Market Timing Pro

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

Can You Predict The Future?

Most investors believe they can predict the future. Or at least, that someone else can. At Fibtimer, we rely on the fact that most investors are convinced they can predict the future. This is where most of our profits come from. Their errors.

In the world of investing, it is prices, not investors, that predict the future.

Looking For The Holy Grail

As our subscribers know, Fibtimer identifies and trades trends. We do not use hocus pocus to forecast the market's direction. We identify the trend and go with it.

Over many years of market timing we have realized that trying to predict the future course of the financial markets is a sure path to losses. But trading trends, which is not predicting but going with the already identified direction of the markets, has produced consistent profits for as long as free markets have existed.

But this is just too simple an answer for most investors.

Looking for the Holy Grail, investors spend untold sums of money on analysis software, trading systems, and market gurus. All in order to predict the future.

However there is no Holy Grail. There never has been and there never will be.

But this doesn't mean profits, indeed huge profits, cannot be made in the markets.

They are just not made by most investors.

True Believers And Greater Fools

Interestingly, Fibtimer profits because we rely on the fact that most investors and traders believe they can predict (forecast) the future.

As these investors buy and sell, the "Greater Fool Theory" kicks in.

Investors buy a stock with the belief someone will pay more for that stock in the future. This continues as a stock is traded up in price. As more investors buy and sell the same share for higher sums, sentiment begins to build that higher prices and profits are almost a certainty.

As more investors believe they can buy a share and sell it at a higher price (looking for the "Greater Fool"), more and more investors (believers) jump on board. Investor psychology in its most basic form.
Of course, someone has to wind up holding those shares with no one interested in buying them. This is when the trend changes.

The "Greater Fools" are holding shares they cannot sell without a loss. As sentiment changes, the markets begin to drop. Eventually the new trend, to the downside this time, builds a head of steam. Investors feel they can (or must) sell shares. They will be able to buy them back at a lower price. (The Greater Fool Theory in reverse).

Market trends are born of changes in sentiment. Fibtimer trades the trends created by the the tens of thousands of traders and investors who make them.

Trend After Trend.

Trend, after trend, after trend. All defined by changes in price. They are rarely forecasted, or there would not be so many investors on the wrong side of trades.

But trend traders, who understand that investors move with a herd like mentality, can use this information to profit.

As the herd starts moving in one direction, what changes? Price.

Using price to determine trend, then jumping on board the trend and riding it till the end, is where true profits lie.

Don't Let Anyone Tell You

Do not let anyone tell you they can forecast the future direction of the markets. We will not tell you that we can do it, and we hope you will not let anyone else convince you they can.

Obviously, if 100 market forecasters make predictions, someone will be right. But consistently being right is another story entirely.

Following trends, determined by changes in price, is the only consistent path to solid profits. It is not right all the time. Nothing is. But trends usually move much farther than anyone ever expects, and in trading those large trends, huge profits are made.

Nothing Has Changed

Change is constant. Because change is constant, uncertainty is constant.

From uncertainty, trends emerge. Sentiment changes, true believers begin to buy into the new rally, and another trend is born. Over, and over, and over. Month after month and year after year.

The markets have come a long way in recent years, with instant quotes, trading software, a mind numbing array of technical indicators. But one thing that has not changed is investor's reactions to change. Fear and greed still hold sway.

Fibtimer exploits the reactions of investors. Those reactions are embedded in prices and lead to trends. In this respect, though trading is now done at the speed of light, nothing has changed.

Market Timer, Know Yourself

Fibtimer's success depends on "your" success. We want you to be successful. To achieve this requires not only successful market timing strategies, which we provide, but subscribers must also follow those strategies correctly.

One of the most difficult tasks for us at Fibtimer, is trying to help subscribers understand what is required to achieve success in market timing. We can publish the reports, but if the strategies are not followed correctly, the odds of being profitable diminish.

This commentary covers some of the questions we would ask every subscriber if we could talk to them personally.

Know Your Limits

Subscribers should use the strategies that suit them best. We have aggressive, active, and conservative timing strategies. Make sure you know what sort of timing strategy you are emotionally able to handle.

A novice market timer, who jumps right into an aggressive timing strategy, might have a difficult time when facing several trades in a fast market. It does not happen often, but it can happen.

If you are conservative, use a conservative strategy. If you are a bit more aggressive, use the active strategies. Remember that you do not have to make lots of trades to be profitable. During volatile markets our more conservative strategies are often the best performers.

Jumping The Gun

Another concern is new subscribers who trade immediately. Entering a new position "before" a new bullish or bearish signal has been issued. We understand the urge to jump in and get started, but in reality, "mid-signal" entries are usually more risky than waiting for a new buy or sell signal. When a subscriber enters on his or her own, mid-trade, the result may be losses that should never have happened.

Patience is a key element to successful market timing. You cannot rush profits. You "can" rush losses though. So take your time and enter properly. You have years of timing ahead. The markets have been around for hundreds of years. They are not going anywhere. Wait and do it right.

