Getting StartedPsychology

Let Your Profits Ride

Stick With The Plan
This may seem like a common sense statement, but the reality of market timing is that the majority of timers "think" they can stick to a timing strategy, however when the market moves against them, as it always does as some point, they are swayed by financial news stories, the desire to be "with" the crowd, and their own emotions, often exiting the strategy at exactly the wrong time.

Think about it. Let’s use a fictional market timer named Mark for this example.

Mark has a strategy he knows has, over many years, outperformed the stock market. Mark knows going in there will be times when the strategy will lose. He sees this in the historical trades. He accepts this or at least he thinks he does.

But then, the market turns against Mark’s first buy or sell signal and he is down 2%, then 4%. Mark is counting the dollars. He wakes up during the night with feelings of dread. Maybe "this" time it is different.

The next day, Mark exits the strategy and immediately feels better. He starts searching the internet for a better timing service. They are easy to find. We have personally seen some that "guarantee" 800% and 1000% returns. Much better than that 4% loss.

Of course the day after Mark exits the strategy, the market reverses and within a few more days, the strategy is now back in positive territory. Mark cannot enter, because he has lost 4% and knows it is not wise to enter mid-trade.

Mark is now feeling upset again. The initial feelings of relief when he exited the trade are gone. Mark is starting to feel he is missing out all over again.

After watching the market continue to advance, Mark finally makes a decision and re-enters the position after it has a nice 10% gain. Mark is feeling good again as the market has obviously turned and he is back on board.

Immediately the market takes back 4-5% of those gains and Mark now has a loss, that never should have occurred, of 8% to 9%.

Those who stayed with the strategy from the initial buy or sell signal are in positive territory and have a nice gain. Mark, however, exits again, with double his original loss, and quits market timing for good.

None of this need happen. When you start following a strategy, plan to stick with it for several years. That is how the smart money makes profits. They do not let emotions rule their marketing decisions. They stick with the plan!

The Trend Is Your Friend – Trade With The Trend
Personally, all of my strategies are based on trend trading. I know that the financial markets are usually in a trend, either up or down. So i enter the markets "after" I’ve identified a trend.

It is great to catch a reversal. It is also very difficult. Let me rephrase that…. it is almost impossible. I read stories of those who have perfectly caught a reversal, but they are news stories "because" it is so uncommon.

It is much easier to wait for a trend to begin, and then jump on board. If the trend fails, and some do, a well managed timing strategy will exit to cash, or reverse position, with only a small loss (or even a small gain). When the trend keeps going, that same well managed timing strategy rides the trend as far as the trend goes. This is where the power of trend trading is seen. By never missing a trend, and staying with the trend, trend following market timers make huge profits over time.

Finally, one of the most dangerous trading methods is to take a contrary position and pray for a reversal. Such trades rarely work out. But many, many traders try them. And… many, many traders lose a lot of money.

Let Your Profits Run – Cut Your Losses Short
The second part of this rule (cut your losses short) is the toughest one.

It involves admitting that you were wrong. But in market timing, as in "all" trading, it is a rare moment indeed where you will eventually be proven right after first being proven wrong.

All strategies should be designed with strict risk management right from the start. NEVER let losses grow. If your strategy gives a buy or sell signal, and the indicators then go into reverse: reverse your position (or go to cash) immediately. If you look at our various strategy trade histories you will see that we rarely take a loss of more than a few percent. Never be afraid to change from a bull to a bear, or vice versa.

There is a reason for this. It is easy to make back a small loss. But large losses are not only hard to make up, but the psychological pain you experience from them could cause you to quite the strategy. And quitting with a loss not only guarantees that you will lock in the loss, but it is likely to have a detrimental effect on your buy and sell decisions for a long time.

The opposite of course is "letting your profits run." I never set a profit target. As far as I’m concerned, when we have a profitable trend going, the sky is the limit. We will stay with that trend as long as it is profitable. 20%, 50% 100%. We "never" limit profits.

This is why small losses do not concern us. We know that when we have our next profitable trend, we will ride it to the end.

Never Make Timing Decisions Based On Tips
A tip is rarely more than opinion, and frequently a bad one at that.

Even if the tip comes from a friend, don’t take it. If you have a hard time with this, go back to "The Trend Is Your Friend."

Burn this into your head! Unfortunately, in market timing, a "friend" is not always a friend.

Remember this: – There is "always" a reason to doubt a trade. There is always someone who knows, absolutely, that the trade is wrong. In fact, they are often willing to go into great detail why you are making a bad trade.

Why would they do this? Simple, it is to prove to themselves that their trade is the more correct one.

Again, this is all emotions. And allowing emotions to have any say in your market timing (or any trading) decisions, guarantees that you you will have even more emotions to deal with. The emotions caused by losses.

Stick to the trading plan. Trade with the trend, cut your losses short and let your profits ride, and never, but never, listen to others. Successfully following and profiting from a trading strategy can be accomplished only by you, and you alone.

