One of the biggest factors that separates the greatest investors and traders from the average is risk management.
Everyone is searching for safe investments with high returns, but high returns are usually correlated with high volatility and large risks. In today's world, high returns can result in a catastrophic losses overnight because they actually represent inordinate amounts of hidden risk. So how do you manage your trading and investment risks so that you don't buy shares right before they plummet in price or so that you don't hold them past an investment peak?
There is no definite way to avoid these possibilities. There will always be risks with your investment selection and investment timing. No one can avoid that. No one.
You can buy stocks at the wrong time and see them drop, or you can hold them past their prime and see them decline. Many people, for instance, held Citigroup and GM all the way down until they became penny stocks. Who could have known that these megafirms (and members of the Dow Jones average itself) would be the biggest risks of 2008-9? You can also buy stocks or some other investment vehicle that you shouldn't even be looking at in the first place.
Investors usually try to protect themselves from such risks by using stop losses on purchases, by diversification so that they are not over-weighted in one particular stock group, by buying puts with their stocks, and by limiting the amount of a single investment to a small fraction (perhaps one or two percent) of their portfolio. There are all sort of ways to do this. Marketing timing is an attempt to lower investment risks as well.
You are pretty much guaranteed to lose money in the markets at some time or another. What we like to do to limit our trading and investment risks is buy shares that -- according to our factor seasonals when current prices are correlated to them -- show ongoing factor seasonal support into the near term future. We can't guarantee that stocks will continue to follow the factor seasonals or that you'll make money referencing them -- it would be criminal to say that -- but you can indeed use them to help manage your investments.
Every month this is exactly what we report on -- which stocks, near term, show a tradable trend and an agreement of price strength or weakness amongst the factor seasonals.
Options traders, who want to write puts and calls to collect premium, also want to know when is the best time they can do this in order to raise the odds that they can collect the entire premium without share prices going against them.
They usually have a system that works under any market environment and which does not need any expectation of price directions. In that way they can write out-of-the-money options (in various combinations such as iron condors or calendar spreads, etc.) having a very short time until expiration. When they expire they can collect the premium if they selected the options correctly, and having a system they can do this as a business.
Our Options Trading Course teaches you how to do just this in a month-by-month businesslike fashion without having any expectation of the future market direction. But when you have our factor seasonal timing information, there are times you can increase the odds in your favor for these mechanical trading techniques. With accurate market timing, you can better select the most profitable times to be selling (or buying) puts and calls. But please never buy or sell puts and calls unless you already know what you are doing and have a system that works without any expectation of price direction. Too many people get into options trading thinking they'll make a fortune, and instead they lose their shirts. You must know what you are doing.
The following example shows how, once the right seasonal charts are selected, a mechanical trading system for buying or selling puts and calls that already works can be leveraged a bit more. Most such systems do not rely on any future price forecasts, but when you have an accurate market timing technique then you can make the directional odds work in line with your system:
Value investors, fundamental investors, contrarians and stock screeners often do not care about market timing but simply buy shares without stop losses or sell triggers, trusting to diversification and a large number of uncorrelated shares to help with their risk management.
All these methods ... and many more ... can all be helped with our seasonal timing charts, especially our Bull/Bear, Recession/Expansion charts available on the Products page. If you want to know when it is historically safer to buy shares or when to expect the lowest prices of the year during a recession or bear market, these chart books can help provide you with some guidance in your decisions.
Whenever anyone wishes to buy a stock, they need only reference a standard seasonal chart to see which time of the year typically produces the lowest or highest prices for shares. This doesn't always work, but yes, sometimes it does, especially when prices are highly correlated to the pattern and follow through on that expectation. That's why we only report on stocks that are actually following their expected seasonal tends.
If a stock or index seems to be following its normal seasonal pattern at the time of review, this real time correlation to the expected pattern can give you a way to time your investments and improve your buy or sell points. You can visually see, in one snap shot, that an uptrend or downtrend is expected in the near future because of the historical pattern which the stock is following.
The concept of reducing your trading and investment risks this way, and getting better buy and sell prices, is extremely simple to understand. Once again it's not always right, but the default most people employ is to use a slow moving average to get out of positions even though that slowness may cost mucho mucho bucks. Our factor seasonal charts provide forecasts you can use to raise stops instead, use a faster moving average, buy puts, sell calls or whatever you want.
Take a look at the annual seasonal chart for Best Buy (BBY). Naturally we can produce 5-year, 6-year, 7-year, 10-year, 12-year, 20-year seasonal charts ... any number of years (up to the amount of price data we have) desired. We want to see which one most closely predicts BBY's actual real time prices in the market place ... with longer term seasonals preferred over those produced with just a few years of data.
