Add Dealers & Hedge Funds
If you have enough money, or more importantly can borrow any amount you want from the Fed at close to 0%, then you have not only the initiative but the means to shove markets wherever you want them.
At times you get caught the wrong way and get stung a little, but overall it’s a game that makes amounts of money an ordinary person would find unbelievable.
“Errr that shiny finance degree don’t mean crap here kid.”
“Sir, do you want me to do some kind of fundamental analysis on industrial demand and mine production?”
“What?? Hell no, we wouldn’t even know where to start. Sit back Jr. and watch me shove a pile of money into some stops!!”
“What’s a stop?”
And there you have it; in a nutshell that is the state of gold trading today.
Granted, there are the “Lemmings in Asia” who will buy every night of every day because they are super gold bugs, but for us traders the dealers, hedge funds, and banks are our greatest impediments to accumulating wealth.
The scam is easy to understand; you simply throw money at a market enough for it to move until you get it at a place where you reverse course. Rinse & repeat; count the money and pay bonuses.
The problem the gold market poses for a trader today is that you have no reference points for risk management. Since the melt-up on January 25, 2012, gold has lost its bearings as far as range and stop placement is concerned.
Add to this the continued criminal behavior of dealers, who jack spreads literally instantaneously and huge slippage if your order isn’t done right, and you have a trading scenario where nothing you use to gauge the market will make sense.
Elevator up; out the window on the way down. If your stop gets hit on the way so much the better. Having fun yet?
And what do you suppose the main purpose of Centrally Planned gold trading is?
Why of course it is to punish you for having the audacity of questioning the power elite by trying to take advantage of their disastrous monetary and fiscal policies.
And what better way to punish you than by having dozens of spikes/drops, $10 / oz. moves in 5 – 10 minutes, stop hunts, and reversals?
Most retail traders are like fish in a lake; bait the hook and throw it in the water and they will bite!
I’m not happy about these market conditions at the moment, but I know how to deal with it effectively. Have a plan, pick your spot [or spots], lower your volume to give you more flexibility, don’t place your stop where everybody else does, make your trade a “free trade” when available, and lastly at the very first sign of price reversal click the button and take the money.
Make them pay you, not the other way around.
Have a good weekend everyone.