Motivated By Immediate Rewards

Very simply, the market is unlikely to hand them to you. Although market timing is all about being profitable, it is not about satisfying our emotional needs. Rather, it is the following of a rational plan to create wealth over time.

A winning market timer must tirelessly execute a trading strategy that will, at times, come into conflict with the timer's emotions. The outcome of any one buy or sell may not produce a profit. It's quite possible that the overall outcome of a series of buys or sells may not produce a profit. It's essential that these possibilities be acknowledged.

People are motivated by rewards and in modern society that usually means money.

The more money we are offered, the harder we work. Perhaps you were attracted to market timing because of the large potential profits you can achieve. It's natural to want to receive a reward, in this case winning trades. But if you expect an immediate reward for your effort and it isn't forthcoming, you'll be frustrated and disappointed. And when it comes to market timing, immediate rewards aren't always there.

For example, everyone expects to get paid on the date their paycheck is due, but have you observed what happens when a paycheck is late? Everyone is quite frustrated and some people can get very angry. People were expecting a hard earned reward but received no reward.

Unless you has the right perspective, market timing can feel that way also. You may put in an enormous effort and receive no "immediate" reward for it.

If you are "expecting" an immediate reward, it can be frustrating and disappointing when it does not appear. That is why it is important to take the proper perspective with market timing, and the proper perspective can only be based by looking at timing results over a long time frame.

The Big Picture

It is essential for a market timer to think in terms of the big picture. You must realize that the outcome of any one buy or sell signal is not significant. It's the outcome over time that matters. If you use good money management rules that limit losses, yet allow winning trades to continue as long as possible, you will be successful.

The more trades you make with a winning trading strategy, the more the law of averages will work in your favor, and across the series of trades, you'll be profitable.

Market conditions, as we all know, are not always conducive to our plans. This is a reality of market timing and it's necessary to prepare for it. If you are aware of this, you'll be less likely to react emotionally to losing trades, and also less likely to make bad decisions when they occur.

Seeing the big picture, and sticking to the trading plan, are the keys to timing success.

Conclusion

If you anticipate that you might not win on a given buy or sell signal, you will not feel disappointed when it happens. You will similarly be able to deal with it, bounce back, and be ready to take the next trade.

But on the other hand, if you aren't prepared for the possibility, you'll feel frustrated and disappointed. You may feel like giving up on timing.

Remember that it is often one or at most two trades a year that make all the profits. If you do not take all the trades, how will you be sure you take the winning ones?

Some market timers hit the jackpot and start timing right at the beginning of a profitable trend. Those who started in mid 2000 and took our short positions made immediate huge profits.

But typically, we start our market timing during difficult market conditions.

The right perspective goes a long way in coping with the inevitable hardballs that the market throws at us. Those who stay the course reap the rewards over time.