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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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  • Trading The Short (Bearish) Side. The Truth Behind The Hype

    There is a great deal of "hype" regarding aggressive market timing, with timing services often advertising overinflated gains attained by trading both bullish (long) positions and bearish (short) positions.

    The truth is that market timers "can" make excellent gains trading both sides of the market. But what no one tells you is that it takes more discipline and patience than most timers are willing or able to give.

    Read on for the "truth behind the hype."

    Natural Upward Bias

    There is a natural upward bias in the stock market. That bias results in long periods of gains, during which there are many short but sharp corrections to the upward trend. These corrections often do not last long and are "usually" impossible to profit from.

    Often such corrections see most of their losses within the first few days. In fact, the markets can go for months without a tradable decline. Declines must be long enough and deep enough for market timers, especially mutual fund market timers, to take advantage of them. Seldom do the financial markets oblige.

    The fact is; using bearish (bear fund) positions during upward trending markets would often results in losses in those trades.

    For this reason, Fibtimer typically moves to a cash position when the markets are near their highs. Cash protects against further declines, and does not lose money when the markets reverse back to the upside, as they so often do.

    If the upward trend is still intact, the markets will reverse back up just as sharply. Often the resulting buying pressure causes traders to quickly exit short positions causing fast reversal rallies.

    It is hard on the emotions when these quick trades occur. But aggressive timers who take both bullish and bearish trades are better safeguarded by being in cash if the markets correct from their highs.

    Only when the stock market is in a long term decline or a bear market does Fibtimer enter bear fund positions. In such conditions, bear fund positions can create substantial profits.

    Time Frame

    Aggressive timers with a realistic time frame (several years or more) will certainly see a correction that will be long enough and deep enough to create substantial gains by taking bearish positions.

    If you want to use bear funds, you must have a long term horizon, and be willing to wait for those big declines (bear markets). This is just the reality of trading.

    Bearish positions are riskier than bullish positions because the markets trend higher for longer periods of time than they decline.

    We only use them when we are in a bear market.

    Of course years 2000 through 2002 were bear market years and the Bull & Bear Timer greatly outperformed all the other strategies. The same thing occurred in 2008-2009 when we profited using bear funds.

    But when will the next bear market start?

    Going For the Home Run

    What market timers need to know is that there can be large profits made during long term declines (bear markets). But until we have a bear market, it is better to use cash positions during sell signals to protect against loss, yet not cause additional losses if the markets reverse to the upside.

    Bull and bear timers must be willing and able to stand this test of time.

    Market timers who trade both bullish and bearish positions should "expect" that they will need to trade for several years before using bear funds. It is not safe to use those funds near market highs. The risk of losses is far too great.

    Those who trade bearish positions are going for the "home run." But you must recognize that home runs are not hit every day. You may go a couple of years between them, or even longer.

    If you feel you cannot stay the course for such a time frame, use bullish only timing strategies like out S&P Conservative Timer, which goes to cash during sell signals.

    Conclusion

    Don't be swept off your feet by hype and advertising. Bull and bear strategies work, but timers who trade them must be prepared to stay with them for long periods of time.

    At FibTimer, even though we have been market timing since 1982 (online since 1996), our preference is to take bullish positions. We trade our own accounts using the Diversified Timing Portfolio which allocates only a limited amount (20% maximum) to bearish positions.

    Remember that Bearish positions should only be used in very specific conditions.

    Yes, bearish positions do result in large gains during bear markets such as we experienced in 2000-2002 and 2008-2009, but such declines are not everyday occurrences

    Jul 12 10:13 AM | Link | Comment!
  • When Your Money Is On The Line... When Your Money Is On The Line...

    The winning market timer is cold, calculating, and unemotional.

    Sound a bit unreal? Maybe it is, but the reality is that it is important to control your emotions, rather than let them interfere with your trading decisions.

    We have written many, many times about fear and greed and how they are the true motives behind market behavior. Fear and greed may control the masses, but if they are allowed to control you, you become one of the millions who can't understand why they cannot make a profit when, supposedly, everyone else is.

    There are also other emotions, such as anger and disappointment, that can influence your decisions. Emotions may interfere with discipline and sound decision-making.

    But, they are not "all-powerful". You CAN master and control them.

    Fight Or Flight

    It is reasonable to be fearful when your money is on the line.

    That is why winning market timers protect themselves by trading with a detailed market timing strategy. Timing strategies are NOT affected by the emotions of the masses, and they are also designed to manage risk.

    When you KNOW your strategy works over time and also is designed to minimize risk, you can execute the buy and sell signals effortlessly and with less fear. You do not fret over the inevitable losing trade.

    Instead you are excited about the next trade. You KNOW that next big winning trend is coming. Whether it begins tomorrow or in several months you trade with the knowledge that when it begins, "you" will be one of the winners who capitalize on it!

    This is why trading with a specific timing strategy is critical. The moment you deviate from the strategy, you become one of the masses. But if you stay with the plan, you USE those same masses to your advantage.

    Anger And Disappointment

    Anger and disappointment are two additional emotions that powerfully influence trading decisions.

    Both emotions concern expectations about our market timing performance and how we expect the market to behave.

