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How To Use The FibTimer Strategies
Important information for new subscribers
Published: Charlottesville, Virginia
Frank Kollar, Editor
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Successful Market Timing With FibTimer
How to Start
This letter is for new subscribers. If you desire to succeed in market timing, we urge you to read it carefully before starting any of our timing strategies.
Following Our Strategies Correctly
FibTimer's success depends on "your"
success. We want you to be successful. To achieve this requires not only a successful market timing strategy, which we provide,
but subscribers must also follow that strategy correctly.
One of the most difficult tasks for us at FibTimer, is trying to make sure that subscribers understand what is required to achieve
success in market timing.
We can publish the reports, but if the strategies are not followed correctly, the odds of being profitable diminish.
Subscribers should use the strategy that suits them best.
We have aggressive, conservative, as well as very conservative timing strategies. Make sure you know what sort of timing strategy you are
emotionally able to handle.
A novice market timer, who jumps right into our Bull & Bear Pro Timer strategy, might have a difficult time
when facing numerous trades in a fast market. If you are conservative, use a conservative strategy. The different strategies are described in detail below.
Another concern is new subscribers who trade immediately. Entering a new position "before" a new bullish or bearish
signal has been issued. We understand the urge to jump in and get started, but in reality, "mid-signal" entries are very risky.
When a subscriber enters on his or her own, mid-trade, the result more often than not, is losses that should never have happened.
Our strategies are designed to manage risk in volatile,
or sideways markets, and to correctly place us in bullish or bearish trends when they occur. In the aggressive strategies, small losses,
and sometimes multiple small losses, are a normal part of trading. The aggressive strategies are the most profitable over time, but
if you exit the strategy after a few small losses, you will not be profitable when the strategies catch a strong trend.
There is an old saying, "If you cannot accept a loss, than you will never succeed in market timing." If you feel you will worry over
multiple trades, use either the Conservative Timer strategy (least number of buys & sells), or the Bull Pro Timer strategy.
Finally, there are those subscribers who wait to see if a signal is correct before following it. This again diminishes the ability of
our risk management, built into the strategies, to work correctly. In the aggressive strategies, we accept small losses as the price of
never missing any trend, but the prices we enter at, can be quite different than an entry made two or three days later.
Following our trading rules is extremely important. We go into them in detail, for each of our strategies, below.
Know Yourself
Before using any of our timing strategies, be sure you know yourself. What type of investor, or trader, are you?
Are you looking for a timing strategy that will keep you in bull markets, and protect you from bear markets, with few timing decisions that
have to be faced? Are you close to retirement and just do not want to risk having a bear market, such as we had in 2000-2002, decimate your savings by 50-80%?
If this is you, use the "Conservative" Conservative Timer, which trades
infrequently, and only goes to cash to avoid potential long term declines.
Are you somewhat aggressive, but uncomfortable with taking bearish positions (betting the market will go down)? Are you unable to trade
bear mutual funds because they are not available to you? Many subscribers cannot make bearish trades. If you are one of them,
but want to market time with those funds available to you using an "Active" timing strategy, use the Bull Pro Timer.
Note: If the funds you use charge short term redemption fees, the ONLY strategy you should use is the Conservative Timer.
The Gold Timer, Bond Timer and Small Cap Timer strategies are all "Aggressive". They are single industry timers and should only be used for a
"portion" of your investment capital. They should NOT be used for all your trading capital. Gold bugs take note...it is not a good idea to
trade only gold funds. They can move against you 10% in a single day.
Yes, a great deal of money can be made in them when they trend, and over time, they are big
winners for market timers. But,
if you put all your eggs in one basket, a sharp swing in the wrong direction may scare you out of the strategy. The next move will
probably be the one with the huge profits, but you will not be there.
If you have access to sector funds, which are available in several fund families, our Sector Timer is one of the best timing strategies we have aver developed.
