Timing the Markets

Today in our issue of Market Slice, we talk about timing the markets and invite you to our free upcoming webinar!

Stopped Clocks and Ticking Time Bombs
If you’ve been following financial advisory services or even the mainstream news, you know about the stopped clock phenomenon.

It’s the guy (or gal) who always takes the same approach, always says the same thing, and always explains the latest developments with the same old analysis.

“Even a stopped clock is right twice every day. After some years, it can boast of a long series of successes.” — Marie von Ebner-Eschenbach

The problem is that when you make investment or trading decisions according to the recommendations of these stopped clock pundits, you are going to be wrong a lot more than you’re right.

This “insight” isn’t going to help you make money in the markets. You might keep more of what you’ve got, though!

That’s why Market Slice suggests that traders develop macro analysis skills. The better able you are to accurately assess economic and geopolitical developments, the more prepared you will be for the constantly changing dynamics of the markets.

Tick, Tick, Tick…
The other problem that most commentators don’t really account for is the ticking time bomb problem.

For weeks we’ve been looking at all the tipping points threatening to boil over into a full-blown market crisis.

  • Runaway inflation
  • Interest rate hikes
  • Debt defaults
  • Crashing bond values
  • Global supply chain bottlenecks
  • War in Ukraine
  • Tension with China
  • Chinese real estate bubble
  • S. stock market bubble
  • Decades-long bond market bubble
  • And more…

The markets are notoriously short-sighted. That’s why volatility occurs… sudden changes in perception sometimes create big swings in sentiment.

Smart traders learn to look for ways to cash in on major market moves, whether that means following the trend with a breakout strategy, or looking for reversals. This second approach is called “market timing,” and when you’re right, it provides some of the best profit opportunities you’ll find as a trader.

Whether you prefer the safer approach of trading with the trend, or the higher returns that come with correct market timing, FFR Trading has a strategy to suit your temperament, and your goals. Call (800) 883-0524 to speak with a strategy team member today, or click the button below to schedule a risk-free consultation. We will work with you to find the trading approach best suited to your personal situation.

Market Timing Challenges
In general, the shorter your trading time frame, the more difficult is to implement a timing strategy.

If you’re a day trader, you might find that 1-minute bars and quick turnarounds don’t fit the timing strategy you are considering. Instead, you might look at 5- or 10-minute bars, and plan to hold your positions a bit longer… even though you will exit before the close of trading.

Swing traders have a bit more flexibility when it comes to anticipating reversals. When you are willing to enter positions with longer durations, you can wait for the expected turn – although you’ll still need stops to protect you in case the market doesn’t comply with your analysis!

One of the common mistakes traders make when evaluating their strategies is to focus on win rate… there is a perception that the higher the win percentage, the more successful the strategy. But this is not correct.

More important is to calculate your profit/loss ratio. Here’s a simple example:

55% win rate with 1.5x profit, 45% losses at -.50x = 60/unit profit rate

50% win rate with 2.0 profit, 50% losses at -.50 = 75/unit profit rate

A lower win % with a higher profit rate will yield a better return within a certain margin… obviously the further the win % falls, the larger the profit per winning trade must be (assuming constant losing rates).

30% win rate with 4x profit, 70% losses at -.5 = 85/unit profit rate.

Therefore, carefully testing your strategies for average profit and loss, as well as counting winning and losing trades, is essential for strategy evaluation.

This matters for market timing strategies, because typically you will experience more unsuccessful trades with this approach than other strategies. But you’ll also have opportunities for larger profits when you’re right.

What if there was a solution that could put both higher win % and larger profit per trade to work in your market timing strategy? Read the article below by guest contributor Lee Gettess to learn more, then schedule a strategy call with FFR Trading at (800) 883-0524 or contact us here.

4 Eye-Opening Truths That Can Lead You To a Much Higher Profit Ratio
by Lee Gettess

If you’ve never experienced truly stellar performance… It’s not your fault.

