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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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  • Critical Issues For Market Timers

    It is not enough to have a successful market timing strategy if that strategy is not traded with discipline. It is also not enough to trade with discipline if you are overly aggressive with those funds allocated to market timing, and cannot handle the resulting volatility.

    Many market timers think that the more they trade, the better they will do. But in reality, market timers do not need to trade aggressively to do well. Four critical issues; strategy, discipline, money management and diversification are discussed below.

    When the market has a prolonged down trend, such as the 2008-2009 bear market, a more aggressive strategy, using bear funds, will achieve huge gains. But when the bear is not growling, a less aggressive approach usually works much better. And of course, no one knows ahead of time when that bear market will occur.

    Our very Conservative S&P Timer, which only averages about one trade per year, has a superb long term track record and was in money market funds for both the 2001-2003 and 2008-2009 bear markets.

    So, much depends on a market timer's expectations. Are you looking for gains over a long time frame, during which bear markets are sure to occur, or must you see immediate or constant gains in order to stay with a timing strategy?

    Market Timers Must Have An Edge

    At FibTimer, our "edge" is trading trends. We know that the financial markets are usually in a trend, either up or down. In fact, history shows us that they are in trends about 80% of the time.
    This "knowledge" is our "edge." We know that there are times that the markets are not trending, but that these times do not last long. We keep our losses small during non-trending markets using disciplined risk management. And, by trading every trend that occurs, we know absolutely that we will never miss a trend.

    By limiting losses, and allowing profits to ride, we use our "edge" to time the markets with great success. There is an old saying that applies here; "Limit your losses and the profits will take care of themselves."

    Disciplined Execution

    Once you have an edge, you have to be able to execute. The common trading errors of not taking trades until you see if they are profitable, or jumping the gun and taking trades ahead of time because you "think" a signal will be issued soon, can be a disaster to your profitability.

    By not sticking to a plan, you allow emotions to rule your finances, and that places you right in with the majority of investors. Those who are the cause of the market's volatility. The "herd" followers.

    At FibTimer, all of our strategies are non-discretionary. Emotions are not allowed. Our strategies offer disciplined execution of non-emotional buy and sell signals.

    The reason for following any timing strategy is to "remove" yourself from making emotional trades. To remove yourself from the herd, which is often headed in the "wrong" direction.

    A second reason for following a non-discretionary timing strategy is that is gets you "out" of losing buy and sell signals fast while limiting drawdowns. You are not subject to the psychology of trading. To holding onto a trade in hopes it will come back to profitability. Then exiting, finally, in a panic after huge losses.

    The disciplined execution of a timing strategy avoids all of these pitfalls. You just follow the buy and sell signals with the absolute assurance that your losses will be limited and you will never miss a trend. Over any fair time frame, you will beat the markets.

    Effective Money Management

    Overly aggressive investment allocations can ruin even a good timing strategy with excessive drawdowns, while overly conservative allocations of capital will not optimize your total returns.

    If you are a conservative investor who wishes to use market timing to protect against losses in a bear market, do NOT invest 100% of your funds in an aggressive bull and bear strategy that you are not prepared for. Yes, they make a great deal of money over time, but aggressive strategies do have more frequent buy and sell signals, and more frequent small losses.

    "Diversification is not just a word., it is a prerequisite to having a successful timing strategy."

    If as a conservative investor you are unable to handle those losses, you are likely to exit the trade, thus locking the losses in, at just the wrong time!

    Stick to strategies that fit your emotions. Market timers should know themselves and use timing strategies that they will be able to stick with over long time frames. Patience is the market timing key to success!

    Diversification

    Even aggressive market timers should not time 100% of their funds in a single aggressive strategy. Diversification is not just a word., it is a prerequisite to having a successful timing strategy.

    At Fibtimer, we rarely invest more than 20-30% of our own funds in bear strategies. The rest is diversified (see the Diversified Portfolio).

    Using at least some diversification takes the stress out of investing, and makes it much easier to follow buy and sell signals with discipline.

    Conclusion

    At FibTimer, we never question buy and sell signals and follow them faithfully. Over the years, our disciplined approach has resulted in superb gains. We hope that we can instill this disciplined trading into all of our subscribers.

    It does not take blind faith. What it takes is a realization that our own emotions and instincts are usually wrong, and that a non-discretionary timing strategy that trades all trends and limits losses in non-trending periods, is the most successful approach to profiting in the stock market.

    Once you realize this, you will relax and allow the strategies to successfully grow your investments as they are designed to do.

    Jan 25 10:48 AM | Link | Comment!
  • New Year's Resolutions!

    Most everyone makes some sort of New Year's resolution. And, most everyone fails at following them for very long.

    The problem with such resolutions is, they are made because you already have trouble sticking to them, so one more promise is not going to change things for very long.

    But if this year was different, what would your resolution be?

    At Fibtimer, we are biased. We want our subscribers to make money. So we will make a list of the resolutions we would like to see our subscribers keep for the year 2014!

    Realistic Goals

    The most important "first step" is to set realistic goals. It makes no sense to set yourself up for failure by setting a goal that it unlikely to be achieved.

