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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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  • Focus On The War, Not The Battle

    Why do most traders lose most of the time?

    Why is it so many investors will stay with a position as it loses, hoping it will bounce back, instead of cutting their losses? And why do those same investors, when they have a winning position, take quick profits instead of letting the trend play out?

    It is all about emotions. Not wanting to lose. Wanting to feel good about a profitable position. But unable to make consistent profits.

    It's Not The Battle, It's The War

    Too many market timers believe their last trade is a reflection of just how good a timer they are (or how good their timing service is).

    This boils down to one word - expectation.

    If you expect to win all the time, or even the large majority of the time, you're setting yourself up for a lot of heartache.

    And the sad fact is, if you believe market timing is about winning all the time, you are also setting yourself up to be one of those many thousands of losing investors.

    To win as a market timer, you must focus on the war - not the battle.

    The fact of the matter is, this is to a large degree a game of odds, and should be played over a long period of time. Those market timers who recognize this fact, and do not pull out during a losing position will be the winners in the end.

    Market timing is about beating the markets, and all those "other" thousands of losing investors, over time. It is about following a timing strategy through thick and thin, and profiting over time.

    We write about this frequently because we are just as human as our subscribers. We know the emotions. We know the pressures. If we can make all of our subscribers recognize that sticking to the strategy over time is the key to success, we will have accomplished a great deal.

    The FibTimer historical trade pages (available by link from all subscriber reports) show the excellent profits we have made over the years. They also show small losing trades. It is to be expected in market timing and in fact in all trading. Be prepared for them so that they are not unexpected, and over time you will be successful.

    The "Worry" Factor

    All humans worry. If we didn't worry, we might take dangerous risks, and pay a steep price.

    Worrying is normal in our lives, and has an important function.

    However, worrying becomes a problem when you do it too often and for no good reason. For example, if your last timing trade was a loss, and you worry about it, you tend to think the same thoughts over and over again. It doesn't help much and you are likely to let it interfere with your ability to execute the next timing signal.

    Excessive worrying "can" be a problem for successful market timing.

    If you are the kind of person who worries all the time, it may interfere with your ability to pay attention to executing your market timing strategy.

    The solution? Think "long term." Remember, it is the "war" you are trying to win, not the current battle.

    The Difference Between Winning Timers And Losing Timers?

    LOSING market timers have unrealistic expectations about the kind of profits they can make, typically shooting too high.

    Losing market timers also debate with themselves before executing buy and sell decisions, and even dwell on a position long after it's closed out.

    Losing market timers pay little attention to money management, tending to enter and exit trades emotionally.

    And critically, losing market timers have no clear plan how, or when, to exit.

    WINNING market timers follow a strategy that uses strict money and risk management rules which keep them in a winning position as long as possible, and protect them against large losses.

    Winning market timers obey their chosen timing strategy faithfully, knowing it will not be profitable all the time, but that over time it will beat the market, and it will never allow them to lose substantial capital in a bear market.

    Winning timers take action instead of suffering "analysis paralysis."

    Winning market timers never allow emotions to take over, or have any part in, their timing decisions.

    Hopefully this second description fits you better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier

    Why Do We Focus On Emotions?

    We have been asked many times why we focus so much on emotions in our weekly commentaries.

    Allowing emotions to affect trading decisions is the number one reason why most investors lose money in the financial markets. Allowing emotions to affect timing decisions is also the number one reason why market timers fail.

    When emotions enter the picture, timers jump the gun on buy and sell signals. They exit positions before the strategy tells them to. Emotions cause them to abandon a perfectly good timing strategy and, almost always, it happens at a time when they wind up losing money.

    Why? Emotions run highest when you are in a losing position. But losing positions are an absolute certainty! So be prepared for them, or be prepared to make bad decisions, and lose capital.

    Giving in to emotions, makes you one of the vast herd of followers, trying to out-think everyone else, but in reality you are just moving with the herd. And the herd always loses in the end.

    To be successful at market timing, and in fact to be successful at any trading, you must follow a strategy that "removes" emotion from the equation.

    This means your trading plan "must" be totally removed from any discretionary input.

    If you can change the trade, you will!

    And if you change the trades, eventually you will lose.

    Choose strategies that match your emotional trading style, whether aggressive or conservative (and hopefully a diversified mix of both) and stay with them.

    The market timer who stays the course, winds up with the gains we post on the website on our trade history pages.

    Aug 29 7:26 PM | Link | Comment!
  • 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!
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