Successful Market Timing DEPENDS On Change

Historically, The Markets Are Usually In Trends

Trend traders depend on change to make their strategies work. Simply said, a market that just goes sideways can not be timed. But a market that trends up and down can be.

History shows us the financial markets are usually in trends. You can go back hundreds of years. You can look at stock markets, commodity markets, Dutch Tulips, you name it, they are more often in trends, than not in trends.

History also shows us that trends usually last much longer than anyone expects.

For example, after a huge upward trend through most of the 1990s, the U.S. stock markets were in a down trend (bear market) from 2000 into early 2003. Any chart can easily show you the trends.

For the next several years, into 2007, the financial markets have been in a solid uptrend.

Now again we have been through another downtrend and Fibtimer subscribers have "made" money, instead of taking the 50% losses that most investors have suffered.

Over all, financial markets are in defined trends "about" 80% of the time. This has been the case for many, many years.

Sideways Markets Are Actually GOOD news

But what about those sideways times? The times that try our patience and our will?

The good news is that sideways markets are always either the base or the top of a new trend. That means the next trend is around the corner when we are enduring a sideways market. We just have to make sure we are on board and profiting when it happens.

"...Think about how powerful such a trading strategy is. You never miss a trend, either up or down."

That is where trend trading comes in. We establish a set of rules that identifies when a trend has begun. If the trend fails, we exit. If it continues, we stay with the trend no matter how long it lasts! Months... even years. After the trend fails, according to our preset rules, we exit.

Cut your losses short and let your winners run. Ever heard that saying?

Think about how powerful such a trading strategy is. You never miss a trend, either up or down. At tops and bottoms you may get some small whipsaws as the market becomes volatile and false trends occur as the markets consolidate and decide which way the next trend will go.

Those whipsaws, however numerous, result in minor losses and/or small gains. But they are just the precursor to the next trend. In fact, they could be considered exciting times because we KNOW that they are just setting up our next big trend and big profit.

80/20 Rule

Have you ever heard of the 80/20 Rule, also known as the Pareto Principle? Dr. Joseph Juran developed the Pareto Principle after studying the work of Wilfredo Pareto, a nineteenth century economist.

The Pareto Principle states that a small percentage of your efforts (typically around 20 percent) will create a large majority of your results (usually around 80 percent).

Expanding Pareto to trading, it follows that roughly 80% of your profits should come from only 20% of your trades.

That means there will be numerous small whipsaw losses and gains, but 20% of the trades will make ALL the profits.

After several small losses it is human nature to feel like giving up. This is the psychological battle that market timers MUST win!

The markets are powered by emotions (fear and greed). But trend traders use the changes caused by those emotions, to make their profits.

If you give in to those emotions, you lose!

Here at FibTimer, where we have been market timing for over 20 years (since 1982). We always know when a new trend with huge profits is near. Subscribers become nervous. Financial news becomes overly positive or negative. The number of reasons why the markets cannot go higher (or lower) increase.

That is just when the big trade occurs, and we make our big profits for the year. It happened during the bull market top in 1999-2000. The ensuing decline, a strong and powerful trend lasting two years, realized a 100% gain as the stock market collapsed.

During the ensuing multi-year advance, Fibtimer subscribers have outperformed the stock market every year, and now, during one of the worst bear markets in history, they are making money instead of losing money. Even our conservative subscribers are 50% ahead of the buy-and-hold crowd because they are in money market funds since January 7th, missing the entire decline.

Conclusion

We are currently in the midst of an historic bear market. When will it end? Has it ended? These are questions for which there are, as yet, no answers. But knowing that you will be on the correct side of every trend means you will be in the next rally; the next bull market. These are more than comforting thoughts. They are critical strategies in troubled times.