    Do not set a goal to reach a specific profit for the year. Those new to market timing will most likely set a profit goal of 30% to 40%. Can such profit be achieved? Of course it can, but no one knows ahead of time what kind of markets we will see in 2014, so such a resolution might very well be doomed to failure from the start

    We could see a continued bull market, or even a bear market.

    So here is a more realistic profit goal. One that can be followed with reasonable expectations of success.

    Promise to stick to your chosen timing strategies, so that you can make as much profit as possible, given what year 2014 offers us.

    This is realistic. You will make as much as you can, depending on what the markets offer us.

    Sticking to the Strategy

    We have said this, and written this, so many times. But it is so critical that we must again say it here.

    NO ONE makes money in the markets without following a trading plan. A strategy designed to profit by using the ups and downs of the markets to determine whether you are in a bullish or bearish position.

    Trading plans are what make the professionals rich. They are the difference between winning, and losing.

    And if you trade a plan, you have to stick to it. The reasons you can come up with to abandon a plan cannot be counted. They are so numerous that no article could list them all. And they always feel right at the time they are made.

    But there is one sign which will tell you that you are making a fatal mistake. If you are acting on emotion and making a decision other than what your followed strategy tells you to make, you are setting yourself up for disaster.

    Trading plans are not just designed to keep us bullish during a bull market. That is easy. Everyone is bullish then.

    Trading plans are not just designed to keep us bearish during a bear market. Again, an easy thing considering everyone will be bearish.

    Trading plans are designed to keep us from making rash decisions are times when the markets are volatile, when emotions are high, when the vast majority of investors and traders are panicking and making mistakes. This is when your chosen plan will keep you safe.

    So if you decide to make an emotional exit right at a crucial moment, why did you bother to use a trading plan in the first place? You will be jumping out of the frying pan and into the fire. It's up to you, but a super New Year's resolution for this year would be, "stick to the plan!"

    Impulsive Trading

    Another great resolution would be to avoid impulsive trading.

    It is not necessary to trade all the time to be profitable. What is important is to not allow any trade to become a big loser.

    This takes us right back to following the trading plan. Impulsive trading is a trait that can only be stopped if you recognize it as a problem. If you are trading when your strategy has not issued a signal, you are likely being impulsive.

    Look back at all your impulsive trades of the past. How many of them turned into disasters? How many of them became big losers?

    Impulsive trading puts you right in with the majority of traders, and the majority are usually wrong. They are especially wrong at times of high emotions, such as market tops, market bottoms, reactions to news events, etc.

    Don't allow yourself to trade unless your trading plan tells you to. Try to relax and realize that the plan is unemotional, and allowing your emotions to rule will cost you money. The plan will not.

    Winning All The Time?

    This New Year recognize that losing is a part of the game? Every successful trader takes losses. If those losses cause you to jump ship, you will then be without a plan and riding the emotional roller coaster along with everyone else.

    Trading plans keep losses very small. This is what is important, not the fact that you had a loss. Trading plans also keep you "in" winning trades. The urge to take a profit is another reason why market timers act impulsively. Everyone wants to profit, but giving up a big profit to lock in a small one is one of the most common reasons for failure.

    Small losses and small winners do not make you successful. Small losses and big winners do. You must stay with the winning trades.

    We do not exit winning trades until the trend reverses.

    Pulling The Trigger

    For all those subscribers who have difficulty with being impulsive, there are also those who recognize the importance of following a trading plan, but when the signal is issued, have a great deal of trouble executing it.

    If the market has rallied that day, and the signal is a bearish one, they decide to wait a day and see if it is correct. Then maybe another day, and another.

    Signals are often not profitable immediately. They are often made against the prevailing sentiment. Those who procrastinate will likely find themselves on the outside looking in. If they wait for the trade to be profitable, they will have lost some of the profits for themselves.

    Second guessing a buy or sell signal is a sure way to miss out on profits, or increase your risk of losses.

    Diversification

    Spread your investments out a bit. This year the falling dollar made substantial profits while gold stock funds rose, but then sold off into the year's end. Having several timing positions that are in different sectors brings in solid gains year after year, while limiting losses to only a portion of your investments

    Select several of our timing strategies. Some aggressive, and some conservative. If any one of them under performs, you will be very happy you diversified.

    Using the Diversified Timing Portfolio strategy is a great way to diversify!

    Conclusion and New Year's Resolution

    You cannot know ahead of time what the markets are going to do. Anyone who promises you that "they know" is lying. Anyone who promises huge gains is lying. Any service that shows huge gains very year, with no losses is lying. Real-time is different than back testing. Back testing is always profitable. Real-time separates the hucksters from the professionals.

    Promise yourself to stick with your selected timing strategies absolutely. Take every trade. Take those trades when they are supposed to be taken, not after the fact.

    Do not place all your investments in any one strategy. Especially do not place it all in the most aggressive strategy just because that strategy has shown good previous gains. No one knows what the New Year will bring. Diversify.

    Wishing each and every one of you a happy, healthy and prosperous New Year. Remember that life is short. Investing is important for your future, but it is not the end all.

