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Trend Following
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. That
information is "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. If prices are trending lower, then the market is trending lower.
Two Kinds Of Traders
News events in particular 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.
| "...price...
the one thing that is guaranteed to make you
a successful market timer or trader." |
There are two kinds of traders.
1. Those who make emotional decisions based on any
of the above.
2. 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 or trader.
There are so many indicators, so much available analysis, but "price" is always
right. It is "never" wrong. At the end of every trading day, price contains the
input of millions of traders, the input of all technical and fundamental analysis.
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. Many made huge profits as they rode this stock down.
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?
Or how much of those losses went into someone's pockets!
How about the 80% decline in the Nasdaq in the 2000-2002 bear market? Or the
50% decline in the 2008-2009 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 over 120% during those bear markets.
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.
| "...when
the trends take off, the profits are made." |
And false trends do 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 risk management trading rules.
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.
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.
Recent articles from the FibTimer market timing services;
The Basics of Support and Resistance
Being Right? Or Making Money!
The Forever Strategy
The Impulsive Trader
Instincts vs. Market Timing Strategy
Making Sense Of The Stock Market
Ignorance, Greed, Fear and Hope Deadly Enemies Of Profitable Trading
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© Copyright 1996-2010, 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. |
