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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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  • Letting Your Profits Ride

    Stick With The Plan

    This may seem like a common sense statement, but the reality of market timing is that the majority of timers "think" they can stick to a timing strategy, however when the market moves against them, as it always does as some point, they are swayed by financial news stories, the desire to be "with" the crowd, and their own emotions, often exiting the strategy at exactly the wrong time.

    Think about it. Let's use a fictional market timer named Mark for this example.

    Mark has a strategy he knows has, over many years, outperformed the stock market. Mark knows going in there will be times when the strategy will lose. He sees this in the historical trades. He accepts this or at least he thinks he does.

    But then, the market turns against Mark's first buy or sell signal and he is down 2%, then 4%. Mark is counting the dollars. He wakes up during the night with feelings of dread. Maybe "this" time it is different.

    The next day, Mark exits the strategy and immediately feels better. He starts searching the internet for a better timing service.

    They are easy to find. We have personally seen some that "guarantee" 200% and 300% returns. Much better than that 4% loss.

    Another says it made 140% in 2013, but does not say the strategy did not go live until the end of 2013.

    So it is not real...fake results...backtesting.

    Of course the day after Mark exits the strategy, the market reverses and within a few more days, the strategy is now back in positive territory. Mark cannot enter, because he has lost 4% and knows it is not wise to enter mid-trade.

    Mark is now feeling upset again. The initial feelings of relief when he exited the trade are gone. Mark is starting to feel he is missing out all over again.

    After watching the market continue to advance, Mark finally makes a decision and re-enters the position after it has a nice 10% gain. Mark is feeling good again as the market has obviously turned and he is back on board.

    Immediately the market takes back 4-5% of those gains and Mark now has a loss, that never should have occurred, of 8% to 9%.

    Those who stayed with the strategy from the initial buy or sell signal are in positive territory and have a nice gain. Mark, however, exits again, with double his original loss, and quits market timing for good.

    None of this need happen. When you start following a strategy, plan to stick with it for several years. That is how the smart money makes profits. They do not let emotions rule their trading decisions. They stick with the plan!

    The Trend Is Your Friend - Trade With The Trend

    At FibTimer, all of our timing strategies are based on trend trading. We know that the financial markets are usually in a trend, either up or down. So we enter the markets "after" we have identified a trend.

    It is great to catch a reversal. It is also very difficult. Let me rephrase that.... it is almost impossible. We read stories of those who have perfectly caught a reversal, but they are news stories "because" it is so uncommon.

    It is much easier to wait for a trend to begin, and then jump on board. If the trend fails, and some do, a well managed timing strategy will exit to cash, or reverse position, with only a small loss (or even a small gain). When the trend keeps going, that same well managed timing strategy rides the trend as far as the trend goes. This is where the power of trend trading is seen. By never missing a trend, and staying with the trend, trend following market timers make huge profits over time.

    Finally, one of the most dangerous trading methods is to take a contrary position and pray for a reversal. Such trades rarely work out. But many, many traders try them. And... many, many traders lose a lot of money.

    Let Your Profits Run - Cut Your Losses Short

    The second part of this rule (cut your losses short) is the toughest one.

    It involves admitting that you were wrong. But in market timing, as in "all" trading, it is a rare moment indeed where you will eventually be proven right after first being proven wrong.

    The FibTimer strategies are designed with strict risk management right from the start. We "never" let losses grow. If we issue a buy or sell signal, and our indicators reverse, we reverse position (or go to cash) immediately. If you look at our various strategy trade histories you will see that we rarely take a loss of more than a few percent.

    There is a reason for this. It is easy to make back a small loss. However large losses are not only hard to make up, but the psychological pain you experience from them could cause you to quite the strategy. And quitting with a loss not only guarantees that you will lock in the loss, but it is likely to have a detrimental effect on your buy and sell decisions for a long time.

    The opposite of course is "letting your profits run." At FibTimer we never set a profit target. As far as we are concerned, when we have a profitable trend going, the sky is the limit. We will stay with that trend as long as it is profitable. 20%, 50% 100%. We "never" limit profits.

    This is why small losses do not concern us. We know that when we have our next profitable trend, we will ride it to the end.

    Never Make Timing Decisions Based On Tips

    A tip is rarely more than opinion, and frequently a bad one at that.

    Even if the tip comes from a friend, don't take it. If you have a hard time with this, go back to "The Trend Is Your Friend."

    Burn this into your head! Unfortunately, in market timing, a "friend" is not always a friend.

