Stock Market Timing

How to use TradeWHEN

TradeWHEN is not just one system for trading and timing the stock market - it's multiple systems. What is the best way to use TradeWHEN?

First of all, if you already have a methodology for choosing investments, you do not need to abandon something that may be working well for you. Instead, use TradeWHEN with your existing methodology. Choose investments as you normally would, but then choose TradeWHEN systems for each of your investments to help you time your trades. TradeWHEN can make any investment strategy better.

Otherwise, feel free to choose your own investments - or choose from some of the investments we have already backtested with TradeWHEN. You will find many to choose from on our backtest page.

If you are using TradeWHEN FREE, we strongly recommend that you do not entrust all your money to this one set of trading signals, or at least, you should split your money, and use the single set of signals simultaneously with more than one investment.

At the very least, you should understand why we take the position here at TradeWHEN that allocating your money among multiple timing signals is far preferable to trusting your money to just one trading system. TradeWHEN's systems, when used in the best way, have an historical average of about 80% positive trades, but No system, no matter how good, can be correct all the time. By sharing risk between multiple investments and multiple systems, you protect yourself from the potential harm that a single trading accident can cause.

To decide how to use TradeWHEN with your own investments, first visit our CHARTS page. This page shows graphically how charts from multiple systems and investments can add and average together into a smooth ride in the stock market. The sample portfolio we construct here should give you a good idea how your own portfolio can come together.

Next, try our TRADING SIMULATOR tool. Using this tool you can try out - for yourself - all of TradeWHEN's stock market timing systems on a variety of mutual funds and exchange-traded funds. Find systems that work well with investments that interest you. You can try the example investments we use in the simulator, or you can choose similar investments you are already familiar with.

If you wish to use TradeWHEN with investments you already have (you may have limited investment choices in your 401k, for instance), try to find a similar investment by experimenting with TradeWHEN's trading simulator. Typically, for example, a TradeWHEN system that works well with technology funds in our simulator is likely to work well with other technology funds. Visit a financial website and compare charts of an issue that performed well in our simulator versus an investment you are considering. If the charts look similar, there is a very good chance your target investment will also work well with the same TradeWHEN system.

While it may be temptimg to choose only funds with the highest possible demonstrated historical returns, it is usually better and safer to think strategically about the future, and choose issues that represent a wide variety of different industries and investment strategies. Remember, also, that you can and should dynamically adjust the makeup of your portfolio over time as market conditions change. Since TradeWHEN does not tell you what to invest in, this part is up to you - we're here to help you out with the WHEN.

So, what are the the differences between the various TradeWHEN systems? You will observe that some systems appear more tuned in to particular industries or investment types. All the TradeWHEN systems use related timing models, and generate about the same number of trades (generally 1 to 2 roundtrip trades per year.) It is not uncommon, while tracking many TradeWHEN systems, for trading signals to be issued by more than one system on the same day. When the market is changing direction, sometimes all the systems will fire within a few days of each other. More often, it will take a month or more before all the systems agree. And when there is a lot of market uncertainty, the systems may never all come into agreement with each other. This is perfectly normal, and it is an expected feature of our statistical model.

How about stocks? TradeWHEN shows mutual funds and ETFs (exchange-traded funds) in all our examples for a good reason. Our trading systems are based on statistical trends which affect the stock market as a whole. When looking at the stock market chart of a particluar stock, that issue will be affected by those same widespread trends but much more strongly by very particular developments that apply just to that one corporation. If we add together the performance of very many stocks (as happens inside a fund), the common elements of those stocks' performances add together (these are the predictable common statistical trends that TradeWHEN tracks), while the individual performance variations of those stocks (not as easy to predict) tend to cancel each other out. This is why TradeWHEN works best with funds. This is not to say that TradeWHEN will not work with individual stocks - sometimes it will, quite well. Any stock investment you wish to trade this way needs to be carefully studied first.

How about a stoploss strategy, for when the market takes a particularly bad turn? This part is entirely optional. We do not have a one-size-fits-all stoploss rule for TradeWHEN - in fact, TradeWHEN portfolios may very well continue increasing, even during extended bear markets - but this depends on which investments you choose. Here's a general stoploss guideline that has worked well for some of us here: Average together the historical performance of all the investments in your portfolio (after using the TradeWHEN trading signals on them), and determine what the greatest amount of drawdown has been over the last few years (that is, the furthest fall from the highest point reached.) Then set your stoploss point several percentage points lower than this. I recommend looking only at the average of all your traded holdings for this measurement, and not applying the stoploss individually to your issues. If and when the average of your TradeWHEN-traded portfolio falls further than the threshhold you have decided upon, exit the market and wait for a tunaround. This is not a hard-and-fast rule. The idea is to set the stoploss at a point where it will very rarely be taken. Since most of the time, the stoploss exit and subsequent re-entry will cost you money, you only want the stoploss tripped under the most dangerous circumstances.

The last thing to talk about is commitment. To be a successful trader, decide what your trading strategy is, and then commit to it - and execute all your trades promptly according to the rules you have set for yourself. Your emotions will often tell you to do something totally different from what your trading system says. Even worse, you will sometimes be right, and the computer will be wrong! As the designer of the TradeWHEN systems, I can tell you that I have wrestled with these same demons. The bottom line for me, is that I have consistently done better in the long term by following my computerized systems than when I have relied on my own intuition. True, the computer makes mistakes - but so do I. And ultimately, the computer makes more good decisions, and fewer bad ones, than do I. A strategy that may prove useful to you is to set aside a portion of your investment capital to trade using your own intuition. Over time, you will be able to compare the returns you get from your intuition versus TradeWHEN.