The Strategies

Our conservative and active strategies are designed to manage risk in volatile, or sideways markets, and to correctly place us in bullish or bearish trends when they occur.

Aggressive strategies often make their biggest gains during bear markets. When everyone else is losing, the bearish positions are making profits.

The aggressive strategies are often, though not always, the most profitable over time. But if you exit the strategy after a small loss, you will not be profitable when the strategies catch a strong bearish (or bullish) trend.

There is an old saying, "If you cannot accept a loss, than you will never succeed in the markets." If you feel you will worry over multiple trades, or may not have the discipline to stay with trades that at times go against the market, use the conservative or active strategies.

Diversification

This all brings to mind the next important subject. Market timers should diversify. Putting all your eggs in one basket just does not make sense. No strategy is perfect. Every strategy will have periods of non-performance. This is a fact of trading the markets.

"...If you have all your timing funds allocated to a single strategy, you are just hurting your chances of success."

If you have all your timing funds allocated to a single strategy, you are just hurting your chances of success. If you have the funds available, use several strategies.

If you do not have the funds available to diversify properly, stay with the Conservative S&P Timer. It just makes sense. if you do, consider the Diversified Timing Strategy which has diversification built in.

Committing

Finally, there are those subscribers who wait to see if a signal is correct before following it. This again diminishes the ability of our risk management, built into the strategies, to work correctly.

In the aggressive and active strategies, the price we enter at, can be quite different than an entry made two or three days later. This potential is somewhat lessened in the conservative strategies which typically hold positions for considerably longer periods of time, but still should considered.

A Butterfly Flaps Its Wings... Chaos Theory And The Financial Markets

A butterfly flaps its wings... a hurricane strikes miles away.

According to Chaos Theory, a seemingly irrelevant action can precipitate, and contribute to, a major event. The right set of factors comes together and a major event takes place.

It's easy to imagine a fanciful chain of events that would initiate a market move.

A housewife attends to her crying child who has tripped over the newspaper, and in doing so, leaves the refrigerator open during an unseasonably warm day. It breaks down, and the family needs a new one.

To get funds for a new refrigerator and some added home repairs, she sells off a large chunk of IBM stock that her parents gave her as a wedding present.

By pure chance, at the moment that she sells the stock, a specialist monitoring the action gets it in his head that the sale of a large chunk of stock means something, so he sells off his positions in the tech sector.

Next, a financial reporter sees the sale and tries to interpret it. He reports that it reflects a shortage of silicon and suggests investors unload their tech stocks immediately.

Many people follow his advice and a massive sell off takes place.

Perhaps it seems a little unlikely that all of this can happen, but you get the idea.

Just like how scientists claim, according to Chaos Theory, that a butterfly can start a hurricane, you can imagine that a few key seemingly minor events can start a major market move

Is It Economic Factors? Or Fear And Greed?

Many investors view the markets from a traditional long-term buy-and-hold strategy. They look at the markets in terms of fundamental variables, such as consumer confidence, demand, and general economic factors that impact a stock price.

If a company makes profits that are in high demand, the price goes up.

Market timers though, realize that many market moves are the result of psychological factors, such as opinions or emotions of fear and greed. In the short-term, anything can happen, and it is vital to keep this in mind.

Nothing is certain in the markets, but is this something to worry about?

Not if you take precautions. By precautions, we mean "following a strategy that uses the ups and downs (trends) of the market itself to generate buy and sell signals."

This way you are always in the current trend, never miss a trend, and are never trading against the market's trend.

Worry Can Be The Doom Of Market Timers

Indeed, a potential chaotic event can be a good thing.

The initial event that set off a market move isn't important. Who cares why the masses buy or sell, for example, as long as you take advantage of the move?

Market timers must learn to view such moves as opportunities to profit.

If you have a timing signal that is ruined by an unexpected adverse event...the chaotic nature of the markets coming to the forefront... there is no reason to worry.

In fact, it is absolutely "going to happen." Signals will go against you. Accept this and you will profit. Worry so much that you jump out of a tried and true strategy because of a losing trade or two, and you will eventually fail at timing the markets.

If you are following a trend, and it unexpectantly reverses, the (trend following) strategy will quickly reverse and place you right back on the right path.

It is necessary to accept that trading can be chaotic. Anything can happen, but it doesn't need to be a source of worry. As long as losses are kept small, and profits are allowed to run, you will beat the markets.

Worry can be the doom of market timers and traders, but if you accept the fact that uncertainty and chaos are part of the inherent nature of the markets, you will accept it when it occurs and recognize that this same chaos is what will make you profitable in the end.

A losing trade here. A losing trade there. All meaningless in the big picture. By following trends, which is FibTimer's market timing specialty, you are always profitable over time.

You profit in "all" of the big trends. By following trends with FibTimer's timing strategies, you are always with the big market moves when they occur...and there is always a big move (trend) just around the corner