Wednesday, December 14, 2011


                                 Let’s Face It, This Ain’t Much

“Oh sure, it’s easy for you. You got a big account and have experience, and I’m just a normal guy with nothing. I can’t do this.”

                          Make Changes, Do Better, TRY AGAIN

There are a million stories in the Naked City, and I hear a lot of them when I do seminars and talk with wannabe traders. My response to all is pretty much the same and really shocks most people. “Is $1.50 a lot of money for you?”

“Well no, of course not.”

“OK, then let’s get started!!”

                                               Uh Oh, Math

First, if you have $100, and lose 50%, what do you have then? “Well, I got $50.”

OK, what percentage do you now need to make on that $50 to get it back to $100? “Well, you need to make 100% to get back to even.”

Exactly, and that is why preventing frequent losses needs  to be your first priority.

Second, do you have a philosophical framework for trading and an algorithm that has proven profitable in all kinds of markets? “Well, no I don’t.”

You do now!

When the MetaTrader 4 [MT4] trading platform came onto the trading scene, I immediately gravitated to it because of the programmable nature of its structure. At the same time that I was experimenting with mq4 code, I also was playing around with the computer language “Python”.

The nice thing about Python is that you can code pieces into the Python compiler and it runs perfectly. It doesn’t need the structure of most programming languages: it’s totally ideal for doing tedious calculations.

Now, as Shakespeare would say, “here’s the rub”.

                 No, Not This Kind; But I’m Looking Forward To It!

Can you consistently make $1.50 / oz. per day?

“C’mon vegas, get real; of course you can. Look at those ranges in gold every day. $1.50? Geez man, that’s peanuts compared to what this market does every day, day-in-and-day-out. Yea, I can make a lousy $1.50.

Ok, so now forget the $7, $11, $20, or even $30+ days the algorithm has delivered in the past. It’s all gravy over $1.50 / oz. per day. Factor in the 6% of the time losses in the $4 - $6 range occur, and it seems reasonable that those are easily offset by the 94% of the time gains, of which a majority are substantially higher than $1.50 / oz. per day. Yes, you can make a logical case that $1.50 /oz. per day is reasonable and not out of the ordinary bounds of volatility for the gold market.

                          Enter Python; The Power Of Computing

“Well vegas, here’s the thing: I don’t have 100 gazillion bucks to trade with, OK?

“Fine, then start with $200 and go from there.”

“What? $200? That ain’t nothin’ man. C’mon vegas, stop screwing with me. How can I possibly make anything starting with $200?”

For those that would like the Python compiler [free] for doing calculations, here is the link:

And as a bonus to all my readers, if you would like the python code I have written that calculates your potential wealth, just email me at and make a request and I will send it to you.

Let’s start from the premise that you start at the bottom. So, your initial starting capital is only $200. If you maintain constant leverage of 12:1, and average $1.50 per oz per day, how long before you are a millionaire?

“Is this a joke? Gotta be like 50 years or something.”

Given the above assumptions, it will take you, EVEN AFTER PAYING TAXES OF 30%, 2 YEARS 10 MONTHS AND 2 WEEKS TO HAVE $1,000,000 IN YOUR TRADING ACCOUNT!!

You have now seen the POWER of $1.50.

Today’s Action & Wrap Up

Can you say ugly price action?

We started the day in “buy mode”, even after yesterday afternoon’s debacle in prices. The Asian session saw prices modestly rally, and at the start of trading [Midnight Chicago time] prices were hovering in a small range near the highs set earlier.

We got our first buy signal at 1:00 AM [Chicago time] at 1639.50. I placed the stop at 1636.50 which was right above the low break a few hours earlier. About an hour later a sell [liquidation of long position] was given at 1638.50. Our first trade was a $ 1.00 / oz. loser.

At 3:15 AM [Chicago time] we got our second buy signal at 1638.50. The stop was placed at 1635.20, just above the recent lows. At 3:40 AM [Chicago time] we got a sell [liquidation of long position] at 1637.50. Again, a $ 1.00 / oz  loser.

Our third buy signal came at 6:25 AM [Chicago time] at 1626. The stop was placed at 1622.90, right above the low of the day. At 7:05 AM [Chicago time] we got a confirmation top [discussed in the manual and Appendix IV] at 1629 and the long position was liquidated. A gain of $3.00 / oz

Now, I’ve gotten 3 signals, 2 of which were losers, and I feel like it’s already late afternoon at 7 in the morning. I’m already 7 hours into trading, and I only have 3-4 hours left to make some initial trades. I’m up a buck and I feel as if I’m spitting into the wind. Maybe the algo gives a fourth or even a fifth signal; the point is do I want to take it this late in the trading day and risk losing money for the day?

The answer is simple: ahhhh, no I don’t, especially after we had a nice day yesterday. And the way the action is playing itself out today [and really yesterday afternoon as well] it feels like we are heading for a blow-off downside move while the algorithm is still in “buy mode”. I will take this meager gain today from the long side and run.

So, a net gain on the day of $1.00 / oz. [Not worth ka-chinging]

Have a good day everyone.


  1. Hey Vegas, great stuff as always. Just a question though. When you talk about the action from today and yesterday it seems like you were looking for buy signals, but since the 4 hr was so bearish shouldn't we have been looking for sell signals?


  2. Send me a private email and I will explain. I defer because too many people try and reverse engineer from my comments. They of course will get it wrong, and then blame me for losses.