At Fibtimer, all of our strategies are non-discretionary. Emotions
are not allowed. Our strategies offer disciplined execution of
non-emotional buy and sell signals.
The reason for following any timing strategy is to remove yourself from making
emotional trades. To remove yourself from the herd, which is often headed in
the wrong direction.
"Extreme
feelings of disappointment and regret cause
us to miss trades! This is the single most
common reason timers fail." |
By merely changing our perspective, we can change
how we respond emotionally to market timing setbacks.
If we believe they are our fault, or a result of
some rain cloud that follows over us, or that we
are just not cut out for market timing, then we are
going to experience extreme feelings of disappointment
and regret.
Extreme feelings of disappointment and regret cause us to miss trades! This
is the single most common reason timers fail. Timers allow their emotions
to keep them from following their strategies. And this almost always occurs
at the most inopportune times. Those times when emotions are at their peak,
and trades are imminent.
However, if we assume that setbacks and losses are inevitable, that they
are to be expected in even the most successful of market timing strategies,
in fact that they are caused by market fluctuations that are beyond anyone's
control, we will be prepared to cope with them.
We will come to expect them, and we are likely to then think that they
aren't as terrible as we had assumed they might be.
Anticipatory Approach To Trading
By taking an anticipatory approach to trading, not only can we rein in
our emotions, but we can put a market timing buy or sell signal in the
proper perspective.
Remembering that a single trade is just one trade among a series of trades
and the only outcome that matters in the end is the overall profit across
the series of trades.
Across a typical series of trades there will be winners and losers, and
usually more losers than winners. But the winning trades are much larger
than the losing trades because they are made when the market trends! And
market trends, by their very nature, last for considerable time frames.
Once we accept this fact of trading, we will be able to see that setbacks
aren't as terrible and devastating as we had thought. They are just part
of the game. There's no point in overreacting.
Control Unpleasant Emotions
Control unpleasant emotions by taking the proper perspective.
Humans tend to overstate the adverse effects of a dreaded outcome. But
there are a few simple strategies we can use to control these emotions.
For example, if we control our risk on the trade, and plan it out carefully,
the risk will be minimized and the actual potential loss will not be catastrophic
at all. Remember that all timing strategies at Fibtimer use strict risk
management. That is why losses, when they occur, are kept so small.
"The outcome of
any single trade means nothing. The big picture is all
that counts" |
Once the risk is truly minimized, a useful thinking strategy
can be used; remind yourself, "I'm making more out of this potential
loss than it deserves; it is not going to be as unpleasant as I am
thinking it will be."
The Relative Insignificance Of A Single
Trade
Another way to minimize disappointment and regret is to try to impersonalize
the trade. Think in terms of probabilities, "This is just one of many trades.
The
outcome of any single trade means nothing. The big picture is all that counts."
By reminding yourself of the relative insignificance of a single trade, you'll
minimize the potential regret should you lose. Similarly, it's also important
to avoid over-interpreting the significance of a trade; a single losing trade
(or even a few losing trades) doesn't mean that you have a poor market timing
strategy. It is an unavoidable fact of trading in the markets. You ARE going
to have losses.
With good risk management techniques, such as those we strictly adhere to in
Fibtimer strategies, any losses are kept very small.
Remind yourself that by following the strategy, you will never miss a good gain,
and that those gains, which are usually considerable in size, over time, will
make you very profitable and successful at timing. But you must be there at the
time the signal is issued, and you MUST take the trade.
Remember that NO ONE knows ahead of time which trade will be the big winner for
the year.
Self-worth On The Line
Most importantly, never put your self-worth on the line with your money. The
outcome of the trade should not influence the positive view you have of yourself
as a person.
Don't let regret and disappointment influence your market timing decisions. Keep
in mind that if you make a losing trade, you may feel a little disappointment
or regret, but you can handle it.
Control your emotions. If you do not, you will likely miss the trade that makes
the big gains. If you do control your emotions, in the long run you'll achieve
the profitable results you've been seeking.