Validea is an advisory service which assesses stocks based on the investing criteria of many of the ...
Following a Timing Strategy
10/08/2014 6:00 am EST
Frank Kollar of Fibtimer.com provides answers to some basic trading questions and suggests that only through following a proven market timing strategy will a trader save himself a great deal of frustration and successfully grow his investments.
When it comes to making decisions, our minds tend to perceive and react to the information available to us, each in its own particular way. This is not something we think much about. It is a part of each of us. Trying to change this process is almost impossible.
This is usually not of any consequence in our everyday lives, but in the realm of investing, our perceptions and reactions, and the emotions they generate, are very often the opposite of what is needed to be successful.
How do we start making consistently correct trading decisions? How do we make decisions without emotions interfering? How do we trade with confidence?
The answer is simple. We follow an unemotional timing strategy which keeps us on the path to profitability. Strategies that have been profitable for many years in real-time trading. Strategies that keep us with the current trend.
Many traders, market timers, investors have no plan at all. They are like the proverbial Gunslingers of the Old West. A news event causes the market to decline and bang, they go short. An economic indicator comes in better than expected, the market rises, and pow, they go long.
Trading by emotion, they make trades that seem solid at the time, and they hold that position until it becomes more painful to hold it than to not hold it. They may even make an occasional profit.
"...Why do so many traders sell at bottoms, and buy at tops?"
But that lack of focus...lack of planning, will ultimately lead to poor performance, and to outright losses.
Why do so many traders sell at bottoms, and buy at tops? It is such a well known fact that it is almost funny, except when you are the person at that top or bottom.
Have you (or someone you know) ever said, "Well, I finally decided to go long (or short), so expect the market to reverse on me, again." Actually expecting “ahead of time" that the trade will be unprofitable.
You will not hear that from someone following a timing strategy.
He or she knows that following the strategy will avoid emotional trading errors, and lead to long term profits.
Strategy Equals Long-Term Success
Trading requires discipline. Some have it, and others that wish for success must learn it.
The benefit of following a proven trading strategy is two-fold.
First—If you have a trading strategy, you'll be able to ignore all the data that doesn't affect your trading. The media is rough on traders. At any given time, you could find ten reasons to buy and ten reasons to sell. That emotional roller coaster is a nightmare, but if you are following a trading strategy, you won't talk yourself out of good trades nor will you keep yourself in bad ones.
Second—Our emotions cannot cause us to make unprofitable decisions if they are not involved in decision making. We have a trading strategy. We know it works. All we need do is follow it. Never second guess the trading strategy. That is allowing your emotions to come back into play and emotions result in losses.
Only through following a proven market timing strategy will you save yourself a great deal of frustration and successfully grow your investments.
By Frank Kollar, Editor, Fibtimer.com
Related Articles on STRATEGIES
The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “T...
The Dow Theory was originally referred to as “Dow’s Theory,” since it was based on...
When stocks are selling at valuation extremes and consumer optimism is at one of the highest levels ...