Tuesday, December 27, 2011


                            Life At The Top Is Lonely & Perilous

The majority of people hate winners and despise losers.

Unlike today, when you stand in a trading pit, all of your trades are there for the world to see. Buy near lows and sell near highs and many people sit up and take notice. Do this more than a few times in a row and most institutions want to know what you are doing.  

                                 All the Institutions That Matter

I raise my arms, and immediately around the pit, you can see clerks letting trading desks know what I am doing. Is he buying or selling? Is he long or short? Is he active or is he playing with us?

You initiate positions silently, without making a fuss. You accumulate 1 lot to 15 lots, each order at a time until you have what you want. Nobody really is noticing you. I’m not trying to muscle the market or make anybody notice me. I’m just one person in a pit of more than 100 people.

Now, when you accumulate size, you had better be right on direction, and if you are wrong, there has to be size close by [in price] for you to get out. The last thing you want to have happen is to be forced to sell in a rapidly falling market or be forced to buy in a melt-up.

When I get the liquidation signal from my algorithm, NOW I want to be noticed. My arms out stretched, I’m screaming and HOPEFULLY I’m the only person there offering (or bidding) size.


Every institution and large trader wants to take me out. “Ohhh yea, I’m gonna teach this SOB to sell a melt-up!! We’re going sooooooooo much higher!! I’m gonna hand you your *%*!!”

Hours later traders are coming up to me and asking, “Ohh man, how did you know that was the top?”

“Ahhhhh, I didn’t.

“Oh OK, I see how it is. Let the little trader starve to death while you sell the top, and now you won’t share anything. Go *$%* yourself!!”


For everyone who is trading the algorithm, go share your results on any forum chat room and see what happens. Whether you are in a pit or trading electronically, everybody hates the winner. Get used too it my friends!




Today’s Action & Wrap Up

We started post Christmas trading with the algo signaling “sell mode” in the Asian session. Our first trade was at 2:15 AM [Chicago time] at 1596. My stop on this trade was very tight, up at 1598.00, which was just above the old recovery high set in Asia an hour or so earlier at 1597.89. With trading ranges tight in almost all markets, I’m not willing to risk wide stops because I may not be able to get the range back later.

We got stopped out on this trade at 3:05 AM [Chicago time] for a loss of -$ 2.00 / oz.

Our second trade was at 4:20 AM [Chicago time] at 1598. Here, I placed my stop at 1600.50, just a little below the high from 30 minutes earlier. Again, a very tight stop but with a fall off of volatility from what we are used to seeing these last months, it is an appropriate place for the stop.

At 6:35 AM [Chicago time] we got a confirmation bottom at 1594. This bottom is discussed in the manual and in Appendix IV. Gain on this trade of $ 4.00 / oz.

Now, as a trader I’m up $2.00 / oz., I’ve been in the market for over 8 hours, and volatility so far today has dried up faster than wet paint on a stucco wall sitting in the sun. I have a decision I have to make which is this: do I take another signal if I get one or do I go home with my 2 bucks? Either call is valid, but which is the more prudent thing to do?

I will only say that remember my post “The Power of $1.50” and make the call. For me, it’s a no brainer: go home and come back tomorrow when hopefully the world returns to trade some this week.

Markets present different volatilities, and you have to decide how you approach them. Knowing that $1.50 / oz. per day makes you filthy rich over time, really the decision has been made for you. I know, the temptation is great, and if there is a move lower later, some of you will do a double face palm and groan. However, keep your eye on the prize and realize these are the temptations that markets throw at you to get the money back.

Do we play by the markets rules or ours? The answer should be obvious.

So, gain on the day of $ 2.00 / oz.

Not enough to Ka-Ching, but enough to make the day worthwhile nonetheless.

Have a good day everyone.


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