    Spend time with your families. Relax and smell the roses.

    Jan 17 9:22 PM | Link | Comment!
  • The Trend Is Your Friend

    At FibTimer we time the financial markets by identifying and trading trends. Over many years of research, we have found that no one can accurately predict the future of the markets consistently. They may do it once or twice (remember Robert Prechter of Elliott Wave fame in the 1980s?) but not over and over again.

    Predicting presupposes you have the ability to "see" the future. Much like a fortune teller. Beware any service that tells you they can see the future. No one can. If they could, every trader in the world would be after their signals.

    There are those who attempt to trade reversals. But first you have to "wait" for the reversal point to be reached, and then if you are incorrect, take a loss, exit the trade and await the next reversal point. Too much like fortune telling to us and really a system for short term traders who are very nimble.

    But there is a way of accurately being bullish during advancing markets, and being bearish or in cash during declining markets.

    Identifying and trading trends.

    What are the requirements and advantages of trading trends? First you must have a trend established before you can trade it. It also means you must wait until after the trend ends before you can exit it. But most importantly, if you trade trends, you will NEVER miss any bull market, nor be hurt by ANY bear market. Ever!

    This is an incredibly important advantage. Imagine never missing a bull market and never being hurt during a bear market. Or even profiting during a bear market. And all you lose is a few points at either the top of the bottom!

    Trend Trading at FibTimer

    We would not have developed our timing strategies at FibTimer without first researching the history of the financial markets, as well as the potential of all of the various timing strategies used by market timers.

    What we found, was that market trends are much more pervasive than most would think. In fact, trends could have been traded just as profitably 200 years ago, as they are today.

    Looking back at price data for 100 and 200 years, the very same trending markets existed. There were short times of sideways (non-trending) movement and long periods of strong advancing and declining trends. Yesterday, just as today, trading trends would be profitable.

    There are several important guidelines to successfully trading trends. Whether used 200 years ago or today, they are just as important. And they will be just as important tomorrow, ten years from now, or any time in the future, as long as free markets are traded. Highly Disciplined Trading Plans

    Successful trend timing strategies use highly disciplined trading plans.

    In the short term, the markets are run by the majority who are reacting to the emotions of fear and greed. It is "comforting" to be moving along with the crowd. That is why the majority do it. But it is NOT profitable.

    The "majority" do not profit.

    Executing a trading plan using unemotional buy and sell signals, designed to capture the majority move of all major trends whether up or down, removes destructive emotions from the equation.

    A market timer will undoubtedly feel pressure to disobey the plan. He may be swayed by advice from friends, current events, or the extremely powerful emotions of fear and/or greed.

    But if you stay with a trading plan that NEVER misses a trend, you will profit over time.

    If a trend fails, the trading plan must quickly reverse. If the trend becomes a long term highly profitable one, the plan must keep you fully invested and not allow you to exit during times of high emotion, when the crowd is exiting in droves.

    Ignoring Short Term Volatility

    Successful trend timing strategies ignore short term volatility in the attempt to realize superior profits during major trending markets.

    Trends can last months, and even years. During those profitable trends there will be corrections to the trend. Exiting at every correction leaves a trend timer on the outside looking in. Reacting to counter trend corrections often results in small losses. This is why FibTimer holds its position during such corrections.

    The is an almost overwhelming desire to "act" in the face of an adverse market move.
    Often it is labeled "avoiding volatility" with the assumption being that volatility is bad.

    But avoiding volatility often inhibits the ability to stay with the current long term trend. The desire to have close stops, and to preserve "open trade" profits has enormous costs over time.

    Successful timing strategies do not avoid volatility. Instead the "depend" on volatility to profit.

    Finally, a successful trend timing strategy, never allows losses to accumulate. Trend timers are protected from large losses by their strategy. A good strategy never allows a failed trend to hurt capital. Trendless and/or volatile markets are inevitable and during trendless markets there may be some small losses. But a good timing strategy protects capital.

    You cannot avoid the occasional failed trend and you cannot avoid the occasional trendless market. But if capital is kept intact, when the next profitable trend begins you are ready to jump on board and ride it to the end.

    Conclusion

    At FibTimer we publish a weekly analysis for each strategy to prepare subscribers for what is "likely" to come. Better to be prepared than to be hit with surprises.

    But we never presuppose that we are so smart we can tell, unerringly, what the markets will do next.

    Trend timers do not try to anticipate reversals or breakouts. They respond to them.

    Trend timers are not prognosticators. We just identify and follow trends.

    Trend timers believe the markets are smarter than any of us. We make it our business not to try to figure out why the markets are going up or down, or even where they are going to stop.

    Successful trend timers identify trends, trade those trends, and patiently allow them to play out while their profits grow.

    Predicting the markets is a fool's game. It is fun to do over cups of morning coffee, but if you want to beat the financial markets, you must identify and trade trends. You must also stay with your trend trading strategy through thick and thin. If no one can consistently predict where the markets are going, they also do NOT know when the next trend will begin. Taking all trades guarantees that you will never miss it when it start.

    Jan 11 12:05 PM | Link | Comment!
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