Like most people, your success has probably been compromised by a variety of profit-robbing misconceptions. Here’s the truth of the matter…

Truth #1: The Trend Is NOT a Very Reliable Friend – Markets trend less than 30% of the time… so you need to make the most of it by getting in at the very beginning, before everybody else.

Truth #2: Technical Indicators Are NOT Dependable – Oscillators designed to measure momentum and tell you when a market is either over-bought or over-sold… ie. Stochastics, MACD, RSI, etc… are no more reliable than a coin flip when it comes to predicting market tops and bottoms.

Truth #3: Market Tops Do NOT Mirror Market Bottoms – Fear is an even stronger motivator than greed. Therefore markets sell off with much greater ferocity than they exhibit going up.

Truth #4: The Market Is Fractal In Nature – And that means looking at multiple time frames is the best way there is, bar none, to determine future price action.

Okay. Now that we have that out of the way let’s talk about fractals in general and the MaxFractal qualifier in particular. Because it’s the one thing that really works.

Introducing the One-and-Only MaxFractal Qualifier
You can read all about the psychology & science behind the MaxFractal Qualifier, along with loads of examples and testimonials, in my book Precision Market Timing: Trading the Triangulation Point. (Editor’s note: 5 copies of this book will be given away on the FREE webinar mentioned below).

Now, let’s get down to the details.
First and foremost… your MaxFractal must occur in a timeframe at least 5 times greater than the timeframe you’re using to trade.

So, if you’re using daily charts to enter your trades, you need to find an exhaustion bar on a weekly or monthly chart… that’s your MaxFractal.

A MaxFractal exhaustion bar is usually pretty obvious to the naked eye; because it’s longer than the other bars and it closes at or near the low.

But, if you want to scan by computer… and surely you do… you’ll need a quantifiable definition. So here it is… Any bar that has a price range at least 25% greater than the 14-bar average & closes in the bottom 25% for that day.

Please Don’t Confuse The Powerful MaxFractal Qualifier With a Common 5-Finger Fractal

Google “Fractal” and you’ll learn that a fractal is a naturally occurring pattern that repeats over and over at every scale… or in our case, in every timeframe.

A fractal pattern you may already be familiar with is what I call the 5-finger fractal… That’s not the official name… But that’s what I call it because a middle bar surrounded by 2 bars up & 2 bars down reminds me of a hand.

And this 5-finger formation occurs so often in every timeframe… 5-minute, 60-minute, daily, weekly, monthly… that it holds very little significance. Worse still, the 4th & 5th “fingers” don’t form until a new trend is already well under way…

And that’s much too late to give you the stellar, triple-digit profits we’re looking for. The powerful MaxFractal Qualifier on the other hand (excuse the pun) is an entirely different story!

The Powerful ‘Big Picture’ Secret
As I said earlier, the market is fractal in nature…

Consequently, greater clarity resides in the ‘big picture’ timeframe. Think back to when you were first learning to drive… Didn’t they warn you not to watch the road directly in front of the vehicle as that would lead to erratic and potentially dangerous over-steering?

Instead you learned to look way down the road… As a result your driving became much smoother and a whole lot safer too.

Well, it’s the same way for trading! So, if you’re going to trade using daily charts… Your first step should always be to scan for a Weekly or Monthly exhaustion bar… that’s the MaxFractal view!

Lee Gettess will reveal the MaxFractal method with his Precision Market Timing system on a FREE webinar, taking place on Wednesday, May 11 at 4:30 pm Eastern Daylight Time. You can register here, or by clicking below. 5 lucky winners will be selected at the end of the webinar to receive a copy of Lee’s book, Precision Market Timing: Trading the Triangulation Point.

Thank you for joining us for Market Slice! We hope to see you at our upcoming webinar! Visit our Instagram, Facebook, and Twitter for more frequent market updates, trading news, and investment inspiration! Happy trading, everyone!

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.