Tactical Investor Tools And Indicators; how we time the markets

Tactical Tools And Indicators

Updated Dec 2022

At the Tactical Investor, we pride ourselves on navigating the treacherous waters of the stock market using various essential tools and indicators. We are constantly fine-tuning and developing new tools to ensure that we stay ahead of the curve, so we encourage you to visit our page occasionally to see if any new additions have been made.

Now, it is essential to note that we are not in the business of trying to catch the exact bottom or top of the market. This is a futile exercise fraught with pain and failure, and we do not have time to waste on such useless endeavours. Instead, we focus on identifying bottoming or topping action and then position ourselves accordingly.

To achieve this, we rely on two of the essential tools in our arsenal: the Trend Indicator and Mass Psychology. These two indicators allow us to gain insight into the market’s direction and the prevailing sentiment among investors. We can decide when to enter or exit positions by analysing these factors.

But we must emphasize that these tools are not infallible. Market conditions can change rapidly, and it is essential to remain flexible and adaptable in the face of uncertainty. That is why we are constantly fine-tuning and developing new tools to stay ahead of the curve.

Investing is both an art and a science, requiring various tools and indicators to navigate successfully. At the Tactical Investor, we rely on the Trend Indicator and Mass Psychology to guide our decision-making process, but we are constantly evolving and adapting to changing market conditions. May we both have the good fortune to navigate the market successfully.

Tactical Tools: The Trend Indicator

At the Tactical Investor, we emphasise our top stand-alone indicator – the Trend Indicator. If the other indicators are not trading in tandem with the Trend Indicator (which is rare), we may choose to ignore them. We never oppose its signals; if it issues a sell signal, we act accordingly. Similarly, we adjust our positions accordingly if it gives a buy signal. For more details on this indicator, please click here.

Tactical Tool #2: Mass Psychology

At the Tactical Investor, we distinguish between mass psychology and contrarian investing, as the two approaches have different objectives. While contrarians seek to take positions directly opposite to what the masses are doing, we use mass psychology to gauge the prevailing sentiment among the masses and the contrarians. By applying the principles of mass psychology correctly, we can wait for the fear or euphoria to build up to the feeding frenzy stage instead of reacting too early, like most contrarians tend to do.

Contrarians often get into trouble by reacting too early and losing their fortunes during market manias such as the internet, housing, and bond markets, as well as during the current bull market that started in 2008. In contrast, we leverage our experience to gauge the psychology of the markets and wait for the situation to reach a boiling point before closing our positions and slowly easing into positions that directly oppose those the masses are opening.

For more information on this fascinating topic, visit our Introduction to Mass Psychology. At the Tactical Investor, we believe that a deep understanding of mass psychology is essential to successful investing, and we constantly refine our approach to stay ahead of the game. Thank you for the opportunity to serve you, my dear friend.

Tactical Tools#3: Volatility Reading Indicator

The volatility indicator we use determines the level of market volatility, with higher readings indicating higher levels of volatility. As of March 2020, the indicator had been trading well above the extreme zone, leading us to predict that 2021 and 2022 will be highly volatile years. We closely monitor this indicator as it helps us anticipate market movements and make informed investment decisions.

If you’re interested in learning more about this powerful tool, we recommend you visit our website for information on how it works and how we use it in our investment approach. At Tactical Investor, we are committed to staying ahead of the game and constantly refining our process to maximize returns and minimize risks for our valued clients. For information on how this powerful tool works, click here.

Esoteric Cycles

We have extensively tested the validity of Esoteric Cycles with 50 years of data on leading indices. Through this rigorous testing, we have observed that this indicator has never failed to give a warning of topping and bottoming action. However, it is essential to note that it does not predict exact tops or bottoms, an endeavour that is best left to fools.

Once we identify stock market turning points using Esoteric Cycles, we position ourselves for the next move. Sometimes, we may get in a bit early, but we believe the early bird gets the worm, while the latecomer ends up with the bullet. We have found that Esoteric Cycles works incredibly well with our top stand-alone indicator, the trend indicator, allowing us to maximize our returns while minimizing risks.

It is worth noting that our objective is not to locate the very top or bottom of the market. Instead, we focus on getting in or out when the market is bottoming or topping. This approach lets us stay ahead of the game while avoiding unnecessary risks associated with catching the exact top or bottom. Trying to locate the very top or bottom is best left to people who thrive on failure and have plenty of time. More information is available here. At the Tactical Investor, we believe this strategy best suits investors who value long-term success over short-term gains.

Multi-time frame Analysis

We use multiple time frame analyses to determine the trend in different timeframes ranging from hourly to monthly cycles. The longer the timeframe, the more data it contains and the longer-term trend it represents. We examine at least one year of daily data, three to six years of weekly data, and 10-20 years of monthly data. By analyzing multiple timeframes, we can confirm the direction of the trend and its strength. When more timelines are trending in the same direction, the trend is considered stronger and more sustainable. For details on this topic, please click here.

Tactical Tools: Article overview

We utilize Tactical tools and indicators to navigate the stock market successfully. Our approach is not to catch the exact top or bottom but to position ourselves accordingly based on bottoming and topping action.

Our top stand-alone indicator is the trend indicator. If it issues a sell signal, we will never oppose it, and vice versa. We also use mass psychology to gauge what the contrarians and the masses do. By applying the principles of mass psychology correctly, we do not react in the same manner as contrarians do. Instead, we wait for the fear or euphoria to build up to the feeding frenzy stage before taking action.

We also use the VIX or the volatility index to determine market volatility. Higher readings indicate more volatile markets. Additionally, we use Esoteric Cycles, which have never failed to give warning of topping and bottoming action. By identifying market turning points, we position ourselves for the next move, aiming to get in or out when the market is bottoming or topping.

We determine the trend in multiple time frames, from hourly to quarterly and monthly. The more timelines trending in the same direction, the stronger and more durable the trend will be, and vice versa.

Research shows that technical analysis tools and indicators can effectively predict market movements. A study by T. Kim and E. Verrecchia (1994) found that using moving average and relative strength index (RSI) indicators significantly improved the predictability of stock prices. Another study by G. Kanas (1998) found that combining moving averages and momentum indicators improved the forecasting of stock prices.

In conclusion, navigating the stock market can be treacherous, but we can position ourselves for success by utilizing essential tools and indicators. The key is not to catch the exact top or bottom but to focus on bottoming and topping action and trends in multiple time frames.