TimingCube - The frequency of profits - profits,frequency of profits,generate profits,false signal,long term approach

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Today's Weekly Update marks a minor anniversary. It has been exactly 6 months since we published our first Weekly Update on September 26, 2003. We thank all the subscribers that send us the feedback and suggestions that are behind the Weekly Updates and many of the recent feature enhancements. We have demonstrated that we listen and are not opposed to innovation in the least.

Today however, we need to draw the line and explain why not all of the seemingly reasonable requests we receive can be satisfied. Some are fundamentally opposed to the Trend Timing Model and discipline. Both the Trend Timing School editorial which deals with the frequency of signals, and the FAQ of the Week on the notion of signal strength, are such examples. As the keepers of the Trend Timing investment Model, it is our responsibility to remain steadfast against compromising the system's key principles.

Signal Update

Current Signal Performance as of

Signal Type	Trade Date	Index	Return since issued
		Nasdaq 100
		Russell 2000
		S&P 500
		QQQ

Cumulative Returns since First TimingCube Live Signal () as of

Index	Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
Nasdaq 100
Russell 2000
S&P 500
QQQ

Note: QQQ returns are included for continuity sake.

Market Update

Markets started the week by moving down on renewed geopolitical worries. After the Nasdaq stabilized just above its long-term 200-day moving average, a powerful rally ensued on Thursday, carrying all indices significantly higher. Markets gave back a small portion of their gains on Friday on lower volume, which is not surprising given the scope of Thursday's advance. For the week, the Nasdaq 100 gained 1.20%. The Russell 2000 finished 0.38% higher while the S&P 500 was basically flat, with a marginal loss of 0.15%. It is interesting to note that, for the first time since late January, the Nasdaq 100 was the week's best performing index. It may be a sign that big money is rotating back into technology stocks, following the correction of the past two months.

Our active Buy signal remains in effect.

Trend Timing School

The frequency of profits

At the end of the day, the only reason we bother investing in the stock market is to generate profits. The more the better. There seem to be an endless number of ways to invest and countless decisions that can affect the return on these investments. We devised the Trend Timing investment philosophy and system to gain some measure of control and boost our profits over Buy and Hold while keeping the investing process simple and manageable. Our Model has taken much of the guesswork out of the equation, telling us precisely what to trade (the market as whole through one of the investment vehicles described in the "Our Service" page), and when to trade (Buy/Cash/Sell signals). Our natural tendency to analyze and second guess is always on the hunt for improvements. Since the size of our profits over a given time period can be expressed as how much we gain/lose on an average trade and how frequently we trade, we immediately ask, would trading more frequently not improve profits? Well, alas, the answer is an emphatic no.

Of course, to anyone inclined towards more rapid trading, possibly looking for faster profits or simply more excitement, may we suggest that Trend Timing is not for you, and that your subscription money would be better applied to a trading newsletter.

And before going any further we would be remiss if we did not promptly reassure all the loyal Trend Timers: "We are absolutely not contemplating a change to our Model to accommodate frequent traders".

Many comments we receive go something like "Why was there no Sell signal at the beginning of this 10% drop? Even if it goes back up from here, we could have been ahead by buying back at a 10% discount. Why can't we exploit all these smaller ups and downs?" The truth is that extensive research has demonstrated that increasing the Model's sensitivity to generate more frequent signals of shorter duration does not lead to higher profits.

Over the nearly 15 years of history we track, live and backtested, we have issued 41 signals and our accuracy ratio is at over 83% winning trades. A funny thing happens when you attempt to speed up the process, the more signals you issue the lower the winning ratio. More of the trades are false signals that result in losses. Then you get the double whammy! Because they were false signals you are now stranded on the wrong side of the market, and until the next Buy or Sell is generated you might forfeit a lot of the gains experienced by those riding the signal through. The net result is substantially lower profits over time.

Trend Timing follows the trend. We always let the market tell us when the trend has changed. There first has to be market action before a new trend can develop.

Trend Timing does not attempt to spot the exact tops or bottoms. We believe no one can do so consistently. In the example above, you would have needed a very good psychic to tell you to sell because the market was going to drop 10%.

Trend Timing is not designed to time us in and out of market pull-backs and corrections. It is geared towards long-term trend changes and this is why we issue very few signals.

This long term approach is exactly what sets Trend Timing apart from the more frequent trading of market timers in general. The two approaches are radically different and should not be mixed.

In contrast to Trend Timing, many active trading systems look not at broad market trends but rather at short term imbalances as buying and selling signals. There are numerous systems built around well known metrics such as the Relative Strength Indicator (RSI) or Price/Earnings (P/E) Ratio to spot oversold/overbought or underpriced/overpriced conditions. Such conditions can change daily or weekly, or instead, as during strong bull or bear markets, they can stay stuck in an under or over condition for prolonged periods of time. The constant involvement required and the much lower winning trade ratios make this frequent trading approach very difficult to sustain over longer periods of time. The Trend Timing wealth building system is designed to help us for the rest of our lives.

Yes, for some people the prospect of giving back, much less losing 10 to 15% prior to a signal is not acceptable, and we respect that. However, we feel this is a small price to pay to consistently participate in the major up and down market trends, and regularly achieving superior market-beating profits. We don't try to dictate their frequency, we just take profits when they come.