Frank started market timing all the way back in 1982 when the Federal Reserve cut interest rates and sparked the 1980’s bull rally.Realizing that this Fed change, as well as the resulting stock market rally, could have been forecasted, he began to search for indicators which had strong forecasting ability. Within a year, his first newsletter was launched, “Growth Fund Strategies Report” which used a market timing strategy consisting of changes in interest rates, Fed changes, Market breadth and market price (using the S&P 500 Index).The strategy was hugely successful. In fact it issued a major sell signal on September 10th, 1987, just five weeks before the market crash on October 19th. This was a clear sign that timing worked if you created a sound trading strategy, and if you disciplined yourself to follow that strategy through thick and thin. Committed to market timing, Frank continued to fine tune the strategy and rode the bull market of the 90’s to gains exceeding 1,600 percent. These were heady times for the financial markets, but of course storm clouds were brewing, and again market timing would prove its value in the coming bear market. In 1996 Frank's first market timing website was launched. “Market Timer Report” used a refined strategy to market time the general U.S. stock market, and followed a variety of growth stock mutual funds. It was geared towards more conservative mutual fund investors and averaged only one to two timing signals a year.By the end of the 1990s, the strategy was refined to one that followed market trends instead of using interest rates and breadth on which to base market timing decisions. this change was fortuitous considering the major declines just ahead. Because trend following never missed any trends, and those trends which failed resulted in either small gains or losses, it became apparent that this was the better way to profit in what was quickly becoming a hugely overbought stock market. Trading trends became the mainstay of Frank's market timing. The bear market of 2000 through 2002 generated substantial “bearish position” profits by following trends and Frank began using Fibonacci support and resistance levels to look forward and help identify trends. In 2002, the name of the online market timing service was changed to Fibtimer.com. This change was to better identify ourselves to market timers. We were trend traders, but we used Fibonacci support and resistance analysis to look forward and help us understand what the market would do in the coming weeks and months. We also began the process of adding new timing strategies, using our trend trading systems to develop both aggressive market timing strategies as well as conservative market timing strategies. In time we added sector fund timing strategies, gold fund timing strategies, bond fund and small cap fund timing strategies. In 2003 we expanded to ETF timing strategies as well as starting a portfolio of individual stocks. All using our trend following systems to time the markets. There timing strategies, as expected, have been creating solid profits for subscribers. Frank is currently the editor and chief market analyst of FibTimer.com, as well as president of Kollar Market Analytics, Inc. which runs several successful financial websites. 

Frank started market timing all the way back in 1982 when the Federal Reserve cut interest rates and sparked the 1980’s bull rally.Realizing that thi...

damianoakley

Established member
542 57
"Letting Your Profits Ride" - one of the most difficult areas of trading to master in my opinion.


Thanks

Damian
 

FXSCALPER2

Established member
964 280
Not another advice about the basics, please. It is such inane pontification that makes me hate people like Van Tharp. Gee, I can kill these guys if it were allowed.
 

dc2000

Veteren member
4,739 127
Frank is currently the editor and chief market analyst of FibTimer.com, as well as president of Kollar Market Analytics, Inc. which runs several successful financial websites.
It does not say Frank is currently Chief financial officer of XYZ, Fund manager for intaglobalcorp or independently wealthy through trading

Let your profits ride so the market can take back tomorrow what it gave you today
 

damianoakley

Established member
542 57
FXSCALPER2 said:
Not another advice about the basics, please. It is such inane pontification that makes me hate people like Van Tharp. Gee, I can kill these guys if it were allowed.

LOL.............I love your bluntness FXScalper!

I know you're not a big fan of Van Tharp - but he does talk a great deal of sense.

You never explained fully on another thread why you detest him so much.


Thanks

Damian
 

pssonice

Established member
900 12
Trade with the trend is Frank Kollar telling us.

starting at 50k in mid 2006 ending in 2007 at 150k$
there is one question still to be answered
when do I ve to take the profits ?
 

the blades

Experienced member
1,336 275
pssonice said:
Trade with the trend is Frank Kollar telling us.

starting at 50k in mid 2006 ending in 2007 at 150k$
there is one question still to be answered
when do I ve to take the profits ?
for me, it's when a better opportunity comes along, and nothing to do with the current trend - which always has to be up.

UTB
 

Dembleton

Newbie
1 0
Very basis advice! We all know to follow the trend and let your profits run. However, this fails to define how to identify a trend and when to take profits. Trend following has a long history with little substance in the majority of cases. More explaination is required and the same could be said for this article.
 

damianoakley

Established member
542 57
FOLLOWING THE TREND AND LETTING YOUR PROFITS RUN.

There are probably hundreds of ways of doing both, and yet they are very difficult aspects of trading to master. I think that because there are SO many different ways you could do it, it can be difficult for many traders to know which method(s) to use.


Thanks

Damian
 

Grey1

Senior member
2,186 177
A very very good and sound advise. I would give 10 out of 10 to this article not because it is some thing new. Only because this is a MUST to remember fact.

Grey1
 

Splitlink

Legendary member
10,850 1,232
dc2000 said:
It does not say Frank is currently Chief financial officer of XYZ, Fund manager for intaglobalcorp or independently wealthy through trading

Let your profits ride so the market can take back tomorrow what it gave you today
But if it did, it would be somebody else's money ;)

On the second sentence, don't you consider moving the stop up? I do, when I'm lucky enough to be able to!

Split
 

Splitlink

Legendary member
10,850 1,232
damianoakley said:
You never explained fully on another thread why you detest him so much.


Thanks

Damian
:( Obviously, he's followed Tharp's system at some time in the distant past. There's nothing like taking bad advice to bring hatred out in a man :devilish:

Split
 

damianoakley

Established member
542 57
Splitlink said:
:( Obviously, he's followed Tharp's system at some time in the distant past. There's nothing like taking bad advice to bring hatred out in a man :devilish:

Split

Hi Split,

I'd love to know what bad advice has fuelled his hatred for Van Tharp.

Personally, I think Van Tharp's principles are sound and logical.

Each to their own I suppose !


Thanks

Damian
 

rcanfiel

Junior member
13 0
Rehash of standard industry preaching. Where is the PROOF? Add something to the collective knowledge, man!!!
 

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