Following The Trend
Barraged With News
Market timers following trends generate great returns over time because their buy and sell decisions are based on the one piece of information
that counts the most. Price.
We are barraged with fundamental analysis, price earnings ratios, economic projections, news events, and a steady stream
of TV and news analysts who tell us where they think the market is going.
But the simple truth is... no one knows where the market is going next.
The only absolute truth... is price. If prices are trending higher, the market is going higher. Lower, and we are trending lower.
Two Kinds Of Traders
News events especially cause traders to make incorrect decisions, because they play on emotions. The urge to follow the
crowd is normal. It is comforting. And in a strong bull market, it may just be correct.
But in most circumstances, letting emotions push you into making trading decisions costs traders money.
There are two kinds of traders.
1. Those who make emotional decisions based on any of the above.
2. And those who make money off of those who make emotional decisions.
Price Is Always Right
It is hard to accept that one aspect of the markets, price, could be the one thing that is guaranteed to make you a successful market timer.
There are so many indicators, so much available analysis, but "price" is always right. It is "never" wrong.
The thousands of investors and traders who owned Enron at $90 felt confident in their positions. Many "averaged down" when the price started dropping.
But we wonder, after all the billions of dollars were lost in the Enron collapse, how many felt that way when shares hit 50 cents.
Trend trading market timers "may" have bought shares at $90. But they were short most of the way down because they made their trading decisions based on "price."
When the price started to drop, they reversed their small losses and changed to short positions.
Losses, such as the billions lost by investors who held shares in Enron, are always reported by the media. But have you ever heard the
media mention the other side of those losses?
All those losses went into someone's pockets!
How about the 80% decline in the Nasdaq in the 2000-2002 bear market? The losses were all over the financial press. But were the gains
on the other side of those losses mentioned. Our Bull & Bear Timer was up close to 70% during that bear market.
Losses are news, gains apparently are not.
Market timers following price trends profited during these declines. They were windfalls. But you will never read about it in the press.
Following Price
Price is objective. You can faithfully follow prices and make timing decisions based on them. You are able to determine
trend changes, and most importantly, to exit those positions if the trend was a false one.
And false trends "always" occur. Usually at market tops and market bottoms. But the losses in "trendless" markets are kept small by those
who use "price" to establish trading strategies.
And when the trends do take off, the profits are made.
Market analysis is always subjective. It can not be trusted in trading decisions. Indicators work some of the time, but also
can fail miserably. The financial news media is not even worth mentioning.
Only price can be trusted. Only price is always right. Only using price to determine trends can lead you to
profitable timing and a successful investing future.
Conclusion
Market timers must follow the trading strategies faithfully. Every sell signal must be followed immediately, and every buy
signal as well. Small losses are part of the game, but then large gains are also part of it.
Guessing how far a trend will go is useless. No one knows. Price makes the trend.
Discipline is the name of this game. Those who stand the test of time and make the trades, will over time, beat the markets,
and will be investing winners.
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FibTimer reports may not be redistributed without
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Disclaimer: The financial markets are risky. Investing is
risky. Past performance does not guarantee future performance.
The foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy or
sell any security. Opinions are based on historical research
and data believed reliable, but there is no guarantee that
future results will be profitable. |