No one can predict the timing and magnitude of a market crash. That said, it is not as difficult as one would think to strategically position themselves for a market crash. To do so, one must take a Zen approach to the markets by calmly monitoring data the market throws at you in real-time during the trading day. Such is the nature of healthy trading regardless of your trading strategy.
Indeed, there are more market crash inducing bubbles waiting to burst than ever before in the history of US markets. The most obvious is the artificial manipulation of the stock market via quantitative easing which began in late 2008 after the financial credit bubble meltdown. Central banks have painted themselves into a corner as they are finding that negative interest rates are crippling to financial structures. But if they start hiking rates, that could create the next crash.
To wit, the US Federal Reserve is guilty of having caused a number of such mega-crashes by hiking rates prematurely. This caused the crashes of 1929–1931, 1987, and 2000–2002. [I will be publishing a piece in the next few weeks on Virtue of Selfish Investing with charts on exactly when the Fed hiked and how markets responded.]
The main thrust behind my algorithmic trading models is that if they sense enough buying or selling pressure in the US markets, they switch signals. They monitor a number of variables such as my Focus List of stocks which is a dynamic list that gets updated regularly. Examples of the Focus List can be seen here: Stock market timing reports (Type keywords ‘focus list’ into the “Search All Reports” search bar. A time delay applies to non-members.)
So far, neither model showcased on my website Virtue of Selfish Investing has ever missed a major market correction: Stock market timing Results-market timing signals-Direction Model
My most recent model (VIX Volatility Model = VVM) has been a work-in-progress over the last few years. Nevertheless, the VVM’s profit/loss is the most impressive of any trading strategy I have ever created in my 25+ year trading career, including the strategy that got me into books such as “Conversations with Top Traders” by Kevin Marder. That said, the VVM has had its share of growing pains as all models do. But after a long beta period, it has launched… in one of the most challenging markets that is akin to one volatile mosh pit.
But what doesn’t kill you makes you stronger, and the slings and arrows the market has thrown at my model has only made it stronger.
Indeed, it was up +177.03% as of 9-8-16. But know that the model was still going through its growing pains at that point. Here’s a piece I published that describes why taking big profits when you have them, in this case nearly +40% on just one timing signal, is sometimes wise. It also gives one a peak into how the self-learning aspect of the VVM functions in real-time: Market Lab Report - Mega-Frustrating Markets ? Not necessarily...
I am the co-founder of Virtue of Selfish Investing, LLC and MoKa Investors, LLC. We run the website www.virtueofselfishinvesting.com