| |
• 
Weekly
Report from the FibTimer Stock Market Timing Services
|
Going For The Home Run!
Predicting The Future?
We have all seen the various headlines, ads and marketing hype.
"Use Japanese Candlesticks to spot reversals!" "Learn the secrets of the Pros." "Learn when to take profits." "Learn how to forecast reversals before they occur!"
The problem is that you cannot spot reversals or changes in trends until "after" they have occurred. No one can, although many profess to be able to do so.
Those who profess to have the ability to call reversals and changes in trends "ahead of time," also expect you to believe they have the ability to "predict" the future.
After well over
20 years of market timing experience, please take our word for this... No one can predict with any certainty what the market is going to do! No one can predict the future.
All we can predict with any certainty is... the markets will constantly change, and they will, based on hundreds of years of history, usually be in an up trend
or in a down trend.
So if there is no way to predict what the markets are going to do, how do we time the markets?
By trading the long term trends that are
inherent in free markets and always will be.
The Question Of Time Frame
How do we establish a trend has started? And importantly, when do we exit it once we have
started the trend?
Simply put, all we can depend on in the stock market is price. Price will change either up or down. Change is constant. If price moves higher we
are in an uptrend. If price moves lower we are in a downtrend.
The question of time frame quickly enters here as mutual fund timers cannot, by definition, be day traders. So a change in price to the upside, lasting several
hours, while it may be an uptrend to a very short term oriented trader, is useless for a fund timer.
The time frame for fund timers is in weeks and months, with an emphasis on "months." There is no way around it. If a fund timer trades more frequently, he or she will
face a much larger percentage of losing trades because the markets change so quickly from day to day and short term trends are much harder to trade.
But remember what we said previously... history shows that trends do occur in the markets that last months and even years. In fact, the stock
market is trending in measurable long term trends between 80-90% of the time.
Think 2000 through 2002, an obvious downtrend. Think March through December of 2003 when the market rallied non-stop. Long term trends that are easy to see on
historical charts. They can also be traded with a high degree of profitability, over time, by using defined strategies.
As Trend Timers We Aim For The Moon
Trend traders, as we at FibTimer are, do not try to catch exact tops. Nor do we try to catch exact bottoms.
We do not believe that anyone can.
Of course with hundreds of different opinions available at any time, someone will always be lucky and call an exact
bottom or top. The financial news media is quick to go with the hype. But try and do it over and over and over.
So how do trend traders know when a trend and begun?
The answer is... "after" it has started. Using prices, which are the only measurement of the markets
that can "always" be depended upon, we can create rules that define when we are in a trend.
We could say that if the market rises a specific percent from a low, that we are in an uptrend. At that point, we can take a long, bullish position.
But when do we exit? Do we exit after we have a 10% return? Or maybe set a goal of 20% and cross our fingers?
No... as trend timers we aim for the moon. If a trend goes 200% we want to be on board it from our entry point, right to the 200% point. We want it all.
But, then how do we know when to exit? The answer is simple...
Going For The Home Run
We exit "after" the trend has ended, and not until then. That means we stay until "after" the trend reverses.
When we start the trade, we go in looking for a home run. The sky is the limit.
We do not exit the trade until the market reverses and "prices"
have moved far enough in the "opposite" direction to tell us a "new" trend has likely started.
That means we never get in or out at any exact bottom. It also means we never get in or out at any top. It means that sometimes we take small losses when
our requirement is met for a new trend, but the trend fails (and they do... remember the 10-20% of the time when the markets are NOT in a trend).
But most importantly, it means we never miss any substantial trends, and we ride every trend as far as it will take us!
This is where market timers make their big profits. They go through boring and sometimes costly sideways markets, but when the
market does trend, they are "always" on board for the vast majority of that trend.
By always going for the home run, trend traders, like baseball players, may have lots of strike outs (small losses). But those strike outs
are obliterated by the home runs which we ride for all they are worth.
In the aggressive strategies, we make money in both up trends and down trends.
And importantly in all our timing strategies, we cut our losses when
a trend does not follow through.
Great fortunes are made trading trends. It takes a strategy. It takes discipline because you must stick to the strategy in all market
conditions knowing that no one knows when the next trend will start.
But you can rest assured that over time, you will beat the market and be profitable.
For prior commentaries still posted on the website, Click
Here
© 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. |
Top of the page
|
|
