Thursday, February 23, 2012


                          Obviously, Kitty’s Been A Tradin’ Gold

How did everybody like the low range, spike induced, new highs-to-new-lows-new-highs-back-to-the-lows-rally-to-new-highs-and-then-do-nothing day? If you’re looking for tax-loss opportunities in 2012, then this was your day!

On the surface, it doesn’t make sense: low volatility increases your probability of loss for the day. I know most of you would think it was the exact opposite, but it simply isn’t the case.

The single biggest factor in professional trader losses are reversal days. And it is much easier to reverse when the range is tight relative to market expectations. Nothing says cover your shorts better than a new high off a new low 45 minutes earlier. If you were short you’d be a scramblin’.

So, while nothing is really happening, both longs and shorts are in panic mode a good part of the day; and it doesn’t take much of a price move to get the ball rollin’.

The really bad news?

There isn’t enough of a price move on the other side to make up for the loss you just had. That new high isn’t going but a buck or two further and you need $5 - $7. Whoops! Time to go lower and now you got a real problem.

Throw into the mix a single 5 minute price spike/drop that can represent as much as 50% - 100% of the entire day’s range, and you have the entire gold trading community on pins and needles.

So, what to do?

Either walk away or be very selective in using algorithm signals until conditions change to normal. I can’t make it any simpler for you.

For today’s trades in the PAMM, go to

Have a good day everyone.


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