Fear, Greed and Trading
What good is a plan, if you can not, or do not, execute it?
Fear and
Trading
How do you make decisions when those
decisions affect something you hold
dearly?
Meaning, your money!
First, fear doesn't form in a vacuum. It is a learned response. In the case
of market timing, when you have a buy or sell signal that goes bad, the regret
and frustration can carry over into the NEXT buy or sell. Or worse, the fear
is so consuming, that you don't even enter your next trade.
"Never
mistake genius for profits derived
from your trading strategy." |
Of course, Murphy's Law dictates that
the buy or sell signal you don't enter
is the one you should have entered, which
only compounds the fear and frustration.
This particular problem is made much worse if you enter every buy or sell with
the "expectation" that it must be profitable.
If you believe that, then here is an important piece of information for you - "not
every buy or sell will be profitable!"
Greed and Trading
Greed creates the opposite problem.
After several winning trades, the feeling of invincibility supersedes being logical.
This will ultimately lead you ignore a successful timing strategy and into trades
that you normally would not have entered.
Successful market timing is only accomplished by sticking to a proven timing
strategy. But entering losing trades, and ignoring your trading plan, seems to
get much easier after a couple of winning trades.
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Never mistake genius for profits derived from your
trading strategy.
-- Genius loses money.
-- Trading plans
make money.
We All Want To Be Bullish
The difference between being "emotional" and being "blinded" by
fear and greed is indeed critical to success.
Experienced market timers know this.
A strategy can go for years making profit after profit,
and then the markets do what they do best. They frustrate
us. We enter a volatile sideways market that is virtually
untradable.
It happens. But it "always" ends. And most importantly, if we don't take the
trade that hits the jackpot, it will only re enforce our fears.
"It's
important to recognize your emotions, and more
importantly, how they affect your investing
approach" |
Every trade MUST be taken. If aggressive trading is
taking it's toll on you emotionally, use a strategy
that works in all markets, like our Conservative S&P
Timer.
But keep trading. The only way to market timing success is to make the trades.
-- Fear blinds us to opportunity.
-- Greed blinds us to danger.
It's important to recognize your emotions, and more importantly, how they affect
your investing approach. In general, we all want to be bullish, and are eager
to see any upward market movement as a rally, even when it's not.
Conclusion
Are fear and greed driving your investment decisions right now? If you are
trading the aggressive Bull & Bear Pro Timer strategy, but in reality you
are just looking for a timing strategy to keep you invested during advancing
trends, and protected from bear markets, then you are in the wrong strategy!
Aggressive market timing is for "aggressive" timers. Those trying to wring
as much profit out of the market as they can, and willing to accept short term
losses as the price for achieving above average long term profits.
Aggressive
timers are unfazed by the ups and downs of an aggressive timing strategy.
If you're not sure, or you are concerned about frequent trading, I'd recommend
using the Conservative S&P Timer, or possibly our Diversified Timing
Strategy, which has some aggressive and some conservative positions, is the
answer for you.
Whatever you do, whichever strategy is right for you, stick to the plan!
Recent articles from the FibTimer market timing services;
© Copyright 1996-2014, 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. |