1) Why have you not changed your signal to sell?
2) Do you have advice on how to emotionally handle a market correction?
3) Does your system have built-in stop losses?
Tonight we will answer these three questions.
Why have you not changed your signal to sell?
Our market timing systems are counter-trend systems, not trend following systems. Therefore, we place sell signals when the market becomes overbought and buy signals when the market becomes oversold. The two levels where we have chosen to trigger signals are based on where reversals are most likely to occur based on past market behavior. Our mid-term system is based on QQQQ and as the ETF did not trigger an overbought condition significant enough for us to change our signal to sell between January 20th (the last buy signal) to present, we remain in buy mode. It is important to remember that even though you are trading a mid-term system, the road to wealth takes years. There will be times of double digit drawdown (our current buy signal has a loss averaging around 9%), but this is the price of building wealth. If you only have a short-term horizon you should not be in the equity markets at all. There is risk associated with the stock market and if you are only interested in playing for a short while, there is significant risk. For the subscribers that have expressed frustration in our service over the recent decline, you may feel comfort in knowing that the largest 12-month loss of the best performing newsletters over the past 25 years was -21.6%, -22.8%, -23.2%, -28.3%, and -59.6% (according to Hulbert Financial Digest). Our current 12-month performance (an equal average of IWM, QQQQ, and SMH) is +4.6%.
Do you have advice on how to emotionally handle a market correction?
Yes. Realize that we do the work for you and that there is absolutely no need to watch the market on a day to day basis. You will receive the signal change via e-mail if there is a signal change to sell. You can also look at our website in the evening to see if the signal has changed (updated by 7:00-8:00 EST). If you are bothered by the recent fall, just don't watch the market on a day to day basis.
Do your systems have built-in stop losses?
Yes. Our systems have built-in defenses for preserving capital when the market is going against the current signal. If the "stop loss" is triggered (we put stop loss in quotes as it is a bit more complicated than this), the signal will automatically move to sell.
In the end, remember that every trading system has drawdowns and wealth is accumulated by putting your money on a market strategy that you believe will perform well over a several year period.
