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Weekly
Report from the FibTimer Stock Market Timing Services
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Maintaining Discipline; Easier
Said Than Done
The winning market timer is the disciplined market timer.
Sounds simple. And everyone should find this sentence easy to agree with.
Basically, it just means following a specific trading strategy and not deviating from it.
But people differ in terms of their ability to maintain self-control and discipline.
Discipline vs. Emotions
It is easy to maintain discipline with a market timing strategy when that strategy is having a profitable run. But "all" strategies have times when they are not profitable. Whether
for days, weeks or even months. This is a fact of trading the markets... and accepted by profitable market timers as the price of "doing business."
However, when a strategy is going through an unprofitable period, maintaining discipline is something else again. A trader, seeing losses in his portfolio, tries to find a reason why exiting the strategy is a good idea. Anything to take away the pain.
The problem is, exiting a proven strategy is almost always going to cause much "more" pain.
Exiting is an emotional decision and the stock market runs on emotions. But that just puts you in with the crowd. Making buy and sell decisions
according to how you feel.
Following the emotional crowd may take away the "pain" for a short while, but it is NOT the way to profit.
Felix And Oscar
As you may have casually observed, some people are very disciplined while others are undisciplined.
Neil Simon's characters Felix Ungar and Oscar Madison illustrate the stark contrast between the disciplined and undisciplined.
| "Remember...there is "always" a next trend. The only question is "when" it will start." |
Felix was a neat freak who wanted everything in its place, while Oscar was sloppy and more impulsive.
But there were times when Oscar was extremely disciplined. He was a well-known sports writer and he must have shown an acceptable amount of self-control in order to put out his column every day.
Although he was a fictional character, Oscar shows how it's possible to be undisciplined in terms of personality traits, yet able to show discipline when completing a specific task, such as executing a trading strategy.
Discipline Equals Profits
Keep in mind that you don't have to be disciplined all the time. You only need to be disciplined when you are executing a buy or sell signal. It sometimes helps to remember this fact. It eases some of the pressure to think that you only need to be "disciplined" when you execute a timing signal, rather than during all waking hours.
Don't minimize the importance of self-control and discipline. The more disciplined you can trade, the more profits you will realize over time.
Remember that market timing often has small losing trades that occur when trends fail. This sometimes occurs several times in a row before a new and profitable long term trend begins. These small losses can sap at a timers confidence.
The urge to ignore a buy or sell signal, or even exit a trade because it is not currently profitable, can be very strong.
But when the big profit-making trend begins, if you do not take the trade, you will be left by the wayside. Because it is impossible to know "ahead" of time when that major trend is going to start, you MUST take all the trades.
Remember...there is "always" a next trend. The only question is "when" it will start.
Conclusion
Last year's 4th quarter bull rally started after many months (nine) of failed rallies. The stock market was in complete disarray.
Many traders and market timers had given up.
One email we received in August, right before the big rally started, asked, "What if we stay in this sideways market forever?" "What if a new trend never starts?"
"I am sorry, but I just can't take the chance."
I have no idea what happened to that trader when the strong (and profitable) year-end rally started only a few weeks later.
More than likely he or she is still worrying and still unable to commit to a timing strategy.
If the majority of stock market investors and traders had the ability to stick with a good timing strategy, most would be rich. Because that is NOT the case, we know that
most market timers fall by the wayside.
Don't be one of them.
If you maintain discipline and make ALL the trades, you will never miss the "next" profitable trend. And there is "always" a next trend.
Recent articles from the FibTimer.com market timing services;
Fear & Market Timing Paralysis
Beliefs of Successful Market Timers
Aggressive Bull & Bear Market Timing, The Truth Behind The Hype
The Basics On Fibonacci Ratios & Elliott Wave Theory
Which Is More Important To You... Being Right, Or Making Money?
Trading Trends; Yesterday, Today & Tomorrow
Immediate Profits vs. Delayed Rewards, Which Is The Key To Success?
The Grass May "Not" Be Greener On The Other Side
Sector Timing - Diversified and Profitable
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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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