    This is another (of many) reasons why we follow non-discretionary timing strategies at FibTimer. There is "always" a reason to doubt a trade. There is always someone who knows, absolutely, that the trade is wrong. In fact, they are often willing to go into great detail why you are making a bad trade.

    Why would they do this? Simple, it is to prove to themselves that their trade is the more correct one.

    Again, this is all emotion. And allowing emotions to have any say in your market timing (or any trading) decisions, guarantees that you you will have even more emotions to deal with. The emotions caused by losses.

    Stick to the timing plan. Trade with the trend (all FibTimer strategies are trend following strategies), cut your losses short and let your profits ride, and never, but never, listen to others. Successfully following and profiting from a timing strategy can be accomplished only by you, and you alone.

    Mar 08 12:44 PM | Link | Comment!
  • Following The Crowd... To Conform Or Not To Conform?

    Humans have a natural tendency to follow the crowd, but when timing the markets, following the crowd can often result in losses.

    Unless you are in the middle of a long term trend, it usually doesn't work to conform to the masses.

    Expert market timers know how to spot trends and they make sure to climb on board and profit. But often, the very same buy and sell decisions, which must be executed to jump on board that trend, are in direct conflict with current market sentiment.

    It is not easy to make that trade when it conflicts with what seemingly everyone else is doing.

    Interestingly, your ability to break away from what the masses are doing, from current sentiment, may have a lot to do with your personality.

    Following The Crowd

    There is safety and comfort in numbers. In following the crowd. Across the generations, people learned that survival depended on banding together and working as a group.

    All humans inherited this legacy, and it is shown in the security we feel when we follow the crowd.

    The most successful members of society have seen the virtues in following the crowd. They have learned to look for rules to follow and to decide which standards to strive for. Blind obedience to authority may not be beneficial but compromise is.

    To be successful, it was vital to protect one's self interests yet also stay within the bounds of acceptable behavior.

    Although you've been frequently warned about the pitfalls of following the crowd, it's important to recognize that it is a survival instinct that is ingrained not only in humans, but in most animals too. Think of herds of deer, flocks of birds, swarms of insects, schools of fish. There is safety in numbers.

    Going Our Own Way

    Although following the crowd isn't bad all the time, such as during a long term rally, there are times when a market timer should not follow the crowd.

    If all we had to do to be profitable was follow our instincts, we would likely be making the same buy and sell decisions as the vast majority of traders. But just as the vast majority of traders are NOT profitable... as market timers we want to "break away" from their emotional trading and BE profitable.

    At Fibtimer, market timers trade market trends. Trends are created by the masses. Those same masses who are buying stocks at the top of a rally, and selling stocks at the bottom of a correction.

    This means that most of the time, as market timers, we must go our own way. And right there is the crux of the problem.

    As soon as our timing strategy, which is NOT based on the emotions of the masses, issues a buy or sell signal contrary to the current sentiment, our very human survival instincts kick in. We want to STAY with the crowd. It is hard to do what your instincts tell you not to do.

    But those market timers who are successful, have learned to do just that.

    Breaking Away From The Masses

    We WANT to follow the masses. It is comforting.

    But if we want to profit when the masses do not, we must learn to push down those same instincts which have made us successful in life, and refuse to allow them to control our buy and sell decisions.

    It is true that the crowd is often right... until a turning point occurs. But when the markets turn, the crowd holds on, often until most if not all their gains have evaporated.

    Going against the crowd takes a special kind of person, a person who isn't afraid of risk but doesn't seek it out, a person who looks inward only, and doesn't need reassurance from others.

    FibTimer has spent years developing and fine tuning market timing strategies that are profitable. Look at the historical trading results of individual trading strategies (at least 10 years of real-time trades are posted for each strategy). These results can be yours, but you must commit to trading the strategies for the months and years necessary to realize them.

    Break away from the masses and you too can realize the profits that we have achieved over the years.

    Mar 01 10:17 AM | Link | Comment!
  • The Grass Is Not Greener On The Other Side

    As market timers who trade trends, we are always on the lookout for a new indicator or strategy that might give us a better edge and improve results. Education and research never end.

    Many hours are spent testing every conceivable timing method. We study suggestions submitted by subscribers (always appreciated), ideas garnered from analysts seen on TV, books offering trading strategies and sometimes spend hours just trying to improve current strategies.

    You name it and we have read it, studied it and spent many hours researching it.

