About Market Timing
There are 2 basic concepts in timing the market:
- Take small losses.
- Stay in the winners for the big gain.
Taking a loss:
Human nature makes people tend to stay with a losing investment and hope that it will go back up. Instead, take the small loss and preserve your capital for the next buying opportunity. The KT Number recognizes when the trend has changed and issues a sell signal long before you are in over your head with a huge loss.
Staying in for the big gain:
Often times people will make a good investment only to sell it and lock in their gains when they are up 10%. They then see it continue on for maybe a 40-50% gain and kick themselves the whole way up for not staying in for the ride. The KT Number keeps you in for the long haul and will get you out near the top of all major market runs.
Some people may say that they are in for the long term, and there is nothing wrong with that. However, the market doesn’t always go up and if you stay in these vicious bear markets, it could take years before you get back to even on your investment. Using the KT Number ensures that you get out before major downtrends occur so you can preserve your capital and live to invest another day when the market turns back up. In fact the KT Number has avoided every major drop in the market since 1971. Is this due to luck? No, just good market timing.
A prolonged up market can outperform market timing:
This is a true statement and over certain portions of history, you could have made more money staying in during a prolonged up market instead of trying to time the market. However, you only know this because you have all the data in front of you now, but you didn’t then. It’s impossible to get in at the exact bottom or out at the exact top. Hindsight is 20/20. Over time, using the KT Number to time the market, and your investment decisions, will outperform the general market tremendously because the market doesn’t just go up all the time. There are big drops now and then that it keeps you out of.
Are my signals perfect?
Of course not. But since 1971, 3 out of every 4 years on the NASDAQ and 2 out of every 3 years on the Russell 2000 have yielded positive results using the KT Number. Yes, we occasionally make trades that result in small losses, but that is the key, small losses. You have to be able to come to grips that losses are going to happen. The gains, however, can be very large, because we stay with the uptrend for as long as it runs and they more than make up for the losses incurred.