Thursday, January 12, 2012


                                      Been There Done That

No matter the situation, at some point we end up disappointed in something that at first glance we thought was perfect. Was it our expectations that were delusional, or is it reality playing tricks on us?

Markets present there own unique problems. I easily remember days standing in the pit where before you even had the trade on the card it was $1,000 in your favor, and you just turned around and gave it to the next guy at a higher price.

Wow that was easy. How many more times can we do this today? Where’s this been all my life?”

Then the relationship turns a bit rocky. Suddenly, things that were once cute and adorable – oops, we’re talking about markets now.

Then the relationship turns a bit rocky. Suddenly, things that were once easy and fast [viz. quick price moves] disappear and you are left wondering where the market you thought you knew went.

Excuse me!! Hello, anybody home?Helllllloooooooooooooo!! Man, where did she go?”

                      Hmmmmmmmm Somethings Goin’ On Here
Am I the only guy who has noticed that we have started the year with volatility dropping? The gold market this week isn’t the same gold market that was here before the New Year started.

Now, you can ignore these changes and be slightly delusional, or you can realize that until our old volatile friend returns, things are going to be a little subdued and take a little bit more time to develop than usual. Welcome to trading.

The algorithm does an excellent job of keeping you focused on what is really important; implementing your signals. By concentrating on this, you free yourself up from the endless mind-games the gold market throws at most participants. No more insecurities or heartache from wondering what you did wrong. [Hint: “It’s not you, it’s me”]

All of us at some point will walk away from the gold market. You will eventually run into somebody who says, “Hey, I’m thinkin’ about trading gold. Whadaya think?”

“Yea, I dated her once. Let me tell you a couple of things yur gonna need to know.”

Today’s Action & Wrap Up

We came into today in “buy mode”. Our first buy signal was at 2:25 AM [Chicago time] at 1646.50. Now, before I place my protective sell stop I am interested in 2 things: 1) Where is the most recent low, and 2) more importantly what is the range of the day so far? I know at this point we have about an $8 range so far. No way is this going to hold for the rest of the day; way too small. Although I’m in closer to the high rather than the low, what I really want to know is what price will take gold lower and maybe start a reversal day.

Looking at the day’s action through the eyes of the algorithm, I know that 1644 is the 50% retracement area, and 1642.05 is the low from about 3 ½ hours ago. I don’t really want to put my stop in under $3 from where I am filled because I know from experience that I run a much higher risk of getting my stop gunned down through random noise if it is under $3.

I also know that if we get to that low mentioned above, that we stand a very good probability of taking the low of the day out and starting that reversal day. So, my stop gets placed at 1642.80, about $3.70 away from my fill.

While in this long position, the algorithm briefly went to liquidation mode for about 10-15 minutes. I did not liquidate the position because the market neither took my stop out nor had much time elapsed since the inception of my position. So, neither price not time were a factor.

I have written before, that it is extremely important not to get chopped up if the algorithm starts to have “buy, then sell, then buy again, etc” type action. The way you try and avoid this is by forcing the market to take you out or go in your direction.

“Hey Market – LISTEN UP!! – Do somethin’ already will ya???”

Now, if you got stopped out, or got out, and took a small loss when the algo chopped for a couple of candlesticks, you still got back in and then made some money. So, the end result was relatively the same. But I want you all to see my thinking here as I set the stop up relative to the information I want the market to give me if the position is wrong AND it fits inside my stop parameters of $3 - $5 from my entry point.

A couple of hours later we got a confirmation top at 1651.50 and liquidated the position. This confirmation top is discussed in the manual and in Appendix IV. So, the gain on the trade, and the day, is $ 5.00 / oz.

Not quite enough for a Ka-Ching, but enough to keep me in a good mood at the beach. Skeptic Cat & Dog eat your heart out.

Have a good day everyone!!


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