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 can not 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 U.S. stock markets were in a down trend (bear market) from 2000 into early 2003. Any chart can easily show you the trends. For the last several months, the financial markets have been in a solid uptrend.
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.
Cut your losses short and let your winners run. Ever heard that saying?
Think about how powerful such a trading strategy is. You never miss a trend, either up or down. At tops and bottoms you may get some small whipsaws as the market becomes volatile and false trends occur as the markets consolidate and decide which way the next trend will go.
Those whipsaws, however numerous, result in minor losses and/or small gains. But they are just the precursor to the next trend. In fact, they could be considered exciting times because we KNOW that they are just setting up our next big trend and big profit.
Have you ever heard of the 80/20 Rule, also known as the Pareto Principle? Dr. Joseph Juran developed the Pareto Principle after studying the work of Wilfredo Pareto, a nineteenth century economist.
The Pareto Principle states that a small percentage of your efforts (typically around 20 percent) will create a large majority of your results (usually around 80 percent).
Expanding Pareto to trading, it follows that roughly 80% of your profits should come from only 20% of your trades.
That means there will be numerous small whipsaw losses and gains, but 20% of the trades will make ALL the profits.
Think how import that makes every trade!
After several small losses it is human nature to feel like giving up. This is the psychological battle that market timers MUST win!
The markets are powered by emotions (fear and greed). But trend traders use the changes caused by those emotions, to make their profits.
If you give in to those emotions, you lose!
Here at FibTimer, where we have been market timing for over 20 years (since 1982). We always know when a new trend with huge profits is near. Subscribers become nervous. Financial news becomes overly positive or negative. The number of reasons why the markets cannot go higher (or lower) increase.
That is just when the big trade occurs, and we make our big profits for the year. It happened during the bull market top in 1999-2000. The ensuing decline, a strong and powerful trend lasting two years, realized a 100% gain as the stock market collapsed.
We had that big trade when we turned bullish on July 31st of this year. No one thought the market could mount a sustained rally. Many are still out and waiting for a decline.
We are currently in the midst of a huge rally. We are not smart enough to know when it will end.
Our strategies stay with the trend until they end, and that is exactly what we are doing.