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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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  • Don't Make It Personal

    Veteran, successful market timers and stock traders stay detached. They know that the markets are impersonal and they trade their strategies methodically. But novice market timers (and novice stock traders) often have trouble achieving this rational mind set.

    Stay Detached From Trading Decisions

    For example, novice timers (and traders) may take market timing losses and subsequent drawdowns personally. Seeing it as a hit to their ego, and attaching personal significance to what is just an everyday fact of all timing and trading decisions.

    Small losses should be expected, and it's vital that you don't take them personally. What is important is keeping them small. Never allowing any loss to grow into a big one. That is accomplished by following a timing strategy that is designed to protect capital.

    Disappointment Is Natural

    It is natural for a person to feel disappointed after experiencing a drawdown. Financially, real money has been lost.

    It's perfectly reasonable to feel a little disappointed, but it isn't useful to take it personally. Disappointment is a natural emotion, but not very helpful in market timing.

    In fact, if you take it personally, you might then try to gain back that small loss, by exiting your strategy and taking an ego inspired trade. The odds are good that you will be the poorer for it.

    Market Timing Requires Doing The Unnatural

    Although we spend a lifetime building up an array of emotional responses to help us cope with uncomfortable feelings, those same, quite normal emotional responses are exactly the opposite of what is needed to succeed in market timing.

    Timing requires that you do the unnatural, and control your emotions. A lifetime of learning how to respond to uncomfortable feelings or situations MUST by unlearned to succeed in market timing (or any trading for that matter). Responses that are correct in personal and even business situations, are sure to cause losses in trading the financial markets.

    You expect to make a profit over time, but in the short term, even a winning timing strategy is bound to have losers. That's just the nature of probability theory.

    So why make it personal? Why put your ego on the line with each trade?

    Why brag when you are lucky enough to have the odds work in your favor and then be depressed when the odds go against you? Both emotional responses are normal, yet they are dangerous to successful market timing.

    But how do you control perfectly natural emotional responses?

    "Unlearning" A Lifetime Of Lessons

    When it comes to market timing, you've got to UNLEARN responses that you've spent your whole life learning.

    Market timing isn't about you. It is just a strategy that works over time.

    In other fields, probability plays little if any role. You put in effort, make sure you meet the expectations of the people who pay you, and you're a success.

    In the traditional workplace, it makes sense to put a little ego and pride into your work. Your effort and talent often have a direct payoff.

    But with market timing, the odds can go against you, no matter how much work you put in. The perfect trade can go wrong.

    That's hard to accept for most people because it means that being a successful (profitable) market timer or trader, to some extent, is just a matter of the odds randomly working in your favor. But there is good logic behind this randomness. And a successful timing or trading strategy uses this logic to profit.

    A successful timing strategy will exit losses quickly. It will not stay with a bullish or bearish position to sooth the ego of the strategy's designer. It will also stay with a successful trade and not exit quickly to lock in a profit. That may feel good for a day, but if the profitable trend lasts two, three, five times longer, you have lost out on a huge profit.

    Recognizing that odds are part of trading takes some of the glory out of it. But on the other hand, understanding odds helps you cope with inevitable drawdowns.

    Conclusion

    If you are a seasoned market timer who really has mastered his or her emotions, you are assured that the odds will, over time, work in your favor.

    You will enjoy your times of glory as the gains add up. You will hunker down and quietly follow the signals during unprofitable sideways markets or during failed trends.

    Taking a detached, unemotional approach may take some of the glory out of market timing, but on the other hand, that same unemotional approach is the KEY to market timing success.

    Most importantly, the unemotional market timer will implement the timing strategy. He or she will make each trade consistently, with the certainty that over time the odds will make him or her a successful timer.

    At FibTimer we offer strategies with years of success behind them. But all of them, at one time or another, have had losing trades. Staying with the chosen strategy eventually paid off. Timing strategies are designed to make their profits over time, not in a few weeks or even months, though it is always nice when that occurs

    Remaining unemotional, so that a timing strategy is adhered to not only in easy (profitable) trading conditions, but also during the tough (unprofitable) ones, leads to success in a field where the majority fail.

