The History of Market Trend Timing Strategies

There are a lot of prevailing ideas concerning the most profitable methods of making money through stocks. In these conversations, market trend following doesn’t always get the consideration that it might deserve. To a large extent, the problem many have with it is that it revolves around a very simple philosophy. Some investors may feel that something so straightforward could not possibly be effective in something as complex as the market. That is why it hasn’t been used before this point. What many are missing is that while there certainly was no method that was referred to as “market trend timing”, the principles of market trend following have been successfully used for a very long time. These are the essentials of the origins and beginning of market trend timing strategies.

Even the most studious academic would be hard pressed to find a definite year or date in the sense of a starting point for market investing. The lack of definite facts can partially be blamed on the lack of information available the farther back one looks. But despite the issues regarding time periods and financial markets, there is some reason to believe that market investors who made profits through market believed to some degree in following the trend.

Economists, traders, and investors alike subscribed to some extent to the idea that trading with the trend was a more profitable strategy than doing anything else. Today many investors of all schools of thought would regard this as common sense. In order to profit on the market you do not invest against it.

The point of interest here however is not just the fact that these individuals profited but also that many of them spoke of hanging onto their market positions for as long as possible before exiting. This shows that in the past investors that made money through the market did so by maximizing their profitable positions. An important part of the trend approach to investing.

Using trends to make substantial amounts of money was not something that was done by a select few traders back then even. Many investors, who have achieved some degree of fame due to their profits, probably had differing approaches in terms of entering and exiting transactions. However many of them shared the same overall approach towards the trend. That is they would ride it and then get out when it became apparent that the trend was going to change.

Even though there is no defined starting date for the trend following philosophy, the ideas behind market trend timing strategies have been employed by investors for years and years. Of course in the past there was no “manifesto” of sorts set up by these investors, but there are traders and speculators who took advantage of the concepts of market following when they made their profits and are now talked about today for the money they made.

Everywhere one looks there will be questions and arguments concerning the right time to enter a transaction as well as the proper time to leave a position. Despite these differences however, market timing strategies have the same approach toward trading. That is they try to make it possible to limit losses while maximizing profits through market trends.

There was no clearly written manual on market timing in the past, but nonetheless it is interesting to see that investors who profited were able to do so while staying with the trend. What is also a point to consider is that this philosophy was not present in a mere few investors, but that trading with the trends rather than other means was a fairly common approach taken by investors. When it is looked at from that point of view, those investors can be seen as the origins and beginning of market timing strategies.

Posted in Uncategorized | Tagged , , | Comments Off

Market Trend Analysis for Options Trading

Almost all options traders have heard the age old trading adage that says “The Trend Is Your Friend”. Indeed, trading options in the direction of the prevailing market trend definitely puts the odds of winning in your favor. Too many beginners to options trading has lost entire accounts by buying call options in a bear trend market and buying put options in a bull trend market.

So, what exactly is a market trend?

Market trends are like ocean tides. You know it is a rising tide when you see the sea coming higher and higher up a beach and you know it is a lowering tide when you see more and more of the beach. Similarly, you know it is a bullish trend when you see the major indices such as the Dow Jones Industrial Average or the S&P500 going higher and higher and you know it is a bearish trend when you see the major indices going lower and lower.

Yes, market trends are general directions in which stocks seems to be moving. In a bull trend, the prices of most stocks will be moving higher and higher and in a bear trend, the price of most stocks will be moving lower and lower.

However, one thing to understand about trends is that trends are a “General Direction of Movement”. It does not mean that in a bull trend, the market only move upwards every single day and it does not mean that in a bear trend, the market only move downwards.

If you observe ocean tides, in a rising tide, the sea doesn’t keep rushing onto the beach but comes in “Waves”. One wave higher than the previous one. This is the same thing in stock market trends. In a bull trend, you will see up days interspersed with down days. However, up days will happen more frequently and will make new highs following each slight retreat.

This fact frequently comes as a surprise to new traders who interpret the first down day in a bull trend as the market “turning bearish”. This is also how beginners and veteran options traders alike fall for the proverbial “Bull Trap” and “Bear Trap”, which are short counter-trend moves that are misinterpreted as trend changes. Traders who fall for either trap usually find themselves surprised when the general trend resumes and they are caught in a losing position that never gets turned around.

Recognizing how trends really work is only the first step to recognizing market trends. Have you ever arrived at the conclusion that the market is in one direction only to have a peer disagree with it? How can two person looking at the same market come to different conclusions about what the market trend is?

The complexity of recognizing market trends come with the realization that the market can really be in all three directions on the same day at any one time!

The market might be in a bear trend for daytraders but on the same day, it may be in a bull trend for a swing trader and a neutral trend for a long term investor. How is that possible?

Actually, there are not just one “Market” condition but countless market conditions depending on the time frame one is trading on! It is the failure to recognize that market trend is different for different trading horizons and investment objectives that led to all the futile argument over what trend the market is in on TV.

If you have a charting software, you might be shocked to see that frequently, you will see a completely different chart pattern on the same index or stock depending on what time frame you are looking at; 1 min chart, daily chart, weekly chart or monthly chart, each of them seems to tell you a different thing.