It is meant to be traded with at least 8 positions (diversification) and is less volatile than you might think. If a sector has a large
sell off, it only affects 1/8th of the portfolio. If a sector get whipsawed, again only 1/8th is affected.
Sector funds, when they
trend, often move faster and farther then the market in general, and usually further than anyone expects. The potential of the Sector Timer for future
profits is huge. We consider this an "Active" timing strategy, but not an aggressive one. Sectors move to cash during declines, adding stability to the strategy.
The ETF and Stock Timer strategies are only for traders who understand "Aggressive" trading strategies. If you are such a trader, read the
trading instructions on each report. If you are not, do not use these strategies. They often trade every day, and must be actively followed.
Mid-Signal Entries
New subscribers should NEVER enter mid-signal in any of our strategies (excepting the Conservative Timer which offers suggestions on
entering mid-trade with minimal risk).
Entering mid-signal adds risk that our timing strategies were designed to avoid.
Yes, it requires patience to wait, but if you wish to be successful, you must wait for a proper entry.
Possibly the best way to illustrate a mid-signal entry, is to describe an improper start for a new subscriber who decides he is an
aggressive market timer, and is so excited he immediately ignores the primary rule and jumps right in:
a. The new subscriber starts, and sees that the aggressive Bull & Bear Pro Timer strategy, currently 100% bearish, is up 6% since turning bearish a month earlier.
b. Understandably, he or she does not want to miss out on potential gains, and does not wait for the next signal. Instead, he or she
immediately enters a 100% bearish position.
c. The market reverses, and two weeks later Pro Timer reverses to a 100% bullish position. The trade is a losing one,
and our subscribers have a loss of 2%. Pro Timer's risk management in volatile market conditions is working perfectly, and we are
now looking for the new bullish entry to generate nice profits.
d. But... the new subscriber has a loss of 8%. He or she has only been timing two weeks, and has a substantial loss. Anger is obvious
in the email we receive.
e. The subscriber wants an immediate refund. We issue the refund, and are sitting here trying to figure out how the new subscriber
lost so much money? Had they followed our timing rules, there is no way such losses would have occurred.
Correctly Using Our Timing Strategies
Below we will detail the most important rules for successfully trading our timing strategies. We have been market timing for many years
and know that following the strategies correctly is critical to success.
If you, as a new subscriber, follow the rules and give the strategies "proper time" to work, you will not only be profitable, but you
will do something few others achieve. You will "beat" the markets.
a. Commit to a realistic time frame. We suggest one to two years. While your first buy or sell signal may be profitable, it also may
"not" be. Often, in a volatile market, the aggressive strategies will have several small losses. That is a small price to pay for being certain to catch
the big (profitable) trend when it finally materializes.
We are the first to tell subscribers that small losses on trades are common in market timing. You must take ALL the trades
so that when the big trade occurs, the one that makes most of that year's profits, you are on board.
b. No mid-signal entries. Yes... it requires patience, but this rule is absolutely necessary. Jumping the gun and entering in the middle
of a trade completely removes the risk management that is built into our strategies. The one exception to entering mid-signal is the Conservative Timer.
c. Take all trades. You cannot pick and chose according to how you feel the market will do. That adds emotion to an unemotional trading strategy.
Almost without doubt, you will lose money.
Correctly using the Conservative Timer Strategy
The following is an example of the correct way to start using the Conservative Timer signals.
a. The Conservative Timer is a Conservative timing strategy. It is designed to keep investors in the market during long term advances,
and to avoid substantial declines (bear markets) by moving to a cash (money market funds) position.
b. While we usually recommend that initial entries to be made only on new buy signal,
this is not feasible for subscribers who want to use the Conservative Timer
strategy, as buy signals can be quite long in duration.
c. We would suggest that a new subscriber enter the Conservative Timer strategy
over a period of time. For example; 20% initially, and then adding funds in increments of 20% monthly.
