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o not have to be in this。business。very long before you will be wrong about something。 Nobody knows。what the future holds。 We can speculate； and be right sometimes。 Our system does。not need us。to forecast the future； but it does。identify probabilities。that we can bet on； and provides。a way of exploiting the winners。and minimizing the losers。 With our system when we are wrong； we can be wrong with confidence。
It pays。off to be in the markets。all the time。 In any given year there are periods of up to six months。when being out maximizes。returns。 This。is。usually between May and October。
In any four…year period there is。likely to be a significant bearish correction phase during which swings。down of between 20 percent and 40 percent are normal。 Moves。of 50 percent are rare； and moves。greater than that are exceptional； epoch…making； and go straight into the annals。of legend。 These drawdowns。do occur； however； and can exceed 80 percent。 They require subsequent 400 percent gains to get back。onside； which always。take many。years。 They are essentially terminating experiences。
Once every ten years。there is a very high probability of a recession； and this。is。at the very end or beginning of the decade。 The ninth year。of a decade is。dangerous； and the first three years。deeply disappointing。
Secular trends。have a high probability of lasting for multiples。of four years； with durations。of sixteen to twenty。being quite normal。 These are periods。when only。active trading can survive （in a secular downtrend）； or alternatively a buy…and…hold strategy。is。really hard to beat。 Even within secular uptrends； when inactive styles。are preferred； there is。still a high probability of a fourth…year correction phase。 This will typically。retrace a significant major fraction of the entire uptrend to date； probably at least 20 percent and possibly as。much as。50 percent。
The odds。of winning are higher if we are long stocks。or markets that are in secular uptrend。 We must be willing to tolerate a certain amount of volatility but not more than 25 percent； or we risk。being eliminated from the game。 We always。use stop…loss。levels； but we do not leave such levels。in the market as。open orders。
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