Tuesday, February 7, 2012


                                        Well, It’s Not This Bad

Some days I feel like I’m building a house one popsicle stick at a time.

First the good news: hopefully the daily range’s from the last two days in gold will continue in the days, weeks, and months ahead. That would mean volatility returning to normal.

The fact of the matter is that low volatility will wreck havoc with the algorithm. We will get buy signals when it’s time to sell, and sell signals when it’s time to buy. The algorithm has to give up something in order to reap the kinds of returns it gets in the long run: and we give up low volatility.

When the market snaps back to normal volatility, the algo will miss a couple of days of signals. Remember, the absolute first priority of the algo is to keep you out of trouble. Then, we go after the highest probability trades. The good news is that what we missed today is simply an opportunity cost.

Since my hand is injured, I’m writing this with one hand. Give me a couple of days to recover and I will get back to normal writing. I appreciate your understanding and will continue the type of market coverage you have come to expect.

Have a good day everyone!


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