    Changing Methodologies To Meet Current Market Conditions

    A good friend emailed the following, "A trader puts himself a great risk of failure trying to guess what the markets are going to do and changing methodologies to meet current market conditions."

    How true. Yet so many investors do just that.

    They will follow a timing strategy, but when the strategy makes a move they are not comfortable with, or the strategy takes a loss, they either hold back on that buy or sell signal, or search for another market timing service that agrees with how they feel at the moment.

    They search for someone who will "promise" huge gains. Who will say they have achieved unrealistic profits over previous years. Who will promise them the world (just send your hard earned dollars).

    We emphasize "promise" because so many services will do just that to entice you to subscribe.

    They are out there. We have seen so many websites offering guaranteed profits of 50%, 75%, 100% (or more) a year we have stopped looking at them.

    Some actual statements copied from market timing websites, "up over 1000%," "gains averaging from 61% to 263% annually," "Up 1500% in 4 Years," "annual returns above 100% with only few trades a month," "up over 900%."

    We personally watched a new market timing service, who's owner asked us for advice (and who's service will not be named here), post years of incredible gains, all achieved by back-testing. Gains averaging 60% to 80% a year every year!

    They started their new service and by the year's end had achieved a loss. Real time trading is completely different than back-testing. Anyone can back-test and achieve wonderful results, but real-time pits you against the real world.

    Every time we are told of a new service that has achieved spectacular results, we check how long they have been in business. Usually it is less than a year. But they are posting trades going back many, many years. Is this not a bit suspicious?

    Getting back to that new website, at the start of the new year, those losses disappeared. I looked. They are nowhere to be found. All I could find were beautiful charts showing how much you would have made, had you followed their strategy for the last ten years.

    It is so easy to make your results look better than they are.

    Please do not fall for such scams.

    Making money in the stock market is not easy. It takes hard work and patience. Anyone who says they have the key to easy money is lying. We received an email recently from a service advertising 288 winning trades with only 3 losing ones. Sure... There are people still buying the Brooklyn Bridge too. At FibTimer we tell all our subscribers that losses are inevitable in trading. The trick is to keep them small.

    We also post every trade, and keep those trades posted on the website for years. Every strategy has a link to a "Trading History" page with complete trade history and details for that strategy.

    If achieving profits in the stock market were no more difficult than going shopping at your local supermarket, everyone would be a billionaire.

    FibTimer offers solid results by trading "all" trends, for subscribers who "stay" with our strategies and do not exit at the first small loss or inconvenient news event.

    The Grass Is "Usually" Greener During Drawdowns

    Typically, market timers experiencing a drawdown are most tempted to change methodologies. If the grass is always greener, it makes sense that it appears vivid green when your strategy is experiencing a loss.

    But changing methodologies mid trade is almost always a losing proposition.

    Traders who change strategies during a drawdown are attempting to "forecast" what the market will do next. There is no way to do this consistently, so the odds are, the change is a mistake. ALL strategies have periods when the markets move against them. If traders think otherwise, they are headed for losses.

    You can always find an indicator that worked perfectly over the prior weeks or months. It is easy to find an accurate forecaster "after" the fact. It is an entirely different matter being accurate in real time and then doing it consistently.

    Emotions are the primary reason for changing a good strategy mid trade. We have written so many commentaries about emotions, this may be repetitive to many of our subscribers, but it is extremely important.

    Emotional decisions are almost always losing decisions.

    Trends are where the money is made. They last longer than anyone expects, and usually no one believes them when they start. They last months, or a year or more. Take a look at a long term chart of the markets. One that covers ten or more years. See any trends in there?

    Don't Be Misled By False Promises

    Because no one can accurately forecast the future, some trends will fail. But at FibTimer we exit those failed trends quickly, keeping losses, if any at all, small.

    As long as "every" trend is traded, trend followers will "always" be fully invested in every real trend. They will "never" miss a trend!

    Those who stayed the course with Fibtimer during the 2008-2009 bear market realized solid gains. And over following years those gains have multiplied to become huge gains.

    Trend trading is the sure path to consistent long term profits. Strategies based on any of the many, many indicators are subject to periods of time when those indicators fail. Do not be misled by anyone who promises he or she has found the perfect indicator. It does not exist.

    Use common sense and stay with the trends to ensure you are "never" left behind in any rally, and are always protected during a bear market or prolonged decline (or profiting in a bearish position).

    Feb 22 1:29 PM | Link | Comment!
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