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The Good News About Sideways Markets
03/07/2016 6:00 am EST
Whether a trader is looking at stock markets, commodity markets, you name it, they are more often in trends than not, so Frank Kollar of Fibtimer.com stresses the significance of this for market timers and offers an important reminder for when dealing with sideways markets.
Historically, the Markets Are Usually in Trends
Trend traders depend on change to make their strategies work. Simply said, a market that just goes sideways cannot be timed. But a market that trends up and down can be.
History shows us the financial markets are usually in trends. You can go back hundreds of years. You can look at stock markets, commodity markets, Dutch tulips, you name it, they are more often in trends, than not in trends.
History also shows us that trends usually last much longer than anyone expects.
For example, after a huge upward trend through most of the 1990s, the US stock markets were in a downtrend (bear market) from 2000 into early 2003. Any chart can easily show you the trends.
For the next several years, into 2007, the financial markets were in a solid uptrend. Then again we suffered through another bear market (downtrend) but Fibtimer subscribers made money, instead of taking the 50% losses that most investors suffered.
Over all, financial markets are in defined trends about 80% of the time. This has been the case for many, many years.
Sideways Markets Are Actually Good News
But what about those sideways times? The times that try our patience and our will?
The good news is that sideways markets are always either the base or the top of a new trend. That means the next trend is around the corner when we are enduring a sideways market. We just have to make sure we are on board and profiting when it happens.
That is where trend trading comes in. We establish a set of rules that identifies when a trend has begun. If the trend fails, we exit. If it continues, we stay with the trend no matter how long it lasts. Months...even years. After the trend fails, according to our preset rules, we exit. To read the entire article, click here…
By Frank Kollar, Editor, Fibtimer.com
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