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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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  • Hope May Spring Eternal, But It Won't Make You Money

    As described in "Reminiscences of a Stock Operator" by Edwin Lefevre, "The speculator's deadly enemies are: Ignorance, Greed, Fear and Hope."

    Each of us has a desire for success. It is why we here at Fibtimer.com use market timing to guide us to profitability. Market timing not only increases our gains in bull markets, but also protects our capital against loss in bear markets.

    But if you are not careful, that same desire for success can stand in the way of your ability to recognize reality, even if it is right before your eyes.

    Hoping For Success

    All of us have a survival instinct that typically causes us to focus on good news. Bad news is avoided, or at least put on the back burner.

    When we take a position in the market, whether bullish or bearish, we "hope" it will be successful. Hope can be such a powerful emotion, that when the same trading plan that told us to enter a position originally, reverses and tells us to exit immediately, our emotions may very well focus on the possibility that if we just hold on a bit longer, any loss might be erased.

    Just give it another day. Just wait till it is back to break even.

    The only way to avoid this is to recognize that hope can destroy our ability to profitably trade the markets.

    Successful Market Timers Win Because...

    Market timing, in fact all trading, cannot be successful without a "plan." Trading by emotion, by news events, or out of fear, is not very different than gambling. Successful market timers win because they follow a plan.

    We all know that no person (trader or market timer) will be right all the time. Knowing this, we must accept that we will have losses.

    What separates the winning traders, from the losing traders, is their ability to recognize that when a trade turns bad, there is no emotion that can fix it. The only correct decision, is not really a decision at all. If you are following a good trading strategy, just follow the "plan." If the plan says reverse, then follow it. If the plan says to go to cash, then go to cash.

    Simple? Not if you cannot accept a loss. Then hope springs eternal. You can find a hundred reasons not to execute a trade. Anything to delay so that "hope" can work miracles.

    Winning market timers have their share of losses. But they keep the amount of those losses small. They follow their plan and "never" hold onto a losing position "hoping" it will break even or turn into a winner.

    In Vegas The House Always Wins

    When we go to Las Vegas, we know that the odds are stacked in favor of the house. But we gamble anyway in "hope" that we will leave a winner.

    But market timing is not gambling. When you trade with a "plan" you have an edge that you know will win over time, as long as you use discipline and follow it. Just as "the house" knows it will win over time in Las Vegas, the trading plan provides the "edge" that makes us winners.

    But once we lose that edge, and start hoping instead of following our plan, we become like the gambler in Vegas.

    And in Vegas, the house always wins.

    Hope and Your Ego

    Hope is also closely tied to ego. We do not want to admit that we have made a mistake. Our ego wants success, and wants it immediately.

    Losses do not feel very successful. Our ego can cost us a great deal of money.

    In order to make money, we need to keep losses small, while letting our winning positions run. Neither hope nor ego has any place in market timing or in any form of trading.

    Conclusion

    When you trade with a "plan," it is in black and white. You know when to execute a buy or sell signal because the "plan" tells you when. A plan does not rely on hope. A plan has no ego. A plan gives us, as market timers, an "edge" over the market and other traders.

    Each day we should examine ourselves. If we feel that hope is part of our trading plan, remember that hope is almost a guarantee of losses.

    The only way we keep our "edge" over the stock market, is when we follow the plan.

    Jun 19 3:37 PM | Link | Comment!
  • The Compulsive Impulsive Trader

    The Stereotype

    We are all familiar with the stereotype of the compulsive trader. Traders who are compulsively looking for trading thrills, while telling themselves they are doing it to make a profit.

    The rush of adrenalin that comes from making the "big" trade and then watching to see if it is followed by a "big" win.

    It is not so different from betting at the race track.

    It is far removed from what is required for successful market timing.

    Compulsive impulsive market timers take trades because of emotional responses to news events, market rallies, or market sell offs, because they "feel" they know what is going to happen next in the markets.

    They take trades not because the trade is required, but for the thrill of the trade itself. All risk controls are ignored, no logical trading strategy is followed, and no exit strategy is prepared ahead of time.

    Of course anyone can act impulsively at times. But in the investing world, impulsive trades are almost always losing trades. And compulsive impulsive trading, can lead to outright ruin.

    Delaying Gratification

    An interesting test was run to measure a person's impulsive tendencies:

    Participants were asked to decide between taking an immediate, small monetary reward (that is, $200 right now) or a larger reward given later, $500 in six months.

    Impulsive people tended to take the smaller, immediate reward. They have difficulty delaying gratification. They can't wait for the larger reward. They want what they can get as soon as possible.

