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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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  • Market Timing Vs. Conventional Wisdom

    Outlandish Claims

    We did a search for "Market Timing" on several of the most widely used search engines. Some of the market timing results posted are staggering:

    Up over 1000%... we guarantee our results! 90% winning trades. 97% Winning Trades! Up over 900%. 138% APR. Up over 1,400%. Up 18,000% since 2000. Up 3,494% in 4 years. We have one question:

    If you could make 1400% every few years (or 18000%, or 900%), guaranteed, would you sell the formula for $20 or $30 or $40 a month? Not us. We would use it for a few years, and then buy an island, complete with mansion and servants, and retire forever.

    These phony numbers are a large part of what gives market timing a dubious reputation.

    While market timing is about profiting, it is NOT about fast gains. It is about capitalizing on trends by following a well researched strategy and avoiding huge losses!

    Such marketing scams as we listed above, and believe us they are nothing but fake numbers, play on an investor's greed.

    You know it can't be true.... but... just maybe...

    One of the two emotions which cause the largest financial losses is "greed." And these ads play into that emotion perfectly.

    The other emotion of course is "fear."

    Market timing is NOT about instant gratification. It is about winning over the long haul. It is about withstanding the test of time. Profiting over the years while others go back and forth, from scam to scam, looking for the holy grail to quick riches. Or trading by emotions, news events, and the next door neighbor's secret tips.

    Successful timing is about discipline. Following a strategy that will catch the major trends so that your are "in" for the advances and "out" for the declines. Most traders and investors are in for the declines and out for the advances. It is the disciplined following of a timing strategy that separates successful timers, from everyone else.

    Fool's Game?

    Critics say trying to time the stock market is a fool's game. That trying to forecast the future direction of the stock market cannot be done.

    They are correct. It cannot be done.

    But at Fibtimer we do not forecast the future. We trade trends that are currently in progress. It is not hocus pocus but a carefully defined strategy.

    Market timing critics have said that, if timing took you out of the market during only the very best days, or the very best months, your performance would suffer enormously. They are right of course" if " that is what market timing did.

    In 2001, Barrons Magazine published a graph showing the hypothetical results of investing in the Standard & Poor's 500 Index in February 1966 through late October 2001. During that period of almost 36 years, an investment of $1,000 in the index would have grown on a buy-and-hold basis to $11,710.

    Then, referring to a study done by Birinyi Associates, (an investment research firm in Connecticut), the article reported that if an investor missed just the five most profitable trading days every calendar year, that $1,000 investment would have shrunk to $150.

    Right again! But what an incredible, one sided, misuse of numbers.

    To anybody unfamiliar with timing, that statement would be convincing evidence that market timing is truly a fool's game .

    Why would anybody even think of giving up a gain of $10,710 and replacing it with a loss of $850?

    True Purpose of Market Timing

    Ridiculous though those results are, they are quite damaging to those who do not understand the TRUE purpose of market timing.

    Recognizing how one sided an imaginary timing system that kept investors on the sidelines during only the best five days of each year was, Mr. Birinyi took the idea one step further.

    What would happen, Mr. Birinyi asked, if a timing system could be invested in all but the five worst trading days days each year?

    He found that a $1,000 investment in the S&P 500 Index that missed only the five worst days each calendar year would have grown to $987,120 .

    Nobody, of course, has been able to devise any system that could eliminate only the very worst days of every calendar year, nor the very best days for that matter.

    But the contrast between "all-but-the-five-best-days" showing an investment that falls to $150, and "all-but-the-worst-five-days" showing the same investment rising to a whopping $987,120, is very telling.

    And the next sentence is the most import one in this article.The article suggests that there are great gains to be made by "missing the worst days."

    Wake up!

    Missing the worst days is exactly what market timing is all about!

    A market timing strategy that gets traders onto the sidelines during more bad days than good days inevitably reduces the risk of being in the market.

    As subscribers who were with us during the bear market of 2000-2002 found out, as well as the bear market of 2008 and into early 2009, missing the bad days not only protects capital, but in the case of our timing strategies that used bearish short positions, it greatly magnified gains.

    It is five years since that last bear market. How long can it be before the next bear takes the stock market down?

    Don't fall for the scams. Execute and stay with a successful timing strategy for the long haul and you will be greatly rewarded over time.

    Market timing is the following of a successful trading strategy that keeps you "in" during long term market advances and gets you "out" during long term market declines. If you are in during all up trends and out during all downtrends, you will be "in" for most, if not all, of those five-best-days, and out for most, if not all, of those five-worst-days.

    Cut your losses short and let your winners run. The very "definition" of market timing.

    Aug 15 7:17 PM | Link | Comment!
  • Fear & Market Timing Paralysis

    The fact is, all traders, investors, and yes market timers, feel fear at times, at some level.

    What is important is how we address it. Knowing the definition and reasons for fear can actually help market timers to overcome it.

    Traders "Believe" They Know The Future

    In the book "Trading in the Zone" by Mark Douglas, he describes how most traders "...believe that they know what is going to happen next."

    This can cause market timers to put too much importance on the "current" trade, and to lose focus on their performance over time.

    But market timing is based on "probabilities" that make us successful over time. Too much focus on a single trade causes the fear levels to rise. As this occurs, market timers become hesitant and cautious, trying to avoid mistakes. The risks of choking under pressure (not making a trade) build.

    All market timers, at times, feel fear. But successful market timers manage their fear, while losing market timers are controlled by it.