    Jan 30 12:12 PM | Link | Comment!
  • Discretionary Vs. Mechanical Market Timing Strategies. Which Is Best?

    Investors Or Traders?

    Those who use the stock market to grow their assets have two choices. They can either be investors, which means they are "buy-and-hold" for the long term. Or they are traders who try to use the ups and downs inherent in free markets to profit.

    Buy-and-hold investors have much to worry about. Are they buying in at high prices? When they are ready to retire, will the markets be in a bear market? Obviously those who planned to retire in the years 2000 through 2002 or 2008 faced a great dilemma. In 2000-2002 aggressive buy-and-holders who were invested in Nasdaq stocks, had lost 70-80% of their capital. Even cautious S&P investors lost 50%. In 2008, all indexes dropped some 50%.

    Market timers, who are actually traders using index mutual funds or ETFs as their investment vehicle of choice, recognize these pitfalls. Their goal is to never to give back much capital.

    Yes, there are sometimes small losses in timing, especially at market tops and bottoms, but if you are trading trends (and historically the markets are in trends more than they are not) you will never take large losses to capital as you will exit immediately if the trend changes.

    And... you will make your big profits from the inevitable long term trends when they occur.

    Two Kinds Of Market Timers

    Market timers, trading all trends, are the most successful over time. But even in market timing, there are two ways to determine your trades.

    Discretionary timers depend on the sum total of their market knowledge to make decisions. Whether it be market analysis, a multitude of indicators, gut feeling, current or even potential future news events, hot tips, etc.

    Discretionary trades are subjective. They can be changed and second guessed. There are no absolute guarantees that each individual trade is based reality and is not colored by any personal bias.

    Mechanical timers use timing strategies based on an objective and automated set of rules which avoid the emotional biases inherent in discretionary trading.

    They follow a set of rules to get them into, and out of, the markets. They know that some trades will not be successful, but they also know that they will always be in for the big trades. The ones that make the money and over time make them successful timers.

    Mechanical systems make life much easier by "removing" the emotional aspect

    Based on Price

    Mechanical timing strategies are based on changes in "price." There is no other information in the stock market that is absolutely correct at all times.

    Price tells all.

    It may seem a bit boring using a mechanical timing strategy. After all, where is the fun, the emotional highs, that many traders thrive on.

    But let's get one thing straight: Mechanical timing strategies, which use price to determine trends, are not about fun. They are not about avoiding emotion and in fact they are designed to eliminate emotion.

    Mechanical trading strategies are about "making money." Pure and simple.

    They are about winning.

    Following The Emotional Crowd

    In fact, the entire stock market moves up and down because of millions of investors depending, for the most part, on emotional decisions. Fear and greed. That is why volume spikes near the tops of rallies, and again near to bottoms of corrections. Everyone is jumping on board.

    There may be comfort in following the emotional crowd, but there is seldom profit.

    Mechanical timing strategies, using "price" to determine buy and sell signals, actually "use" the emotional ups and downs of the market to make money.

    The rallies and corrections are going to happen, so if we use price to tell us when they are happening, as trend traders we just jump on board and let the market take us along for our profits.

    Conclusion

    Discretionary traders sometimes have big winners. Toss a coin enough times and it always comes up heads eventually. But the only certain way to be successful for the long haul in the markets is to follow a "non-emotional" trading strategy and to always "stick-to-the-plan."

    There is no second guessing. There are no worries. We know the strategies work over any two or three year period and that can be proved with historical data going back a hundred years or more.

    Trend followers know that the markets are "in" trends most of the time. They also know that at tops and bottoms there will be times of whipsaws where small losses are endured.

    But trend traders who understand the logic of their strategies, are excited at these times. Why? Because those times of sideways non-trending markets are the precursors of the next big trend.

    Be sure to stick to the trading strategies. No one knows what will happen tomorrow, but trend traders "know" they will beat the markets and make great profits over time.

    Jan 23 11:46 AM | Link | 2 Comments
  • It's All In How You Play The Game

    There is an old saying, "It's not whether you win or lose but how you play the game."

    Few realize just how relevant that saying is, to achieving profitability in the financial markets.

