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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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  • Maintaining Discipline, Easier Said Than Done

    The winning market timer is the disciplined market timer.

    Sounds simple. And everyone should find this sentence easy to agree with.

    Basically, it just means following a specific trading strategy and not deviating from it. But people differ in terms of their ability to maintain self-control and discipline.

    How are you handling the current volatility? Are you agonizing over sell offs and feeling great when the market rises?

    There is nothing wrong with these emotions, unless you act on them. That is the reason why non-discretionary timing strategies work. If you follow them, no emotion is involved and you are relieved of having to make emotional decisions.

    You just follow the trading plan.

    Discipline vs. Emotions

    It is easy to maintain discipline with a market timing strategy when that strategy is having a profitable run. But all strategies have times when they are not profitable. This is a fact of trading the markets and accepted by profitable market timers as the price of doing business.

    However, when a strategy is going through an unprofitable period, maintaining discipline is something else again. A trader, seeing losses in his portfolio, tries to find a reason why exiting the strategy is a good idea. Anything to take away the pain.

    The problem is, exiting a proven strategy is almost always going to cause much "more" pain.

    Exiting is an emotional decision and the stock market runs on emotions. But that just puts you in with the crowd. Making buy and sell decisions according to how you feel.

    Following the emotional crowd may take away the "pain" for a short while, but it is NOT the way to profit.

    Felix And Oscar

    As you may have casually observed, some people are very disciplined while others are undisciplined.

    Neil Simon's characters Felix Ungar and Oscar Madison illustrate the stark contrast between the disciplined and undisciplined.

    Felix was a neat freak who wanted everything in its place, while Oscar was sloppy and more impulsive.

    But there were times when Oscar was extremely disciplined. He was a well-known sports writer and he must have shown an acceptable amount of self-control in order to put out his column every day.

    Although he was a fictional character, Oscar shows how it's possible to be undisciplined in terms of personality traits, yet able to show discipline when completing a specific task, such as executing a trading strategy.

    Discipline Equals Profits

    Keep in mind that you don't have to be disciplined all the time. You only need to be disciplined when you are executing a buy or sell signal. It sometimes helps to remember this fact. It eases some of the pressure to think that you only need to be "disciplined" when you execute a timing signal, rather than during all waking hours.

    Don't minimize the importance of self-control and discipline. The more disciplined you can trade, the more profits you will realize over time.

    The urge to ignore a buy or sell signal, or even exit a trade because it is not currently profitable, can be very strong and often only those traders committed to following an unemotional timing strategy will stay the course.

    But when the big profit-making trend begins, if you do not take the trade, you will be left by the wayside. Because it is impossible to know "ahead" of time when that major trend is going to start, you must take all the trades.

    Conclusion

    This year's rally in the early months came after a second half of 2011 that was extremely volatile, with violent ups and downs but no trend. Yet the trade that resulted in large early 2012 profits had to be followed or we would not have had those profits.

    This summer, after what appears to have been a normal correction, the stock market is again moving sideways with volatile moves up and down lasting only weeks.

    Which buy or sell signal will be the one that makes a good profit? This is the point. No one knows ahead of time so they "all" must be taken.

    If the majority of stock market investors and traders had the ability to stick with a good timing strategy, most would be rich. Because that is not the case, we know that many market timers as well as traders fall by the wayside.

    Don't be one of them.

    Jul 18 5:19 PM | Link | Comment!
  • 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!
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