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Market Timing vs.
Conventional Wisdom
Outlandish Claims
We did a search for "Market Timing" on several of the
most widely used search engines. Some of the market timing
results posted are staggering:
Up over 1000%... we guarantee our results! 90% winning trades.
97% Winning Trades! Up over 900%. 138% APR. Up over 1,400%.
Up 3,494% in 4 years.
We have one question:
If you could make 1400% every few years, guaranteed, would you sell the formula
for $20 or $30 or $40 a month? Not us. We would use it for a few years, and
then buy an island, complete with mansion and servants, and retire forever.
These phony numbers are a large part of what gives market timing a dubious
reputation.
While market timing is about profiting, it is NOT about
fast gains. It is about capitalizing on trends by following
a well researched strategy and avoiding huge losses!
Such marketing scams as we listed above, and believe us they are nothing but
fake numbers, play on an investor's greed.
You know it can't be true.... but... just maybe...
One of the two emotions which cause the largest financial
losses is "greed." And these ads play into that emotion
perfectly.
The other emotion of course is "fear."
Market timing is NOT about instant gratification. It is about winning over
the long haul. It is about withstanding the test of time. Profiting over the
years while others go back and forth, from scam to scam, looking for the holy
grail to quick riches. Or trading by emotions, news events, and the next door
neighbor's secret tips.
Successful timing is about discipline. Following a strategy
that will catch the major trends so that your are "in" for
the advances and "out" for the declines. Most traders and
investors are in for the declines and out for the advances.
It is the disciplined following of a timing strategy that
separates successful timers, from everyone else.
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Fool’s Game?
Critics say trying to time the stock market is a fool’s game. That trying
to forecast the future direction of the stock market cannot be done.
They are correct. It cannot be done.
But at Fibtimer we do not forecast the future.
We trade trends that are currently in progress. It
is not hocus pocus but a carefully defined strategy.
Market timing critics have said that, if timing took you out of the market
during only the very best days, or the very best months, your performance would
suffer enormously. They are right of course" if " that is what market timing
did.
In 2001, Barrons Magazine published a graph showing the hypothetical results
of investing in the Standard & Poor's 500 Index in February 1966 through
late October 2001. During that period of almost 36 years, an investment of
$1,000 in the index would have grown on a buy-and-hold basis to $11,710.
Then, referring to a study done by Birinyi Associates, (an investment research
firm in Connecticut), the article reported that if an investor missed just
the five most profitable trading days every calendar year, that $1,000 investment
would have shrunk to $150.
Right again! But what an incredible, one sided, misuse of numbers.
To anybody unfamiliar with timing, that statement would be convincing evidence
that market timing is truly a fool’s game .
Why would anybody even think of giving up a gain of $10,710 and replacing it
with a loss of $850?
True Purpose of Market Timing
Ridiculous though those results are, they are quite damaging to those who do
not understand the TRUE purpose of market timing.
Recognizing how one sided an imaginary timing system that kept investors on
the sidelines during only the best five days of each year was, Mr. Birinyi
took the idea one step further.
What would happen, Mr. Birinyi asked, if a timing system could be invested
in all but the five worst trading days days each year?
He found that a $1,000 investment in the S&P 500 Index that missed only
the five worst days each calendar year would have grown to $987,120 .
Nobody, of course, has been able to devise any system that could eliminate
only the very worst days of every calendar year, nor the very best days for
that matter.
But the contrast between "all-but-the-five-best-days" showing an investment
that falls to $150, and "all-but-the-worst-five-days" showing the same investment
rising to a whopping $987,120, is very telling.
And the next sentence is the most import one in this article.The article suggests
that there are great gains to be made by "missing the worst days."
Wake up!
Missing the worst days is exactly what market timing is all about!
A market timing strategy that gets traders onto the sidelines during more bad
days than good days inevitably reduces the risk of being in the market.
As subscribers who were with us during the bear market of 2000-2002 found out,
as well as the bear market of 2008 and into early 2009, missing the bad days
not only protects capital, but in the case of our timing strategies that used
bearish short positions, it greatly magnified gains.
It is ten years since that last bear market. How long
can it be before the next bear takes the stock market
down?
Don't fall for the scams. Execute and stay with a successful timing strategy
for the long haul and you will be greatly rewarded over time.
Market timing is the following of a successful trading
strategy that keeps you "in" during long term market
advances and gets you "out" during long term market
declines. If you are in during all up trends and out
during all downtrends, you will be "in" for most, if
not all, of those five-best-days, and out for most,
if not all, of those five-worst-days.
Cut your losses short and let your winners run. The
very "definition" of market timing
Recent articles from the Fibtimer market timing services;
© Copyright 1996-2019, 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. |