    The Only True Measure Of Success Is Long Term Profits

    Typically, those new to stock market timing work under the assumption that winning is all that matters. Obviously winning is important, but being profitable is more important. And it is a goal that the majority of traders fail to realize.

    The ultimate goal is being profitable over the long term, with profits greater than what can be achieved with a buy and hold strategy.

    This is what Fibtimer is all about. Long term profitability and beating the averages. It takes years of experience to achieve this. New traders usually find this out the hard way when they begin trading with the absolute certainty, felt only by those who have never experienced a loss, that they can easily achieve huge gains.

    In fact, a new market timer may develop what he or she feels is a great timing strategy and immediately have a short term gain from it. Or they may exit a winning strategy and take a trade based on emotions or a news event.

    But they will quickly find it's difficult to continue winning.

    The stock market is a tough playing field.

    Being profitable over time is the only true measure of a market timer's success and such success requires experience, discipline, and a tried and true trading strategy.

    We have the experience (we have been timing since the early 1980s) and we have the tried and true timing strategies (with years of published real-time trading profits). But if we must instill in our subscribers anything, it is the ability to follow our strategies correctly and with discipline.

    Simply said... If you trade by the seat of your pants, you may get a win here and there, but you will not accumulate profits. You will not win over the long term.

    Now let's get into the details of this commentary, "It's all in how you play the game."

    Paying A Psychological Price

    How do you approach market timing?

    Do you try to follow a detailed and disciplined timing strategy such as the strategies available here at FibTimer? Or do you rely on current news events, market sentiment and your gut feelings to make sure all your trades work out the way you want?

    If you rely on the latter, you may pay a psychological price when it comes to your ability to trade with discipline.

    Making a quick profit without a solid and proven market timing strategy may provide short-term pleasure, but these kinds of winning trades can adversely influence discipline in the long term. That one short term profit may cost you a great deal more over time.

    Rather than using a well defined market timing strategy, following it, and getting rewarded by trading it, an undisciplined market timer puts on a trade haphazardly and may be coincidently rewarded.

    In this case, a lack of discipline is rewarded, and this "unjustified" reward may increase a timer's tendency to abandon timing strategies in the future because he or she has been rewarded for doing so in the past.

    However, the positive outcomes are usually short lived, and a lack of discipline ultimately produces losses. Trading without a plan makes you part of the "herd" that follows their emotions over cliffs, over and over again. Don't be one of them.

    The stock market is filled with investors who are trading by their emotions. Emotional investors are what makes the stock market so profitable for those who understand what the majority of investors are doing, and use this information to profit.

    Justified Vs. Unjustified

    It's useful to distinguish justified wins from unjustified wins.

    A justified win is when a market timer follows a timing strategy and over time generates a nice profit. A win resulting from following a timing strategy is justified and reinforces discipline.

    An unjustified win occurs when a market timer (or any trader) doesn't follow a well defined strategy or exits a strategy because of emotions (fear & greed), current news events, market volatility. He or she may be rewarded that time, but the outcome occurred by chance. The win is unjustified and can reinforce undisciplined trading.

    That chance win can cost a great deal of money over time. The easier it is to abandon a sound market timing strategy when emotions are running high, the more money will be lost over time. You will have become part of the emotional "herd." And the herd, the majority of traders, lose.

    Discipline Is Crucial

    Discipline is crucial for market timing success.

    Successful market timers execute a proven trading strategy, over and over, so that across a series of buys and sells, the strategy produces a solid profit. Taking every trade ensures when the big trade occurs, the one that makes most of your profits for the year, you will be onboard and profiting from it.

    Consistency is key. One must follow the timing strategy consistently and execute each and every single trade.

    Don't let an unjustified profit interfere with your ability to maintain discipline. If you abandon a timing strategy, and get an unjustified win, you may feel good in the short term, but you'll pay a long term price when it comes to your ability to maintain discipline, and that price is losses.

    Follow a real-time tested timing strategy and reinforce the idea that if you follow it, you will end up with excellent profits in the long run.

    Jan 16 4:27 PM | Link | Comment!
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