In business schools, the majority still consider the buy-and-hold strategy to be the most viable investment strategy for financial markets.
It is difficult to change old beliefs. I often wonder if those who teach such strategies have their own money invested in accordance with their teachings.
“Buy and Hold” in the 90s
Most people invested using the buy and hold strategy in the 1990s and as we all know they lost a lot when the dotcom bubble burst and we entered the 2000-2002 bear market losing 50-80%. %.
Many investment professionals now admit that stock prices are based on the beliefs of the masses. A company’s assets can play a role in the stock price, but most of the price is influenced by popular opinion.
It is difficult for many new to the market to accept the idea that prices are based on the beliefs of the masses and little else.
But in the acceptance of this truth lies the path to profit.
“Buy and Hold” in the 1970s
Have you ever talked to people who traded stocks in the 1970s? Many will tell you, “I learned my lesson a long time ago. I put my money in the markets and lost it. Never again.”
In the 1970s, almost all investors used a buy-and-hold strategy.
They searched for “undervalued” stocks, bought shares, held them, and waited for them to increase in value.
Sometimes it worked, but many times it didn’t. And even when it worked, the profits were nowhere near what a trader or active market timer can make.
The buy and hold strategy misleads investors. Markets don’t go in one direction forever, whether the trend is up or down.
Only by trading the ups and downs of the market can you make significant profits. If you are striving to become a profitable market timer, it is critical that you let go of the buy-and-hold mentality of the long-term investor and learn to “think” like a market timer.
The “commercial advantage”
Without a crystal ball, you cannot know the future direction of stock prices with certainty, regardless of whether you use fundamental or technical analysis.
However, once you recognize that market prices are the result of thousands of investors “thinking” they know the direction prices will go, you have the “key” to beating the markets.
Knowing that prices are based on the beliefs of the masses is your “business advantage.”
If you look at any long-term chart of financial markets, you’ll see that “most” of the time, markets move up or down in trends that last for many months and sometimes years.
These “trends” reflect the “beliefs” of all those investors. And those “beliefs” are controlled by the “emotions” of fear and greed.
Although prices are going up, most investors “believe” that they will “keep” going up.
Although prices are “falling”, most investors “believe” that they will “continue” to fall.
Because emotions are involved, you will see more investors buying near the highs and driving prices higher than anyone expected.
And of course, because emotions are involved, you will also see more investors selling near the bottom, pushing prices lower than anyone expected.
This has been going on since the beginning of free market trade.
Conclusion
FibTimer uses that “commercial advantage”. We know that the “masses” will drive the financial markets with big up and down moves. Not all the time, but most of the time. That “commercial advantage” is our key to profit.
FibTimer does not try to “predict” where the market is going. We trade with the “trends” of the market. Those same trends that are created by the masses of investors who are buying on the rises and selling on the dips.
We also know that trends will last longer than most expect and that’s why we stay “with” the trend all the time.
Over time, the “knowledge” that the masses will drive the markets up and down in big trends, and trading those trends, results in huge profits.
