How To Have Trading Success on Any Time Frame
Published: Sat, 09/10/11
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September 10, 2011 Dear Toolbox Readers,
This has been a very rough start to September in the equity markets. The sell off is not really a surprise to us since at the end of last month our long-term market timing model moved all equity markets to the sidelines and remained in or added to long positions in commodities such as Gold, Silver and Agricultural Commodities. We are also long Bond ETFs and watching almost all positions moving in our favor.
Bill and I had Dave Landry on the show in the Research Lab on Friday and went into a rather lengthy discussion about when is the right time to be "in" the market and when its best to be on the side waiting it out.
It all comes down to time frame really and I want to discuss for a minute or two the various time frames and why knowing your time frame actually dictates which strategies you should be using.
First, for long-term investing you absolutely MUST time the market. It is NOT hard and anyone can do it by using some very simple rules about when to be in and when to be out. The model that we use has been profitable for 22 of the last 23 years with only a very slight draw down in 2008 as the major averages got literally crushed.
You can access the long term model in its own section of the Research Lab and have updates at the end of each month and a complete white paper on the philosophy behind the model.
The BEST part of this model is that you can manage a portfolio in less than 1 hour a month.
Seriously. This model would have SAVED YOUR A$$ in 2000 and 2008 if you only KNEW when it was right to get out of the market. More importantly the model would have gotten you back into the market in time to participate in any BIG rally. In the last 12 years or so the markets have seen some spectacular highs and lows and riding the roller coaster of doom is no way to manage a portfolio.
Position traders can use the market timing model as well, I mean after all... why should we let the market go down for extended periods without have a bet on the downside?
You could easily use the market timing model to decide when to move from long to short and compound your wealth on the way up AND down. Simple trades from long to short ETFs will make you wealthy if you have the right market timing rules.
Position traders will also want to use specific entry rules and money management strategies when taking new positions. It does not have to be an "all or nothing" affair.
There are very simple strategies for scaling into and out of positions that can reduce your risk as well as compounding your gains so be aware of what your "end game" is before starting any new positions.
Can you imagine being able to bet on a horse after half the race has been run and he is in the lead? This is what position trading can be like when you are using the right strategies.
Swing traders have already seen the strategy room video about using the 15 minute chart to pin-point changes in direction. This is just one of many powerful strategies we like when it comes to being on the "right side" of smaller market cycles.
In the Research Lab every week are new lists of pivot high set ups, new pivot lows, a downloadable list of stocks to watch and we post new "charts we like" every week on the blog and quite frankly I must say the chart set-ups are awesome!
You can get fully laid out trade plans too and we have a running track record back to the beginning of 2010. There is a full accounting of every trade and you can see for yourself the number of winning trades.
You can view the actual chart of each trade set up and how each trade played out going all the way back.
The Trade plans are set up with entry prices, stop-loss prices as well as 3 price targets. 73% of all trade have hit target 1. more than 60% have hit target 2 and almost 45% hit target 3.
The compounding of gains is VERY powerful and how real actual wealth is built over time. Short term traders know this and that is why they trade rather than invest.
I should write an article about why investors make lousy traders and why traders make lousy investors but it will suffice to say that these endeavors have very little in common and thus rely on different methodologies for success.
Short term trading is a whole different animal. ESPECIALLY in this crazy market filled with uncertainty. Never-the-less having the right "rule set" can and will mean the difference between success and compounding or failure and devastation.
On Friday the market tanked by any reasoning and it was clear first thing in the morning as things fell apart right at the open.
Seeing this on the Friday morning show we immediately started looking at our watch list of inverse and leveraged ETFs and sure enough we got some spectacular chart set-ups for intra day trades.
We like to look for specific support on the 2 minute and 5 minute charts as the day plays out in real time. As the set-ups became clear it was time to market entries and stops while we wait for confirmation that the trade will move in our favor.
When the Alpha list (one of our stock scans) started picking up the inverse ETFs we knew we were looking in the right direction.
Finally the market direction was decided and the entire collection of inverse ETFs went higher... through the entries and as the market continued to tank... the higher they went.
It was a pretty good trading day actually while "investors" were freaking out because the Dow 30 was closing down 300 points.
Now we are into the weekend and we have "terror alerts", non stop 9-11 programming across the cablesphere and default rumors coming out of some EU rumor mills.
There is plenty to be worried about but the single best thing you can do is make sure you are using the right tools for the job at hand.
Know what kind of trader or investor you are, know the right strategies for success on that time frame and move forward with your plan boldly.
Many other things are always in play as well and nothing is ever as easy as it should be , that is why we do the LIVE support room every Monday, Wednesday and Friday morning as the market opens up until about 11:30 eastern.
We talk about market conditions, geopolitics, domestic economic issues, debt crisis revelations and anything else that may have an impact on "the street".
In times like these it pays to have your finger on the pulse of all of this and more and you can count on us to stay up to date on everything that is going on... but we will not sugar coat how we feel about it.
If you are not yet a premium member, the sale is still on.
We will see you all Sunday night at 8pm Eastern on the show.
Until Next Time...
Best Wishes and Good Investing,
Doug Newberry The Investing Systems Network
The Market Toolbox LIVE! is a presentation of the Investing Systems Network. We help you work with the markets every trading day. We Welcome & Appreciate Members Like You!
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