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Weekly
Report from the FibTimer Stock Market Timing Services
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Money And Emotions
Possibly the most difficult aspect of successful market timing
is dealing with our emotions. Like oil and water, money and
emotions do NOT mix.
There is nothing wrong with emotions of course. A good love
story can fill the eyes with tears. Injustice can fill your
heart with anger, and a job well done can fill your soul
with feelings of well being.
But when it comes to dealing with your money, emotions can
be your worst enemy.
The same emotions which fill us with elation during times
of joy, can also cause us to buy at market tops, to hold
onto positions long after they become losers, and to give
up when filled with despair, usually right at market bottoms.
Take a look at a chart of the stock market. It is easy to
see the emotional bottoms when everyone is selling at the
same time.
It is also easy to see the emotional tops, when everyone
is buying at the same time. Huge spikes up on
extremely high volume.
Most of those sellers, and most of those buyers, will lose
their money.
Living In The Past
Although there are literally thousands of books written about
emotions and trading, the biggest problem market timers face
can be easily summarized in four words;
"Living in the past."
Because we are all emotional about our money, taking a trading
loss, or worse yet taking a big loss, has an effect on every
future timing decision we make.
| "...if
you carry the emotional baggage of a losing trade
around your neck, every decision you make going
forward will be affected by it." |
What is the old saying? "Once burned, twice shy."
But if you carry the emotional baggage of a losing trade
(or several losing trades) around your neck, every decision
you make going forward will be affected by it.
You will enter trades too late, to make sure they are not
going to become losers. You will exit trades too early, to
make sure they do not reverse on you. The end result? Losses
and even heavier emotional baggage.
The Current Trade Is The Only Trade
The most effective and successful market timers live only
in the present. The current trade is their only trade.
What happened last year, last month, or last week has no
emotional bearing on their current trade. The trade is based
on a successful strategy, and it will take care of itself.
So why spend useless time worrying about it, and potentially
sabotaging it?
In other words, yesterday's trades are "out of sight and
out of mind."
Successful market timers look at those selling climaxes on
the charts, and the buying frenzies, and see them for what
they are.
| "It's
not about ego... it's about making money." |
Emotional responses to fear and greed!
Successful market timers ignore those emotional responses
and instead trade the charts. They ignore the big ups and
downs. They ignore the daily news and they especially ignore
their know-it-all friend, who says "he/she" is absolutely
right, and "you" are absolutely wrong.
It's not about ego... it's about making money.
Trade The Plan
Trade the strategy. Trade the plan. Expect the markets to
throw tons of darts at you, but stick to it anyway.
Remember.... at emotional market tops and at emotional market
bottoms, "everyone is right!"
But a month or two later, although they may not admit it,
better than 80% of those buyers and sellers will have lost
a good deal of money.
Sticking to a trading strategy helps combat those emotional
feelings. The strategy says when to buy. The strategy says
when to sell.
Trading by emotions however, is doomed to failure from the
very first emotional high.
That is why we stick to our strategies here at FibTimer.
It is not always easy. Even after over 20 years of timing
the markets we feel the emotions everyone else does. But
we follow the plan because experience has taught us it is
the "only" way to ensure profits over time.
Look at our various trade history pages. They show many large
gains... but also small losses (though never big losses).
Those who emotionally give up after a loss will never realize
those profits. But those who "trade the plan" do!
Because our timing signals are created "by" changes in the
market, and because the only sure thing in the markets "is" change,
trading the plan will always succeed over time.
Recent articles from the FibTimer market timing services;
The Grass Is Not Greener On The Other Side
Buy-And-Hold? It Works... If You Have 40 Years Or So
Trading Fears... We All Have Them. Part 2
Trading Fears... We All Have Them.
It's How We Handle Them That Counts.
Focus On The War, Not The Battle
Critical Issues For Market Timers
Hope May Spring Eternal, But It Won't Make You Money
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© Copyright 1996-2009, Market Timing Strategies, Inc.,
All Rights Reserved.
FibTimer reports may not be redistributed without
permission.
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. |
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