    When faced with a particularly stressful decision, it is a perfectly normal human response to revert to the "fight or flight" response. Either we do battle, or flee. When a market timer feels such an emotional response, his or her decisions are very likely to be adversely affected.

    Fear of Loss

    The fear of loss can keep a market timer from executing a trade. Or it can keep him from exiting a trade when the trading plan calls for it. Either can be costly.

    No one likes to have losses, but even the very best timers do. The key is to realize that you are worrying about the results of "that" trade, and not concentrating on executing the plan, which over time will make you successful.

    Trading plans, such as the ones we use here at FibTimer, take time. No single trade makes or breaks the plan. Once you understand and accept that, it is much easier to make the trades without the "fight or flight" response hampering your ability to act.

    Fear of Missing Out on Profits

    This fear is usually felt during runaway rallies. All your friends are talking about the incredible profits they are making every day. If you really look at this in the right perspective, it is a very dangerous kind of fear.

    It eventually causes you to buy in, and of course, when you and thousands of others who feel the same way react at the same time, the market is finally at its top.

    Having a trading plan, and sticking to the trading plan, eliminates this fear. You "know" your plan works, so you are not susceptible to the "greed" factor that comes so easily in market rallies.

    Fear of Losing Profits

    This fear arises when you have a profit, and start worrying about losing it. If you take your profits, you will feel like a winner! But you know this story. The market will likely continue in the same direction, leaving you with an entirely new set of fears.

    Fears cloud decisions. And decisions clouded by fear, that feel right at the time they are made, are more often than not... wrong.

    Again, back to the trading plan. You know what to expect, because you have a plan that "will" succeed over time. It "will" bring in those profits. So a commitment to the "plan" relieves you of the fears of missing out on that quick profit, and the decision that invariably turns bad.

    Fear of Being Wrong

    Consider these next two sentences;

    1. The desire to be "right" is in direct opposition to the ability to be successful.

    2. The desire to be "right" is in direct opposition to the ability to make money.

    A market timer's desire to be right, to be able to tell his friends how successful he or she is, can become so powerful, that a he or she winds up second guessing, the "plan." Taking winners too quickly, or holding onto losers in the hopes that they will come back, or at least break even.

    Conclusion

    To sum it all up, "successful" market timers actually make their profits off the "fears" of the majority of investors, traders, and even other market timers.

    They do this by "sticking to a plan" and not allowing emotions (fears) to rule their decision making ability.

    FibTimer provides the plan. Based "not" on emotions, but on a sound "trading strategy."

    Fear can be conquered when you have a plan. As time passes, confidence builds, and the plan will become easier and easier to follow. Stick with the plan.

    Aug 08 4:57 PM | Link | Comment!
  • Emotions And Trading

    The stereotype of the perfect trader (market timer) has many of the same traits as Mr. Spock on "Star Trek." Mr. Spock looks at events logically and objectively, and follows a rational plan when creating a solution to a problem.

    In some ways, Mr. Spock would appear to be the ideal trader.

    He would carefully formulate a detailed trading strategy, find the market conditions that suggest his strategy will produce a profit, and then and only then, would he execute it.

    But, in the end, it is important to realize that Mr. Spock is a fictional character. And even if he were real, he is a Vulcan; he isn't human.

    Traders are humans, however. In addition, market participants are humans, and they don't always behave rationally. Indeed, they tend to be driven by fear, hope, and greed, and thus, forecasting market behavior has proven much more difficult than space travel.

    In the real world, humans are emotional. Emotions rule everything in the markets. The decision you must make, however, is whether you are going to control your emotions in order to trade decisively and profitably, or let your emotions rule you.

    Realistic And Logical

    The successful market timer is realistic as well as logical.

    It doesn't do you any good to become overly disappointed when have a loss or overly euphoric when you have a big gain.

    Extreme pleasant and unpleasant emotions can be very distracting. If you are angry, frustrated, or worried, you won't be able to focus on sticking to the timing strategy. Your attention will be elsewhere, and those negative emotions can cause you to make incorrect, and usually costly, trading decisions.

    It is essential to keep negative, or unpleasant, emotions at bay.

    At the other extreme, it isn't wise to feel too elated or euphoric. Extremely pleasant emotions are usually the flip side of extremely unpleasant emotions. That is, it is usually those timers who experience extremely unpleasant emotions when faced with setbacks who also experience extremely positive, euphoric emotions when suddenly faced with a huge gain.

    At moderate levels, pleasant emotions are motivating, but at the extreme, they may be associated with impulsive decisions, such as exiting a position for no good reason or abandoning risk control strategies.

    Emotional By Nature

    That said, it is almost impossible to be emotionless. Humans are emotional by nature. It is difficult to experience absolutely no emotion. In all likelihood, the closest we could get to an emotionally neutral state is indifference.

    So what is the best way to cultivate an optimal emotional state? We know that negative emotions, such as fear, anger, and disappointment can be harmful. And we know that euphoria often leads to over confidence and timing errors.

    One possibility is to cultivate emotions that are only moderately positive, emotions that aren't euphoric and prone toward over confidence.

    Rather than react to setbacks with frustration or fear, one can approach the setback with a sense of realistic optimism. Losses are part of the game. There is no way around them. Market timers should focus on the goal of generating successful gains over the long term, not the daily or even weekly ups and downs of the markets.

    Never underestimate the power of emotions. Extreme optimism or pessimism can interfere with your goals, but by approaching problems with a realistic sense of optimism, you will stay the course, stick to the trading strategy, and generate excellent timing profits over the years.

    Aug 01 12:44 PM | Link | Comment!
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