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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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  • Buy-And-Hold? It Works If You Have 40 Years Or So

    In business schools, the buy-and-hold strategy is still viewed by the majority as the most viable investing strategy for the financial markets.

    It is hard to change old beliefs. I often wonder if those who teach such strategies have their own money invested according to their teachings.

    "Buy-And-Hold" In The Last 15 Years

    An investor buying the S&P 500 Index 15 years ago, would have endured two horrific bear markets. Both of which cut the major indexes by 50%. Twice!

    Is this what you want?

    Had you caught the major part of each bear market while in bear funds, and the major part of each bull market while in bull funds, you would be ahead over 600%.

    This is what we did at Fibtimer and because we have been online since 1996, we have the realtime trading statistics to prove it.

    "Buy-And-Hold" In The 90s

    Most people invested using the buy-and-hold strategy in the 1990s, and as we all know, they lost a bundle when the dot-com bubble burst and the 2000-2002 bear market began with losses of 50% to 80%.

    After several years, investors finally began to feel better about the financial markets when in 2007-2008 the major indexes took another 50% hit.

    If stock prices are based on the fundamentals of the companies they represent, how could such losses occur?

    Investment professionals now admit that stock prices are based mostly on the beliefs of the masses. Assets of a company may play a role in the stock price, but the bulk of the price is influenced by popular opinion.

    It's hard for many new market timers to accept the idea that prices are based on beliefs of the masses and little more.

    But in the acceptance of this truth lies the path to profits.

    "Buy-And-Hold" In The 70s and 80s

    Have you ever talked to people who traded stocks in the 1970s? Many will tell you, "I learned my lesson a long time ago. I put my money in the markets and lost it. Never again."

    In the 1970s, 80s and 90s, just about all investors used a buy-and-hold strategy.

    They searched for "undervalued" stocks, purchased shares, held them, and waited for them to increase in value.

    Sometimes it worked, but many times it didn't. And even when it did work, profits weren't anything near what an active market timer or trader can make.

    The buy-and-hold strategy misleads investors. The markets don't go in one direction forever, whether the trend is bullish or bearish.

    Only by trading the ups and downs of the market can you make significant profits. If you are striving to become a profitable market timer (trader), it is vital that you cast aside the buy-and-hold mindset of the long-term investor, and learn to "think" like a market timer.

    The "Trading Edge"

    Without a crystal ball, you can't know the future direction of stock prices with any amount of certainty, regardless of whether you use fundamental or technical analysis.

    However, once you recognize the market prices are the result of millions of investors who "believe" they know the direction prices are going to take, you have the "key" to beating the markets.

    Knowing that prices are based on the beliefs of the masses is your "trading edge."

    If you look at any long term chart of the financial markets, you will see that "most" of the time, the markets are moving up or down in trends that last many months, and sometimes years.

    These "trends" reflect the "beliefs" of all those investors. And those "beliefs" are controlled by the "emotions" of fear and greed.

    While prices are rising, the majority of investors "believe" they will "continue" to rise.

    While prices are "falling" the majority of investors "believe" they will "continue" to fall.

    Because emotions are involved, you will see more investors buying near tops and pushing prices higher than anyone expected they would go.

    And of course, because emotions are involved, you will also see more investors selling near bottoms, pushing prices lower than anyone expected they would go.

    This has been going on since the beginning of free market trading.

    Conclusion

    FibTimer uses that "trading edge." We know that the "masses" will push the financial markets in big up and down moves. Not all the time, but most of the time. That "trading edge" is our key to profits.

    FibTimer does not try to "predict" where the market is going. We trade "market trends." Those very same trends that are created by the masses of investors who are buying into rallies and selling into declines.

    We also know that trends will last longer than most expect and that is why we stay "with" the trend all the way.

    Over time, the "knowledge" that the masses will push the markets up and down in huge trends, and trading those trends, results in huge profits.

    Oct 24 5:54 PM | Link | Comment!
  • The Case For Market Timing Diversification

    Definition: "Diversification" - a portfolio strategy designed to reduce exposure to risk by combining a variety of investments which are unlikely to all move in the same direction.

    Many Market Timers Pay Little Attention

    As we have written before, "market timing is the following of a long term strategy to profit from the financial markets, that also protects us from the inevitable down trends that occur."

    Many investors who understand the potential of market timing, pay little attention to the potential of diversification. Many jump right into an aggressive timing strategy with little thought about how they will handle a loss.

    But there is a way to jump right in, and also realize the long term potential of even the most aggressive strategies. It does require a bit more work, but not all that much. Just a few minutes a day to check for changes and make adjustments.

    Aggressive Market Timers Can Benefit

    Many market timers already follow well defined investment plans that include diversification. But as we just discussed above, some do not.

    If you are one of those who do not, consider changing. Diversification is not only for those who are afraid of volatility. It has an important place in even the most aggressive of portfolios.

    We have been market timing since the early 1980s and although we are aggressive, we diversify our timing funds, not just for safety, but also to "enhance" our profit potential.

    Those who follow our Aggressive Bull & Bear Pro Timer strategy will make a great deal of profit over long time frames. Because the markets tend to trend most of the time and the aggressive strategies will catch the major part of all long-term trends in "both" directions.

    But non-trending markets can be quite frustrating and aggressive market timers, in our experience, become frustrated more quickly than most.