A chart that looks extremely bearish on the 1 min chart might look extremely healthy and bullish on a daily chart. As such, the analysis of trend requires first and foremost an understanding of the exact time frame that you are trading on.

Recognizing the exact time frame you are trading on is an extremely important pre-requisite in options trading where the options contracts and positions you bought are time sensitive! Yes, options positions don’t last forever and all options strategies have an ideal time frame within which to make an optimized return.

For instance, if you are day trading with options and either writing or buying options in order to close them out for a profit by the end of the trading day, the market trend you should be concerned with would be the intraday trend identified most commonly with the minute charts. In this case, whether the market is in a long term bull or bear trend doesn’t really affect your trading anymore. The world might be shouting bullish but if your minute charts are showing bearish for the day, then bearish is the direction you make your money from.

If you are trading a Covered Call, you might want to write the call options on a stock that is relatively sideways on the daily charts with the market trading within a range on the daily charts if you intend to keep the stocks from being assigned.

Conversely, if you are buying long term LEAPS options, you might be more concerned with what the longer term trend of the market is instead of being too concerned with the day to day volatility.

So, what are the most common tools to use for market trend recognition?

Most veterans are capable of recognizing the trend a chart is in simply by looking at how the price chart looks like. However, for the less experienced or more technically inclined, countless complex technical indicators have been invented over the ages. Personally, the most time proven one is the Simple Moving Average. Which is simply averaging the price over a period of time to see where it is generally moving towards. This is what I personally rely on most of the time and I use a different period moving average for different time horizons. Most commonly used are the 30days or 50days period.

Posted in Uncategorized | Tagged , | Comments Off

Fort Collins Real Estate: Market Situation and Trends

Amidst the lush green surroundings, Fort Collins provides families and couples a wonderful locality to settle into. The real estate and value of property was in a decline but gradually the prices have picked up again; causing several sellers and buyers to enter the market. The Fort Collins real estate market situation has also considerably improved despite a continued presence of distressed properties. These distressed properties are foreclosures and short sales. The overall Fort Collins property market has increased slightly with a 1% increase since June 2013. The prospect buyers can either choose a condo/apartment or a single family home for themselves. The market price of houses in Fort Collins has a less dramatic real estate drop than other areas of the state and country. This implies that the price of Fort Collins property will also show lesser gradual recovery because of the lesser drop to recover from initially. The current market statistics for Fort Collins real estate are:

Average Listing Price: $273,251
Median Listing Price: $235,200, up 3% from 2010
Current Inventory (properties/homes available): 1039 Listings
Recently sold: 402
New Listings: 488
Distressed: 1

The right to invest is NOW

If we observe the first half of 2011, we will notice that there have been 5,617 sales in that period which in comparison to 2010 were 5991. This shows a 6% decrease in Fort Collins property sales. If we consider the inflated sales due to the tax credit in the spring of 2010 then this fall is instead a healthy improvement. Without such artificial enticements, the market has remained strong and grown to almost equal levels this year. The median listing price in Fort Collins went down from June to July. There were a total of 28 price increases and 147 price decreases. The final conclusion is that it is a great time to invest in Fort Collins property.

Fort Collins real estate listings are available online for buyers to browse through and hunt for houses as per their requirements. These listings are constantly updated so that any house up for the sale in the market is immediately added in the database. The real estate market is always considered a buyer’s market especially after the aftermath of the national mortgage crash and the economic turndown. If you are looking to buy property in Fort Collins then you need to adjust your practices accordingly.

Buyers vs. Sellers

Thanks to the improving situation in real estate, the buyer’s market is now a seller’s market. According to the real estate experts, the shift of market trends is a process that is caused by several buyers and sellers when they are practically indulging in the buying and selling of property. If you are hunting for a house then you should prequalify for financing. It is most likely that you will be competing for same property against people who have enough money in their hand. The Fort Collins real estate market is fast-moving with sellers inclined to accept an offer on the contingency that the buyer can round up the necessary funds.

If you have already made up your mind to purchase a home then you should be willing to immediately put up an offer and pay upfront because the house may not be available in the market for a long-time. Experts say that the days of making low-ball offers are over as low interest rates on home loans and pent-up demand are driving speedy sales. The buyers who have been sitting on the fence for past couple of years would be happy to know that Fort Collins real estate market situation is constantly improving.

This statement is further backed by the number of sales made during this year. Fort Collins has not experienced valleys and peaks as dramatic as other areas in the boom and bust times for the market. The last decade witnessed loose lending practices to steer the mortgage industry off a cliff. However, this time around, the real estate industry is all set on a sustained rebound. Lenders are scrutinizing the prospective buyers while the buyers are making more informed and practical choices. All these factors contribute to the fact that real estate situation has picked up and confirms to be a fast moving market for buyers and sellers. A laid back attitude in making a valid offer for a house can end you up on losing out on your dream house as there are plenty of buyers willing to make viable offers to the sellers.

Posted in Uncategorized | Comments Off