Critical Issues For Market Timers

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It is not enough to have a successful market timing strategy if that strategy is not traded with discipline. It is also not enough to trade with discipline if you are overly aggressive with those funds allocated to market timing, and cannot handle the resulting volatility.

It is not enough to have a successful market timing strategy if that strategy is not traded with discipline. It is also not enough to trade with discipline if you are overly aggressive with those funds allocated to market timing, and cannot handle the resulting volatility.

Many market timers think that the more they trade, the better they will do. But in reality, market timers do not need to trade aggressively to do well. Four critical issues; strategy, discipline, money management and diversification are discussed below.

Strategy - Market Timers Must Have An Edge

At http://www.FibTimer.com our "edge" is trend trading. We know that the financial markets are usually in a trend, either up or down. In fact, history shows us that they are in trends 80-90% of the time.

By limiting losses, and allowing profits to ride, we use our "edge" to time the markets with great success.

Disciplined Execution

Once you have an edge, you have to be able to execute. The common trading errors of not taking trades until you see if they are profitable, or jumping the gun and taking trades ahead of time because you "think" a signal will be issued soon, can be a disaster to your profitability.

At http://www.FibTimer.com 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.

Effective Money Management

Overly aggressive investment allocations can ruin even a good timing strategy with excessive drawdowns, while overly conservative allocations of capital will not optimize your total returns.

Stick to strategies that fit your emotions. Market timers should know themselves and use timing strategies that they will be able to stick with over long time frames.

Diversification

Even aggressive market timers should not put 100% of their funds in a single aggressive market timing strategy. Diversification is not just a word., it is a prerequisite to successful timing.

Using at least some diversification takes the stress out of investing, and makes it much easier to follow buy and sell signals with discipline.

Conclusion

At http://www.FibTimer.com we never question buy and sell signals and follow them faithfully. Over the years, our disciplined approach has resulted in superb gains.

It does not take blind faith to be a successful market timer. What it takes is a realization that our own emotions and instincts are usually wrong, and that a non-discretionary timing strategy that trades all trends and limits losses in non-trending periods, is the most successful approach to profiting in the stock market.

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Frank Kollar

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