Wednesday, March 28, 2012


                            We’re Vampire Squid & Here to Help

All the exuberance of Tuesday’s advance just got a whole lot of cold water thrown on it. Even a Vampire Squid [Goldman Sachs] buy recommendation to their customer clients muppets couldn’t save gold today.

“Hey, it’s only money – and yours at that!”

Until late morning stops were set off, it was looking like a pretty dull affair. Stock market weakness, along with declining crude prices, and a rising dollar proved too much too handle for gold.

I’m wondering how many muppets bought gold while the prop desk at Vampire Squid was selling?

Below is an example of what I was talking about yesterday. The black dot is where the bid started climbing from about 1674.09. Over the next few seconds gold climbed all the way up to about 1675.09, a gain of about a dollar. If you long, from let’s say 1674.00, things for a second look promising; and if you’re trying to get out you have to push the liquidate button on the way up.

But let’s say you hesitate – wait a second – wait for it to roll over. Sorry, you lose. In the next second [red dot] the bid is 1673.83. What was a gain is now a loss Welcome to nibble, nibble, nibble, BOOM!

If you are not early, either getting in or getting out, you will pay the price with the dealer.

This is the major reason I have cut my leverage the last couple of months from where it was most of 2011. What looks great one second looks like death the next, and if you have a very highly leveraged trade you’re gonna hit the panic button and end up feeding the dealer.

I’m no muppet, and I don’t trade to feed the dealer or the house; I trade to make money. In these types of conditions it will be near impossible to get the price you want when you want it; you have to be early and be willing to take the money and run.

If you choose to wait, most likely price will get away from you and whatever risk management priorities you once had are now out the window. How do you recover from this?

Have a good day everyone.


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