticipating What The Masses Will Do

    Many market timers try to anticipate what the masses will do. Will they buy or will they sell? The crystal ball method of timing.

    But this method has a long history of lost fortunes behind it. In fact this is the method that gives market timing a bad name. No one knows the future and even though they may make a lucky pick, getting the future right again and again is impossible

    You cannot predict precisely how people will react to world events, economic changes, etc.

    But there is a method of timing that has worked for many years and will continue to work.

    The Very Best Timing Strategies

    The very best market timers follow market trends. They wait until the trend in confirmed and then climb on board, riding it as long as it lasts. If the trend fails, and some always do, they exit quickly and await the next trend.

    This follows the old market saying, "cut your losses short and let your winners run." Everyone has heard it but so few are able to adhere to it.

    That is why we follow trends here at We do not try to forecast the future like other timers do and usually fail at. We identify trends and take positions accordingly. If the trend fails we exit quickly. If it continues, we ride it to the end. That could be weeks, or even months as profits accumulate.

    Following a carefully defined trend following strategy is the only sure way to be certain you will be in the right position, at the right time, when the markets take off in one direction and stay in that direction.

    Emotions should have no place in your decisions and they absolutely have no place in ours.

    Unemotional buy and sell decisions, generated by tried and true trend timing strategies, are the certain road to profits.

    Oct 30 2:06 PM | Link | Comment!
  • The Ultimate Indicator

    While the investing world has always been subject to innumerable uncertainties, it seems that in recent years this is even more the case. On any given day there are so many potential news events that could change market direction that it is impossible to keep track of them all.

    The world has emergencies just waiting to boil over all the time. How can we as trend traders stay one step ahead of the financial markets? Markets which are assimilating and reacting to all these events constantly, and more importantly, instantly?

    Over the years, trend timers (trend traders) have consistently generated excellent returns in the markets because they make their trading (market timing) decisions based on a core piece of information.

    Although there are innumerable indicators measuring everything from sentiment to volume, every one of them is subject to interpretations which can result in incorrect decisions. For example; MACD crossovers can give two correct signals in a row, but then be wrong several times. What seems perfect for awhile, is not so perfect when watched over time. This is true of all the indicators most technicians follow.

    Fundamental analysis can identify the perfect stock or market sector, but of what use is it if that stock or sector declines even while the fundamentals look superb?

    But there is one indicator, one core piece of information, that is always up to date and always correct. That piece of information, is price. And particularly the closing price at the end of every trading day.

    All the news, inside information, economic and fundamental data available, is reflected in that closing price.

    Price is the ultimate indicator. Seem too simple? Read on...

    The Combined Thoughts Of Millions Of Investors

    In prior commentaries we have described price as, "...the perfect reflection of the combined thoughts, analysis, indeed the intelligence, of millions of investors."

    No matter what is occurring in this world that could conceivably affect the markets, it is "already reflected" in the current price.

    Whether you are looking at commodities, stocks, currencies, or any freely traded market for that matter, the current price reflects all the news, all the time.

    Market investors and traders are constantly bombarded with a huge array of statistical information, indicators, fundamental data, economic studies, news releases, plus the tug of war created by our own emotions.

    All You Need To Know

    There is enough information out there to make your eyes glaze over. But none of them tell you when to buy or sell.

    The very idea that price offers all you need to know, that it tells you when to enter and exit "any" freely traded market, flies in the face of many analysts who have spent their lives studying these markets. How could something a simple as price be all that we need?

    Let's look at some simple examples:

    Let's say that XYZ stock has gone from $10 all the way to $100. When that stock was at $10, did anyone know it was going to $100? It is likely that no one knew, but trend traders using price to determine when to buy the stock would have been buyers all the way up because as price increased, they bought.

    When Nortel (NYSE:NT) was at $80 a share in year 2000 and dropped to $70 a share, the vast majority held onto this blue chip stock, and many bought more shares at this new bargain price. In fact, people were buying at $60, $40, $20, $10. They all lost money. Huge amounts of money.

    Were they buying when it was under $1.00 a share? Probably.If you had a chance to buy the same stock at $25 a share, would you have taken it? Probably not. The stock was up +150% at that point. Most investors would wait for a pull back to buy it.

    But not trend traders. The trend is up, you go with the trend. "Price" has dictated the direction of this trade in unmistakable terms. It was a buy at $15, $25, even a buy at $80.

    But trend traders were taking short (bearish) positions because the "trend," based on changes in "price," was down. It made no difference what the analysts said, or what the prevailing sentiment was. The price was declining so the trend was down.

    When Nortel was trading at less than 50 cents a share only two years later, trend traders were buying their own private islands, but those who bought Nortel for the long haul had lost their entire investment except for just a fraction. This included huge investment firms, pensions, money managers, etc.

    Nortel may be old news now, but what happened to that stock, and the investors who traded it, applies as much now as it did then.

    Had investors even considered trend changes in price in their intricate trading plans it would never had happened.

    Trend Traders Never Fix A Profit Target

    In the above examples, would you have taken profits at some point?

    Trend traders never fix a profit target. They realize that there is no way to know ahead of time when a trend will end, so they stay with the trend all the way. When it ends and reverses, "then" they exit the trade.

    If you bought the above XYZ stock at $20 and took profits at $30, you would have a nice +50% gain, but would have missed the +400% total gain of the entire trend.

    If you had exited your bearish position in Nortel at $60, or at $50, you would have missed the huge profits still to come.

    No one, not even trend traders, knew that Nortel would reach less than 50 cents a share. But those who trade trends and allow price to dictate when to exit a position, held the bearish position for huge gains. At the least, those who exited to cash did not lose their capital.

    No one knows when a trend will end. Only price tells us.

    Trend traders seldom get in at the exact bottom, nor exit at the exact top, but they do profit from the majority move of every trend, and they have clear buy and sell signals.

    All generated by that one simple piece of information, price.


    Trend traders do not believe that anyone can consistently pick tops or bottoms. They do not believe that reversals can be consistently traded either. Sometimes people get lucky, and sometimes they do not. But if you trade trends, luck is not needed. You have price to tell you when to enter and when to exit.

    Trend traders who use price to determine trends have been quietly beating the markets for many years. They will quietly continue to do so for many more.

    FibTimer identifies and trades trends. We never miss any trend because we trade them all. Emotionless, non-discretionary and profitable.

    Oct 23 3:30 PM | Link | Comment!
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