When we find that number of years and compute the seasonal with the best fit, all we have to do is see which flex point, turning point, or change in trend (CIT) points are expected in the near future, and take that information into account in any of our investment decisions. Of course they don't always trasnpire, but sometimes those predictions are correct down to every wiggle. If you set trigger indicators off of the expectations, you have a system to make money when the trades are right and can simply avoid using the charts if the market stops following expectations.
You can use this information to decide whether to delay the purchase of shares waiting for a better price ...
You can use it to determine it's time to get out of a position entirely, or lighten your position by selling some shares, or raise protective stops against an expected coming drop in prices ...
Or use it to write or buy options ...
There are all sorts of ways that seasonal information (when you have the right chart) can help lower your losses and investment risks.
Nothing is for certain in the investment field, but after years of research and analysis this is the best system we've found to help investors make better timing decisions. The factor seasonal charts and newsletters can help you manage your potential risks and losses.
Make no mistakes: Factor seasonals don't always work -- nothing does in the investment field and you should not expect seasonals to be that way either, even with all the confirmations we look for because of our own high risk aversion. The market service that never makes mistakes just does not exist. It's as simple as that. If you ever hear that, run the other way because no one can guarantee the accuracy of their method or that it will even be profitable for you and unfortunately neither can we. Your long-term success for trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities.
But with that being said, after many years of research this is the best risk aversion, risk management, market timing, or buy and sell trading system we could develop ... however you wish to word it. We've striven to combine the best of fundamental and technical analysis into one simple, easy to use, visual and accurate system that will help you achieve superior market profits. Traders say they are always looking for just one or two great trades per month, and we do all the pre-processing for our newsletters to find that small subset of possibilities for you.
We hope you can see the value of factor seasonal information when the market keeps following the historical price pattern in a highly correlated fashion. Naturally this doesn't always happen, but at times it happens almost to the letter and it makes your jaw drop and wonder why you weren't in on it because it was so clear. That's what we strive to find and report on each month. Exactly that! Of the 8,000-10,000 shares available that you could trade, wouldn't you want to have the short list of those stocks following their expected trends and look for the large gainers?
We simply feel that our seasonal timing information can be as valuable as other fundamental information including ratings from services such as Value Line, IBD, Vector Vest, Zacks and other technical analysis information that helps you categorize your risks and produce buy and sell signals. In short, we feel that seasonals help you manage the selection risks and buy-and-sell timing risks of trading and investing.
In short, factor seasonal charts can be valuable to you if you are interested in managing the risks of your trading and investing. We don't ever tell you how to use our information because we are not investment advisors. We do not solicit people to buy or sell stocks or other investment vehicles. We are simply publishers of information like the Wall Street Journal or Investors Business Daily, but in our case the content is factor seasonal charts when those stocks seem to be following their historic trends.
At no time will Market Timing Research make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Thus, we only tell you what the numbers reveal which we plot out in chart form and it's up to you to use them in the way you see best fit.
One more thing I want to stress ...
This information is ESPECIALLY valuable not just for the trader who works with technical information such as this on a daily basis, but for the value investor or fundamental analyst who knows that a stock might be a good buy, but doesn't know exactly what price is best for purchasing or when they might get a better price for their position. And that holds on the sell side, too. Options traders therefore love us as our charts often give turning points to the day!
With seasonal information -- especially when all the Factor Seasonal information is available that encompasses the effect of fundamental conditions (on company profits and thus) on stock prices -- we feel you can make more informed and thus better investment decisions. Our chart books enable you to do this on your own to some extent, but in our newsletters we monitor the ongoing price correlations with the various factor seasonals for each stock as well as watch cycles and "best correlated years" seasonals that produce much better real time market forecasts and projections than the chart books. That's why we encourage you to try out a trial subscription.
Our lawyers tell us to tell you once again that the purpose of Market Timing Research's market-oriented publications is to outline the progress of markets in terms of the Factor Seasonals and to educate interested parties in the successful application of Factor Seasonals. We do not guarantee investment profits or that you'll make money with our products.
It's strange that we have to keep saying this legal stuff but some people think there are 100% risk free profits out there and we say it's just not possible. We're straight arrows so just want to tell you upfront that our projection charts are not always accurate. The past history of a stock or its seasonal is not necessarily indicative of future returns nor a guranatee of the same future trading pattern. You can lose money trading stocks with any technique and are solely responsible for your own trading decisions, efforts and results. We will not be responsible for any losses you incur in your trading when using our materials.
As publishers, we do not make recommendations for any specific person. The information provided by our website and services is expressed in good faith, but it is not guaranteed. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions as trading stocks, ETFS, indices, futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds.