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TimingCues & Signals FAQs
- Q: Are the trades and statistics posted actual or back-tested?
- A: The statistics posted on this website are back-tested up to the point of "site launch" and TimerTrac.com tracking which initiated February 27, 2007. TimerTrac.com is used to establish third party verification of the results since that time.
- Q: Do you suggest what stocks/investments to buy?
- A: Yes and no. "No" is the answer for "which stocks" to buy because the investments suggested here are exchange traded funds (EFTs) that track market indexes. Like mutual funds, the indexes are "baskets of stocks". When you buy a share of QQQQ, you own the largest nonfinancial securities listed on the Nasdaq like Amgen, Microsoft, Apple, Cisco, Google, etc. Owning groups of stocks is safer because they tend to run together in direction like a school of fish whereas individual stocks can move any direction. The emphasis of the site is anticipating or following the trend movement of the school of fish.
- Q: Why is there more than one TimingCue signal?
- A: There is no single "holy grail" of market timing signals. Be wary of websites offering one signal. The truth is, all signals go through periods of weakness and suffer their drawdowns at different times so using more than one signal reduces the risk (and anxiety) of having all of your eggs in one basket. You wouldn't put all of your money in one stock or mutual fund, would you? Having said this, everyone's means are different and small amounts of capital to invest may dictate one signal. Even one signal is safer than "no signal" which is the default of the buy and hold crowd.
- Q: What is "drawdown"?
- A: Drawdown refers to the condition of being in the signal and having the investment direction go against you (opposite the intended result). For instance, a signal may indicate "buy" so you do but the market declines instead. This is a normal phenomena and something market timers get comfortable with. There is NO signal in the world that will prevent this. To reduce stress, you could pick a maximum drawdown (or stop loss) of say 8% and sell the position to cash if that is exceeded.
The returns posted on this website do not use any such stop loss but in real use, this is a valid strategy. Remember, it is not that every trade wins but that on average, there are more winners than losers. Look at the percentage winners to gain comfort from the signal you are using. Temporary setbacks more than anything else cause users to "chuck the whole system" which is truely unfortunate. Learn to stick with the signals through thick and thin. Using more than one signal makes that easier to do.
- Q: How do I get started?
- A: You need a self directed IRA, brokerage, or 401k account to get started. Discount brokers like Scottrade, TD Ameritrade, Charles Schwab, or Fidelity make good choices. Deep discount brokerages like www.interactivebrokers.com only charge .005 or .01 cents per share in commissions for trades. Another brokerage, www.zecco.com even offers free trading. The author has no personal experience with these last two but offers them as suggestions to check out. Also check out the "Getting Started" page for additional information.
- Q: My Financial Advisor says that market timing doesn't work
- A: Of course! Market timing doesn't fit their business model. Consider this from the advisor's perspective. If I am an advisor and I am managing 100 client accounts and a signal change occurs, how can I react quickly for all client accounts? It's easier to cite the advisor mantra of "buy and hold".
Interestingly, everyone (including investment advisors) uses market timing but they don't call it that. Recommendations to "take some cash off the table" or "put money into emerging market funds" qualify as market timing. Many advisors and their clients would be smart to use the discipline of a long-term market timing signal (and some do) but why pay them for something you can do yourself?
Market timing does work but it isn't always easy. For more information, check out a few books on the subject such as "All about Market Timing" by Leslie Masonson.
- Q: What is an ETF?
- A: An ETF is an "Exchange Traded Fund". They represent "baskets of stocks" just like mutual funds but trade in real time like stocks; not at end-of-day pricing like mutual funds. The most popular are the "Spiders" (symbol SPY) and "Qs" or "cubes" (symbol QQQQ). These represent broad market indexes and make perfect trading vehicles for TimingCues. Mutual funds work as well but may be subject to short term trading fees or penalties. ETFs eliminate this problem. Newer ETFs allow the investor to trade with leverage, short the market, and trade a multitude of foreign markets. See the "What to Trade" section for more details.
- Q: Do you recommend using TimingCues for all of my investment money?
- A: It depends. For new investors with low balance accounts, a single signal and ETF may be all that can be used. For large accounts, the author believes in a diversified approach using multiple strategies and multiple signals. For example, 30-40% may be placed in an indexed portfolio. The remainder might be divided up among the two TimingCues (signals) and managed according to their readings. Much depends on an investors age, risk tolerance, and experience with the market. Younger investors can afford to be more aggressive but are advised to read a few good books such as those on he recommended reading list for general stock market investing education.
- Q: How can I use TimingCues in my 401k account?
- A: Most 401k funds come with an option of a broad based index mutual fund like the S&P 500 or a "Total Market Index". These funds make excellent choices for these low frequency trading signals. Either the Short Term Signal or Cyclical Trend Signal
can be used to manage your 401k account. If index mutual fund options are not available, any managed fund will most likely follow the movements of these signals in general. Most managed funds will hold one hundred or more stocks so their movements correlate closely to the general market direction.
- Q: Performance Returns for Leverage / Short & Long strategies are huge. Is that for real?
- A: Yes but the return figures are hypothetical and back-tested. Investing directly in the indexes is not possible but can be approximated through investment vehicles intended to mirror the performance of the indexes. In real life, returns would be somewhat less due to the expenses (expense ratios) associated with holding ETFs which are low but not without some annual drag on performance. All mutual funds and ETFs have annual expenses however expenses on the ETFs tend to be far lower than the average mutual fund. Also, commission expenses and slight ETF tracking error exist in the real world so returns should be viewed in a general sense.
The strategies shown on the performance page are progressively more aggressive as the return figures increase. The most aggressive strategies should be traded by individuals who are experienced, confident, and familiar with the risks involved. These strategies should be used cautiously since the draw downs can be severe. NEVER commit all of your investment capital to such strategies. With increased returns comes increased risk so use them like spices in food to flavor overall portfolio returns.
- Q: Trade Logs only show "Long to cash" yet performance tables show "Long and Short". Where are the short signals?
- A: All cash signals can be interpreted as short signals. For long and short strategies, the return tables assume a move to a short position instead of a simple sell to cash. It all depends on an individuals risk tolerance. Less aggressive investors should use cash and more aggressive investors may want to use some or all of their money in a short position when the cash signal is given.