    Aggressive timers.... try this strategy: Use the Aggressive Bull & Bear Pro Timer strategy for 20% of your timing portfolio. Use the Sector Fund Strategy for 50%. Divide the rest between Bond Timing, Small Cap Timing and Dollar Timing strategies.

    Although the sector funds go to cash on sell signals, these industry specific funds are big winners when they trend. Often they will trend much further, by 100% to 200%, than the rest of the market.

    Stick with the sector funds that follow major industries, such as Health, Technology, Internet, Energy, Financial Services. Most of the sectors we follow are major sectors. Pick five that are affected differently by the economy. Example; do not choose Health and Biotech which have similarities.

    When the bear growls, you will have 20-50% of your portfolio profiting on the short side, or in cash, plus those sector funds that are profitable even during a bear market (there are always some).

    You will make money, but have only a small percentage of your timing portfolio at risk.

    During a bull market, you will be fully invested most of the time, except in those few industry sectors that are not doing well.

    Diversified portfolios have a dramatic effect in controlling volatility and drawdowns. Yet can be extremely profitable over time. The best of all worlds.

    Fibtimer already has a Diversified Portfolio Strategy that can also be used. It divides your timing into five distinct investment areas. Interested subscribers should check it out. It does not include the sector funds but it is a well diversified strategy.

    Even Conservative Market Timers Can Benefit

    Those conservative market timers who are willing to devote at least a little extra time, can enhance their profits by adding the Sector Timer strategy as a percentage of their timing portfolio.

    Being conservative does not mean you cannot be active. Using the Conservative S&P Timer strategy will always do well over the years because it is designed for long trending markets, and makes changes infrequently.

    But if you used it as a base for your timing portfolio, say for 50% to 60% of it, you can easily be more active with the other 40% to 50%, and still be well within the guidelines of "conservative" investing.

    Again we suggest using the Sector timer. In this case "because" it goes to cash during sell signals, and because it follows a diversified strategy of its own (multiple positions are always used), it can add considerably to your profit potential (sectors tend to trend longer and higher during bull markets).

    For those who prefer using ETFs, use the major industry sectors in our EFT strategy.

    Each His Own Style

    Diversification can obviously be quite varied. Each market timer will have his or her own style. Even a very basic plan can be made more stable with diversification.

    For example, if your core timing account follows the Conservative S&P Timer strategy with 70% of its funds, allocating 15% for the aggressive Pro Timer strategy and 15% for the Bond Timer strategy will cover most bases, and yet still offer an additional level of safety.

    Conclusion

    Consider at least some diversification for your market timing funds.

    We mention the Sector Timer in several the diversification scenarios above. This is because it is "already" well diversified (at least five different industry sectors should be used by subscribers who use this strategy), yet has the tremendous profit potential inherent in industry specific funds (sector funds usually trend farther, percentage wise, than the general market). The ETF Strategy can also be used of course.

    Diversification can dramatically help control volatility and drawdowns.

    Diversification, when properly applied to your portfolio, will actually enhance your profit potential over time.

    Oct 17 4:34 PM | Link | Comment!
  • Following A Timing Strategy

    When it comes to making decisions, our minds tend to perceive and react to the information available to us, each in its own particular way. This is not something we think much about. It is a part of each of us. Trying to change this process is almost impossible.

    This is usually not of any consequence in our everyday lives, but in the realm of investing, our perceptions and reactions, and the emotions they generate, are very often the opposite of what is needed to be successful.

    How do we start making consistently correct trading decisions? How do we make decisions without emotions interfering? How do we trade with confidence?

    The answer is simple. We follow an unemotional timing strategy which keeps us on the path to profitability. Strategies that have been profitable for many years in real-time trading. Strategies that keep us with the current trend.

    Gunslingers

    Many traders, market timers, investors have no plan at all. They are like the proverbial Gunslingers of the Old West. A news event causes the market to decline and BANG, they go short. An economic indicator comes in better than expected, the market rises, and POW they go long.

    Trading by emotion, they make trades that seem solid at the time, and they hold that position until it becomes more painful to hold it than to not hold it. They may even make an occasional profit.

    But that lack of focus...lack of planning, will ultimately lead to poor performance, and to outright losses.

    Why do so many traders sell at bottoms, and buy at tops? It is such a well known fact that it is almost funny, except when you are the person at that top or bottom.

    Have you (or someone you know) ever said, "well, I finally decided to go long (or short), so expect the market to reverse on me, again." Actually expecting" ahead of time" that the trade will be unprofitable.

    You will not hear that from someone following a timing strategy. He or she knows that following the strategy will avoid emotional trading errors, and lead to long term profits.

    Strategy Equals Long Term Success

    Trading requires discipline. Some have it, and others that wish for success must learn it.

    The benefit of of following a proven trading strategy is twofold.

    First - If you have a trading strategy, you'll be able to ignore all the data that doesn't affect your trading. The media is rough on traders - at any given time, you could find ten reasons to buy and ten reasons to sell. That emotional roller coaster is a nightmare, but if you are following a trading strategy, you won't talk yourself out of good trades, nor will you keep yourself in bad ones.

    Second - Our emotions cannot cause us to make unprofitable decisions if they are not involved in decision making. We have a trading strategy. We know it works. All we need do is follow it. Never second guess the trading strategy. That is allowing your emotions to come back into play, and emotions result in losses.

    Only through following a proven market timing strategy will you save yourself a great deal of frustration, and successfully grow your investments.

    Oct 02 9:37 PM | Link | Comment!
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