Tom DeMark Relies 100% on Market Timing
12455
Finance > Currency Trading
Apr 18, 2007
Tom DeMark Relies 100% on Market Timing
Trader and consultant Tom DeMark has invented dozens of proprietary technical indicators over the years and relies strictly on the technical principles of market timing for his research and trading. In fact at one point in his career, DeMark went through the CFA program (certified financial analyst), but chose to never complete it. "Markets over the long term are controlled by fundamentals. But, my indicators measure psychology--that's what technical analysis does," DeMark explained. DeMark's first step into the financial world came after graduate school in both business and law, when he joined National Investment Service, based in Milwaukee, Wisconsin, as a fundamental analyst in the early 1970s. The firm managed roughly $300 million in pension and profit-sharing assets, investing in primarily fixed-income securities and equities. National Investment Service's strength was market timing. But DeMark said of his first job, "I was a professional gofer .. I was low man in the company, but I ascended quickly because I was good at market timing." "My goal was to be involved with a small group of people who were progressive," DeMark said. The firm "avoided the stock market crash in 1973 and 1974," and assets under management grew to $6 billion. "1974 was severe ... (The Dow Jones Industrial Average) went from over 1000 to 570 during the political crisis with Nixon. There was a 50% decline in the stock market," DeMark remembered. However, the firm avoided that debacle through market timing. "They just gave me a license to do whatever I wanted to do," he said. "I went off on my own and traded commodities. My bosses didn't mind if I diversified for my own account," DeMark said. In general, DeMark believes "the commodity side (of the business) has the more creative people-because the leverage involved is so big." In 1978, DeMark set up a financial markets consulting division within National Investment Service. "We had a Who's Who in the industry list of clients," DeMark noted. "I diversified, supplying stock and fixed-income commodity timing ... the profitability of the subsidiary was greater than the parent," DeMark said. However, in 1982, DeMark broke away and continued his consulting. "I had $120 billion in assets collectively following my bond calls," DeMark said. Just ahead of the U.S. stock market crash in 1987, one of DeMark's indicators posted an equity sell signal. Shortly thereafter, he joined Paul Tudor Jones's firm for a stint as an executive vice president and continued his market research and systems development there. Regarding the basis of his research, DeMark said, "market timing is 100%. It's anti-trend, it's contratrend, it's pattern recognition and price exhaustion." DeMark believes his technical indicators differ from others because "they are totally objective and mechanical and they are against the grain of most technicians." One of DeMark's well-known technical indicators, which he has trademarked Sequendal--"is a cyclical approach to market analysis, determinant on the market itself," DeMark explained. "People who work with cycles generally take slices of time and make them equal. I'm saying that some trading days in the market are irrelevant. I try to mark comparisons with price activity and activity of days ago," he added. In a year-long series in Futures magazine, beginning in August 1995, DeMark authored articles outlining many of his technical indicators, which readers can refer to for more in-depth details. DeMark also authored a book entitled The New Science of Technical Analysis, published by John Wiley & Sons, Inc. in 1994. DeMark is putting the finishing touches on a book called New Market Timing Techniques: Innovative Studies on Market Rhythm and Price Exhaustion, which he expects to be published in the spring of 1997 "I'll be releasing 20 new indicators. Four of them were some I traded while I was at Tudor-plus the ones I created with Larry Williams," DeMark said. When asked if there are some markets DeMark prefers over others, DeMark responded in the negative. "Everything I've done has application to all markets," he explained. "I try to address every aspect of technical analysis and leave some of the variables open so people can research on their own," DeMark said. Nonetheless, his indicators are "99% mechanical, objective and simplistic," he added. However, DeMark admits there is more to successful trading than just good indicators or system. "Money management and discipline are more important than the system," he said. In fact "good discipline, a knowledge of their (personal) limitations and good money management are more critical than the system or indicator," DeMark said. Advice DeMark has for beginning traders? "Read a lot. Test a lot. Don't trade until you've done your homework. Make certain you've made your technique objective-it should be a definitive process," DeMark concluded.
Martin Chandra is a full-time investor. He has been researching investment strategies and make his own living. For more information please go to here.
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links at Finance > Currency Trading
Simply put, technical analysis means that one studies price movement. You can use price charts in order to keep track of price movement history. By doing so, you can try to figure out which way prices will go, up or down, in future trends.
Category:
What is required of you to be a profitable trader? There are more than one answer to this question. One answer is given in this article based on the experience of the author and his interviewing several successful traders of forex and other instruments...
Category:
Currency rates and the differential between countries and over time is the meat of the foreign exchange game. They are constantly changing and the better your ability to predict these changes the more money you are going to make over time in this market.
Category:
Picture the scene -- you have done your an alysis and have been waiting for the breakout of a range. You might even have identified a head and shoulders or double bottom. So anyway, you have a trade all set up and you are just waiting for the move.
Category:
The Forex market is the biggest and fastest growing financial market on earth. More than 2.5 trillion dollars is traded daily. The participants in this market are banks, organizations, investors and private individuals. The market consist of the currencie
Category:
Site Sponsor
Directory Statistics
Articles: 68309
Categories: 501
Yahoo Entertainment