    Even disciplined people can act impulsively when the conditions are right.

    There is little harm in impulsively going for a latte instead of your usual morning coffee, black with two equals.

    Yet while some impulsive decisions may have little effect on one's life, impulsive decisions when trading the stock market can have major negative consequences.

    Compulsively Impulsive

    Trading (market timing) requires that investors clamp down on emotional impulsive behavior. Market timing is possibly "the" perfect example of unemotional, non-compulsive and non-impulsive planning. Timers look far ahead in time, planning for gains that may not be realized for months. If in cash during a bear market, actual profits may be postponed years.

    Instant gratification is the exact opposite of what market timers must expect. Those who think that long term buy-and-hold investors hold the edge in long term planning are not correct. It is market timers, following a plan that takes years to unfold but offering gains far in excess of a simple buy-and-hold, who have the real long term strategy.

    Conclusion

    Compulsive traders will have great difficulty being successful (profitable) market timers. Market timing is the non-compulsive execution of a planned strategy, that can only be successful over time.

    Impulsive traders will have great difficulty being successful (profitable) market timers. Market timing requires adherence to a trading strategy that requires trading not when you feel the urge, but only at specific points in time when your trading strategy tells you to do so.

    Compulsive impulsive personalities face many difficulties. But in investing, be sure to hold those impulses at bay if you want to successfully beat the markets.

    Jun 12 11:50 AM | Link | Comment!
  • Market Timer, Know Yourself

    Fibtimer's success depends on "your" success. We want you to be successful. To achieve this requires not only successful market timing strategies, which we provide, but subscribers must also follow those strategies correctly.

    One of the most difficult tasks for us at Fibtimer, is trying to help subscribers understand what is required to achieve success in market timing. We can publish the reports, but if the strategies are not followed correctly, the odds of being profitable diminish.

    This commentary covers some of the questions we would ask every subscriber if we could talk to them personally.

    Know Your Limits

    Subscribers should use the strategies that suit them best. We have aggressive, active, and conservative timing strategies. Make sure you know what sort of timing strategy you are emotionally able to handle.

    A novice market timer, who jumps right into an aggressive timing strategy, might have a difficult time when facing several trades in a fast market. It does not happen often, but it can happen.

    If you are conservative, use a conservative strategy. If you are a bit more aggressive, use the active strategies. Remember that you do not have to make lots of trades to be profitable. During volatile markets our more conservative strategies are often the best performers.

    Jumping The Gun

    Another concern is new subscribers who trade immediately. Entering a new position "before" a new bullish or bearish signal has been issued. We understand the urge to jump in and get started, but in reality, "mid-signal" entries are usually more risky than waiting for a new buy or sell signal. When a subscriber enters on his or her own, mid-trade, the result may be losses that should never have happened.

    Patience is a key element to successful market timing. You cannot rush profits. You "can" rush losses though. So take your time and enter properly. You have years of timing ahead. The markets have been around for hundreds of years. They are not going anywhere. Wait and do it right.

    The Strategies

    Our conservative and active strategies are designed to manage risk in volatile, or sideways markets, and to correctly place us in bullish or bearish trends when they occur.

    Aggressive strategies often make their biggest gains during bear markets. When everyone else is losing, the bearish positions are making profits. A 20% market loss equals a 20% gain for the timer, which is 40% better than the market.

    The aggressive strategies are often, though not always, the most profitable over time. But if you exit the strategy after a small loss, you will not be profitable when the strategies catch a strong bearish (or bullish) trend.

    There is an old saying, "If you cannot accept a loss, than you will never succeed in the markets." If you feel you will worry over multiple trades, or may not have the discipline to stay with trades that at times go against the market, use the conservative or active strategies.

    Diversification

    This all brings to mind the next important subject. Market timers should diversify. Putting all your eggs in one basket just does not make sense. No strategy is perfect. Every strategy will have periods of non-performance. This is a fact of trading the markets.

    If you have all your timing funds allocated to a single strategy, you are just hurting your chances of success. If you have the funds available, use several strategies.

    If you do not have the funds available to diversify properly, stay with the Conservative S&P Timer. It just makes sense. if you do, consider the Diversified Timing Strategy which has diversification built in.

    Committing

    Finally, there are those subscribers who wait to see if a signal is correct before following it. This again diminishes the ability of our risk management, built into the strategies, to work correctly.

    In the aggressive and active strategies, the price we enter at, can be quite different than an entry made two or three days later. This potential is somewhat lessened in the conservative strategies which typically hold positions for considerably longer periods of time, but still should considered.

    Jun 05 2:48 PM | Link | Comment!
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