Tuesday, May 1, 2012


                                         USS Federal Reserve

Back in the day when I stood in a trading pit and was a member in the “Masters of the Universe” club, one of the very first things you learned was to be early. Early made you money; early saved your life; late led to losses, and the inevitable fatal insult to a trader which was leaving the business for a real job.

“Would you like fries with that order?”

The stark reality in trading is markets go up differently than they go down. Stair steps up; out the window down. Falling isn’t so bad; it only does damage when you hit the ground.

More than any other manipulated market, gold gets skewed lower much, much faster compared to when it rallies. Take any 5M candlestick chart and look at the breaks and then look at the rallies. If you are selling on the way down or buying on the way up, good luck with the extra slippage if your timing isn’t totally impeccable.

Add in the USS Federal Reserve, and your trading rowboat gets lost in the wake.

Which means that you have to be one of the first rats off the ship when it takes on water; it doesn’t matter if price goes any farther. With the Central Planners in charge, being late liquidating your trade could mean gaps of anywhere from $4 - $20 with the outlier of maybe $50 - $70 [remember Feb. 29?].

I guarantee if you get caught in one of these the first thing that hits you is denial.

“Dude, this can’t be happening.”

It’s the nature of asymmetrical trading. Planning for it can help you sidestep the large landmines that litter the landscape. Don’t fall into the trap of thinking that a market “has to do something”; that is only an idea in your head. Reality isn’t mirrored around your opinions.

Ultimately, the only reality in trading is up money or down money. Opportunity cost is the cheapest form of capital to lose [like in zero] and happens to all of us every single trading day. Being early out of a move usually guarantees better prices; allows us to “book” the profit; and keeps us objectively focused on price.

“Oh yea, it eventually makes you rich too. Duhhhhhhhh.”

Have a good day everyone.


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