How I Developed My Market Timing Methodology

I developed my Stock Market Timing methodology in the following manner…

I decided that my trading style was going to be longer term, more specifically, swing trading. I looked at many different timers and liked the VectorVest (VV) confirmed calls timeframe. In addition to the timeframe, I liked the VV timer in that it had been extensively tested by many traders and consistently made profit. In effect, I used the VV timer as my baseline. While looking at the VV confirmed calls, I noticed that I could make a lot more money if I could get the signal sooner, even 1 day early would make a big difference.  Then I looked at the many indicators and tried to come up with a simple and repeatable way to get a signal sooner or the same day as VV without a lot of additional whipsaw. Take a look at the correlation between my Long Term (LT) timer and VV confirmed calls.

If you notice, I have not mentioned strategies yet. At this point, I am strictly trying to get more profit out of the market as a whole. Again, I was trying to keep it as simple as possible.

Once I had a LT timer, I looked for other ways to make more profit. I then started developing my bottom feeder timer, to cut the losses when a LT down was ending and a LT Up was starting. Again, I looked at many indicators to come up with a simple and repeatable way to get a signal to take more profit out of the “market”.

At this point I still have not looked at any strategies for individual stocks. I am only looking at how much market share I am getting. I define “market” as the S&P. I buy and sell the SPY on my signal dates to see if I am making a profit.

This is how I developed my two timers. About this time I joined a yahoo group and noticed that Lionel had developed a similar “2 timer” methodology.  It gave me confidence I was on the right track, that two people could work independently and come up with the same basic concept.

At this point, it was a simple (but laborious) process to find stock picking strategies that work best with my timers/signals. I looked for strategies that worked consistently over a large timeframe (9 years) and over shorter timeframes. I am not looking for the flash in the pan that makes big money in just one timeframe. I am trying to put the odds in my favor.

Tags: market timing system

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