Such an entry strategy reduces the risk of entering at a top.
d. As with all of our strategies, the signals MUST be acted on when they are
issued in order to be successful.
e. The Trade History page has several S&P index funds from well known fund
companies on it to track performance, as well as several well managed growth funds, plus a small cap index fund, so that subscribers can see how this strategy works
with a wide range of mutual funds.
Correctly using the Pro Timer Strategies
The following is an example of the correct way to start trading the Pro Timer (either the Bull & Bear Pro Timer or Bull Pro Timer) signals.
a. The Bull & Bear Pro Timer is an Aggressive timing strategy. It is designed to trade "all" trends. During a trending market, there may be few buys or sells,
but during a sideways (non-trending) market, subscribers must expect that multiple trades will occur as the strategy looks to stay on the correct side of
any potential trend.
b. The Bull Pro Timer is an Active timing strategy. It is also designed to trade "all" trends, but during sell signals
it moves to a cash (money market funds) position to reduce volatility and also reduce potential draw downs. During a trending market, there may be few buys or sells,
but during a sideways (non-trending) market, just as in the regular Pro Timer strategy, subscribers must expect that multiple trades will occur as the strategy looks to stay on the correct side of
any potential trend.
c. No mid-signal entries.
d. When we issue a bullish or bearish signal for 50% of the Pro Timer (either SPX or NDX), you should enter the bullish or bearish
position with only half of your allocated timing funds account.
e. Should this first position reverse, then you reverse those funds only. Until a second signal is issued for the other 50% of the portfolio,
the second half should remain untouched.
Correctly using the Gold, Bond & Small Cap Timer Strategies
The following is an example of the correct way to start trading the Gold, Bond And Small Cap Timer signals.
a. The Gold, Bond And Small Cap Timers are Aggressive timing strategies. They are designed to trade "all" trends. During a trending market,
there may be few buys or sells, but during a sideways (non-trending) market, subscribers must expect that multiple trades will occur as the strategy looks
to stay on the correct side of any potential trend.
b. The Gold and Small Cap Timer strategies move to cash (money market funds) during sell signals as, in our experience, trading them with bearish
positions (gold does not have a bearish fund available) results in losses more often than not. The Bond Timer uses both bullish and bearish positions.
c. No mid-signal entries.
d. These strategies should be not be used for all of your timing funds. They are volatile, and can have huge up and down moves.
e. Diversify.
Putting all you timing funds in the Gold Timer, for example, is quite risky. The risk has nothing to do with the strategies prospects over time.
The risk is that a fast reversal, common in a single industry fund, will scare a subscriber into exiting the strategy mid-signal, with a loss.
The strategies
must be followed, all trades taken, and over time they will all be successful. Single sector timing is best used within a diversified portfolio.
Correctly using the Sector Fund, ETF & Stock Timer Strategies
The following is an example of the correct way to start trading the Sector Fund, ETF and Stock Timer signals.
a. The ETF and Stock Timer strategies are Aggressive timing strategies. Subscribers should understand that using these
strategies will result in multiple, often daily, trades. Traders using these strategies must be experienced, disciplined and should understand what such
aggressive trading strategies entail.
b. The Sector Fund Timer is an Active timing strategy. It is suitable for most market timers who actively trade, and can check the reports
every evening for possible buy and sell signals. Because the sectors move to cash (money market funds) during sell signals, the Sector Timer is remarkably stable
for an active timing strategy.
c. No mid-signal entries. Read the important trading rules and strategy information, specific to each strategy, at the bottom of each report.
d. All three of these strategies are meant to be traded as a diversified portfolio of positions. At least 8 positions in the Sector Fund or
ETF Timer strategies. At least 12-15 positions in the Stock Timer strategy.
e. While most individual Sectors, ETFs and Stocks will be profitable over time, the increased volatility of trading a single position is virtually
eliminated if you trade them as a diversified portfolio.
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© Copyright 1996-2005, Kollar Market Analytics, 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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