Tuesday, May 15, 2012


                         What He Sees & Hears Would Shock You

Back in the day before electronic trading, when trading pits were all the rage and people jammed the exchange gallery all day long to watch us act like chimps in heat, the things that really mattered were often ignored and unseen by most traders. It’s what we don’t know that is our biggest problem.

Greece is in the Euro; Greece is leaving the Euro. Greece has money; Greece has no money. Europe is doomed; Europe will survive and later prosper. Banks are bankrupt and doomed to close; we need banks to facilitate commerce. Guess what? It doesn’t matter.

“Only the fly knows what’s really going on, and he ain’t sayin’.”

Buying/selling based on news flow will put you in the padded room quicker than being a chaperone in a room full of teenage girls. The same news that takes [pick your market] up, two weeks later takes it down. You tune in to your favorite “Money Honey” on CNBC or Bloomberg to get the low down on what’s going on and all you get are shills talking their position.

There are bull markets and then there are bear markets. Right now, gold is in a bear market. Sorry if that offends you if you are a “gold bug”, but it simply is the truth. Maybe tomorrow it starts the next leg up, or maybe it takes another 5 years to get back over 1800. I dunno and neither does anybody else.

The best simple advice, as a trader, I can give somebody who wants to trade can be summed up in what I read yesterday on Zero Hedge [in mother approved language of course]: “If you are going to buy the dip, you better be willing to sell the rip.”

Masters of the Universe, hedge fund traders and managers, and large spec retail accounts often mistake their opinions as market facts; next thing you know they are OOB [out of business]. Price means nothing; volatility means everything.

All that matters is the flow of money into and out of a market. You have to be early to every move to get the prices you want getting in, and you have to be willing to leave money on the table on the way out; volatility will hopefully take care of the rest. Reaching for that last dime will kill you.

In bull markets, it is the sudden drops that keep you from getting long; in bear markets it’s the explosive rallies that hurt your short positions by forcing you out. I can give you 5 reasons gold has to go higher; once you absorb this I can give you 5 reasons gold has to go lower. What do you do now?

Understanding money flows makes trading simple; I said simple, not easy.

Have a good day everyone.


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