Market Timing Facts
Market Timing Fiction
The phrase "market timing" has been terribly misused,
and misunderstood, by market commentators, analysts, traders
A stock, ETF, mutual fund, commodity, is purchased with
the expectation it will be worth more over "time." It is
sold when the expectation is that its value will decrease
over "time." Any analysis intended to create a profitable
return on investing, is a form of market timing.
The fact is, no one buys a stock expecting it will be
worth less over time. They choose a time to buy it, based
on fundamental or technical analysis, and expect that over
time it will be worth more.
Market timers usually use index mutual funds and more
recently ETFs covering one or more of many possible markets.
They can time the S&P 500, the Nasdaq 100, Gold, small
caps, bonds, U.S. dollar, etc.
Timers purchase the index fund with the expectation that
it will increase in value. They sell the index fund when
they expect it will decrease in value.
Just about everyone trading the financial markets is,
in one way or another, a market timer.
If you think of market timers as crystal ball watchers,
well...there are some out there who believe they can forecast
the future. But we do not.
We use technical analysis to identify and follow market
trends and we do so quite successfully.
At Fibtimer, we specialize in trading index funds, as
well as sector funds, exchange traded funds, and even selected
stocks which tend to trend well and work profitably with
our timing strategies.
Tell Us Another Story
We believe that some of the worst advice, which is given
to the vast majority of investors, is to select an index
fund, set up an automatic deposit program to make monthly
deposits into it, and then do nothing until you retire.
At that time, so the logic goes, you will be rich from
the huge profits derived from your investments.
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We profit year after year after year. In fact, we have been
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Buy-and-hold say the experts.
Buy-and-hold say the advisors who profit from your investment
purchases though commissions.
Buy-and-hold say most mutual fund companies who profit
from load fees so numerous in variety it would take too
much space to list them all here.
Buy-and-hold say TV commentators and newsletter publishers
who's clients already own the stock.
Imagine for a moment an investor, following such a buy-and-hold
strategy, who planned to retire in 2002 or say 2008.
Depending on the index fund, the value of his or her
retirement funds would be worth 50% to 80% less after
the 2000-2002 bear market.
And if they did manage to recoup some of those losses,
what happened in 2008-2009 when the stock market again
markets will always go up and down, and the majority
of stocks in the market will follow the current
trend. Change is inevitable! "
But those mutual fund traders who spent a little time
watching the markets, who used even a simple 200 day
moving average to determine that their fund investments
were no longer performing well and exited to cash, avoided
most of the losses and made money in money market funds.
Market timing doesn't work? Sure, tell us another story.
Change Is Inevitable
Market timing is based on the fact that 80% of stocks
will follow the direction of the broad market. It is
based on the fact that the markets trend over time, and
have been doing so since the beginning of freely traded
It is based on the fact that change in the financial
markets is the one thing we can count on to always happen.
Simply said, the markets will always go up and down,
and the majority of stocks in the market will follow
the current trend. Change is inevitable.
And here is the key.
While over the short term, financial markets can seem
very chaotic. Going up one day and down the next, seemingly
with no rhyme or reason. Over time, they trend in huge
up and down moves, easily seen on historical charts.
And those long term moves can be traded profitably. Trend
timers (trend traders) have been doing it for years.
Quietly making huge sums of money while most investors,
following the emotional dictates of fear and greed, lose.
Either Take Action, Or Go
Along For The Ride
The best tools for making entry and exit decisions,
in order to profit during upward trends and safeguard
capital during downward trends, are technical analysis
tools. Fundamental analysis does not take into account
whether a stock is in a down trend or up trend. It is
of little use to market timers. What counts is price.
Is price rising or falling? Is it trending? Technical
analysis can give us the answer.
As mentioned above, a simple 200 day moving average
would have kept mutual fund investors (and most individual
stock investors) from losing their shirts in the 2000-2002
bear market. It also would have saved them from losses
during the 2008-2009 bear market. Moving averages are
very simple technical analysis tools.
use a methodology that takes you out of declining
markets, or you tank right along with the declining
markets (along with all the other buy-and-hold
Obviously there are better tools than the 200 day moving
average. Not everyone wants to wait until a mutual fund
has dropped below its 200 day average. Much depends on
a traders time frame. Are they aggressive, conservative,
or active? Their emotional ability to handle losses is
also a factor.
Gains can also be enhanced by aggressive traders who
are willing to use bear funds during declines. In the
case of the 2000-2002 bear market, our aggressive strategies
that use bear funds beat the market by over 100%. In
the 2008-2009 bear market, our aggressive strategies
beat the market by 59%. Even our conservative strategies
were safe in money market funds.
But regardless of a traders choice of funds, whether
or not they are aggressive, conservative, or just don't
want to lose their shirts when the markets tank, market
timing is the only answer.
You either use a methodology that takes you out of declining
markets, or you tank right along with the declining markets
(along with all the other buy-and-hold investors).
There is little choice. Either take action or go along
for the ride.
We are market timers here at Fibtimer and have been
for a very long time. We have realized the profits, and
have also been through the ups and downs of many market
cycles; bull, bear and sideways.
Exceptional results are made by following solid, tested,
non-discretionary timing strategies for long periods
of time. Poor results are the consolidation prize for
those who follow conventional wisdom, park their brains
on hold for decades, and let the markets decide whether
they retire rich, or unfortunately, poor.
Recent articles from the Fibtimer market timing services;
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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.