    We become angry when things don't go our way. Because we want to win, we hope that the market will behave in a manner consistent with our timing strategy.

    When we feel that fate, or some unidentified external forces (i.e. news events) have created a situation that thwarts our plans, we become angry.

    When we think we ruined our own plans because of our incompetence, we feel disappointed.

    Regardless, there's a natural inclination to want to control our destiny, and when it comes to market timing, we want to control the market.

    We may want to impose our will onto the market.

    The market, however, can not be controlled. One must accept what the market has to offer. You cannot make the market do what you want it to do.

    Acceptance Is Key

    If you accept that you are powerless over market action, you will be less angry or disappointed. If you anticipate and truly accept the fact that the market can, and often will, go against your timing strategy, and that it isn't personal, you will not be fazed by it when it happens.

    You will just accept it, and move on.

    If, on the other hand, you expect the market to move in your favor, you will feel angry and disappointed, which often leads to feelings of revenge or despair.

    These emotions can be paralyzing. It is better to accept the market for what it is. Accept the results you achieve, good or bad, and just move on to the next trade. A good timing strategy is not profitable on every trade. No strategy is.

    But if you quit because you are angry or disappointed, think how you will feel when the next trade is the start of the next big and profitable trend!

    Emotions are a natural part of trading. The markets don't always meet our expectations. If you accept this fact, you will be able to minimize the influence of emotions.

    You will then follow your timing strategy and over time, will achieve the results you desire.

    Those Who Leave Never Achieve

    Those who leave never achieve. All they do is chase the promises of supposed market experts who will take their money, but seldom ("never" is a more accurate word) give them the profitable results they desire. There are hundreds of them out there making promises so ridiculous we are embarrassed to even print them.

    Fibtimer does not post inflated (or back-tested) timing results like so many of our competitors do. We have years of trading behind us as well as years of posted real-time trading history. All subscribers have full access to all trades and trading history.

    Our posted results have actually been realized by those subscribers who faithfully followed our trading signals in real-time trading.

    Stick with the plan and you will succeed.

    Jul 03 12:44 PM | Link | Comment!
  • Making Sense Of The Stock Market

    When a person decides to enter the financial markets, he or she brings years of personal experiences with them. Those experiences are usually a detriment to profiting as they are based on one's life experiences. The financial markets, as well as all freely traded markets from stocks to commodities, from currencies to tulips, behave in a much different manner.

    Typically, when we first learn how to trade, we study the markets and try to develop our own personal theories about how the markets work. Because we don't actually conduct formal experiments though, we fall prey to psychological biases.

    Those same personal experiences, built over a lifetime, which helped us to advance and learn in our world, wind up being the very reason many traders fail to profit.

    False Consensus Effect

    One of these psychological biases is the false consensus effect... we tend to wrongly think that others believe what we believe and do what we will do, but that's only our perspective and it can mislead us.

    Why is it difficult to anticipate what people will do? Part of the problem lies in the fact that we are mere mortals. Humans have a limited capacity for understanding complex information. In some ways, people can process information better than a computer, but in other ways they cannot.

    The false consensus effect is one of those rules of thumb that may bias our decisions. No matter what decision you ask people to make, no matter how important the issue, and no matter what choice is made, social psychologists have demonstrated that people over-estimate the number of others who agree with them.

    There is a natural tendency to believe that our decisions are relatively normal, appropriate and similar to what our colleagues and peers would do in a similar situation.

    We use our decisions as an "anchor" and evaluate what others would do based on what we would do. Decisions based on "our" life's experiences. Our biases. Our interpretation of events and their consequences.

    This decision-making bias can contribute to feelings of over-confidence. Once we make a decision, we tend to be confident that we are correct and that others will agree with us, but had we seen the situations from their perspective, we may see that they would behave quite differently.

    Anticipating What The Masses Will Do

    Many market timers try to anticipate what the masses will do. Will they buy or will they sell? The crystal ball method of timing.

    But this method has a long history of lost fortunes behind it. In fact this is the method that gives market timing a bad name. No one knows the future and even though they may make a lucky pick, getting the future right again and again is impossible

    You cannot predict precisely how people will react to world events, economic changes, etc.

    But there is a method of timing that has worked for many years and will continue to work.

    The Very Best Timing Strategies

    The very best market timers follow market trends. They wait until the trend in confirmed and then climb on board, riding it as long as it lasts. If the trend fails, and some always do, they exit quickly and await the next trend.

    This follows the old market saying, "cut your losses short and let your winners run." Everyone has heard it but so few are able to adhere to it.

    That is why we follow trends here at Fibtimer.com. We do not try to forecast the future like other timers do and usually fail at. We identify trends and take positions accordingly. If the trend fails we exit quickly. If it continues, we ride it to the end. That could be weeks, or even months as profits accumulate.

    Following a carefully defined trend following strategy is the only sure way to be certain you will be in the right position, at the right time, when the markets take off in one direction and stay in that direction.

    Emotions should have no place in your decisions and they absolutely have no place in ours.

    Unemotional buy and sell decisions, generated by tried and true trend timing strategies, are the certain road to profits.

    Jun 27 12:20 PM | Link | Comment!
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