HIDE THE CHILDREN

                                       Long, Wrong & Gone

XAUUSD

One thing you can always say about the metals; when they decide to correct they don’t mess around. Ya think they caught a few longs going into the weekend?

Hopefully, today’s almost $40 / oz. range can manifest itself in higher intra day volatility going into next week and beyond. We’ll see how that goes.

For now, what can you say about the price action today except it was ugly on the downside.

We came into the day in “buy mode”, but because of the NFP report at 7:30 AM [Chicago time], nothing really mattered pre-report. As is typical with the “lottery” mentality, we quickly hit both new highs and new lows within 15 minutes of release.

To say that profit taking took over would be a gigantic understatement. Nobody it seems, wanted to go into the weekend long.

We got our first algorithm buy signal at the 9:15 AM [Chicago time] candlestick. Because prices had moved rather rapidly off the bottom, it was almost impossible to get long at an acceptable price. I therefore did 2 important things: 1) I cut my trade size, and 2) I waited for the first correction to get long.

The dilemma you face in buying the first quick bounce is that if you get in at a bad price, your stop needs to be necessarily wide. The second problem is that when the correction resumes, how deep is it going to go: does it hit a new low, or test the low before a nice short covering rally commences. This is why you cut your trade size: to give yourself some flexibility if it makes another new low.

I finally got long at 1739.76 with a stop at 1734.90. I got out at 1741.24 for a gain of $1.48 / oz.

A number of things to consider: 1) it’s Friday and it’s getting late in the day, 2) gold is down over $20 / oz and it doesn’t look like any kind of reversal is going to take place, 3) I’m up for the day at my minimum goal amount, and 4) I’m trying to buy into a selling frenzy.

Time to call it a day.

 AUDUSD

Who said AUD always correlates positively with gold?

Up, up and away to new highs. A nice steady gain throughout the day with only minor corrections along the way. I was looking to get long AUD, but it never corrected enough to give an algorithm buy signal.

Next week the Central Bank of Australia [RBA] meets for an interest rate decision regarding short term rates. A 25 bps [basis points] cut in rates is expected and baked into the market.

AUD feels like it’s on its way to 1.10 and setting a new record against the dollar. It’s been a very long time seeing gold down $40 / oz. and AUD up 100 pips.

We’ll pick things up again next week. Have a great Super Bowl weekend everyone!

-vegas

WHAT YOU DON’T LOSE MAKES YOU RICH

                     Building Negative Equity One Trade At A Time

Every day you don’t lose money trading, makes you 3 days closer to the wealth and financial freedom you desire.

We need time and volatility to make money trading; when we don’t get either or both, we walk. END. OF. STORY. PERIOD.

How many times have I seen the “trader face palm”? How many stars are there in the night sky? Yea, that many.

For the first 16 hours of trading today there was nothing but drifting dealer stop hunting: then came 45 minutes of “fun”, that I am sure created tax loss opportunities amongst  the trading community.

XAUUSD

                                         Are You Guys Hiring?

It’s days like this that always makes me think of what it would be like to be the sword-eater at the circus.

We came into the day in “buy mode” and for all of Asia and 90% of the European trade; the market had a whopping $11 / oz range. Up, down, back up, back down, new lows by a few ticks, up to the highs, you get the idea.

We got long on a buy signal and then got out with a few pennies / oz. when it turned around and started dropping. Lack of upside momentum was the key for me in getting out. As I say in my post today, in a low volatility environment, the slowest traders get eaten first.

Thanks to Weimar Ben Bernanke, gold went nuts when his prepared remarks before Congress were released. Elevator up turns into elevator down after the last retail trader finally gets long at the top.

Tomorrow is NFP Friday, so don’t expect much in the way of action until 7:30 AM Chicago time. We could get some position squaring that will extend the ranges.

I am definitely missing my buddy Ka-Chingggggg.

AUDUSD

Paste what I said about gold “here”: only it was even more boring and uneventful. No sense boring you to death, but the thing to note was that when gold made its run, AUD did almost nothing. Trading off that perceived positive correlation to gold are you? How’d that turn out for ya?

Have a good day everyone!

-vegas

SETTING PRIORITIES

                                  Mum Says Do Chores First

A couple of administrative notes before I comment on today’s action.

First, I am adding AUDUSD to my comments each day along with XAUUSD [spot gold].

Second, starting tomorrow Feb. 2, 2012, I will post comments regarding XAUUSD & AUDUSD sometime between 2:00 PM and 4:00 PM [Chicago time] each market day. This will help you better plan your market day and give you a window for my comments and at the same time allow me to comment on market conditions from the US session.

XAUUSD

Market continues to suffer from a) high spreads, b) tight daily ranges, and c) dealer non liquidity. If you can’t see the difference from now and Q4 2011, you are blind or in denial, or both.

We came into the day in “neutral mode” and before the US session opened we were in “buy mode”. After this change in mode, there were 2 buy signals I could have taken, but I didn’t. The first would have resulted in a small loss, and the second maybe would have gotten back to even. At worst, it would have netted a loss of about a dollar.

So, again I outperformed the algorithm by not getting sucked into a market that feels like it’s going nowhere fast.

This took us up to our time window in gold to 11 AM [Chicago time]. After this time, I refuse to take new positions due to time constraints on profitability. So, no trading in gold today.

AUDUSD

I got to trading a little late last night and missed the early “buy” signal in AUD. For the rest of the entire trading day, we got no other buy signal.

Now, I don’t chase markets. If it goes, and for whatever reason I’m not in it, I’m not just going to seat-of-my-pants wing it and take a position just so I can say, “Hey, I got a position.”

The market is in “buy mode” for now, and I look to take a position as it backs off it’s rally and gives a “buy signal”. That’s how I trade, and that’s how we make money.

I’ll have more comments on AUD as we trade it in the days and weeks ahead.

Have a good day everyone!

-vegas

MARKET RECOGNITION

                                         Just A Tad Different

To say that the gold market is a lot like last year isn’t saying much. On recent days I’m struggling to see the connection. So far this year, activity in Asia and Europe has been muted at best, with choppy tight ranges that get made in about 20 minutes. Outside of that, it’s a stop hunt for the dealers.

We continue to be in “buy mode”, looking for our signals where appropriate. We got a buy signal immediately at our session open around Midnight [Chicago time] and baled out of it when it came back to make a few pennies / oz.

In these types of low volatility affairs, I’m just not willing to give up anything once I’m up a buck or two. I’ll take the free trade, but if action by definition is slow and choppy, even the free trade isn’t going anywhere.

The algorithm outperformed me today by a few pennies per oz., as the liquidation signal came just a few cents above where I got out. So, no real news here, except to say that it continued to rally a few more dollars from the post European open.

As is usual in low volatility trading, the correction off the high was fast and wicked, with prices pulling back into congestion.

So, while the algorithm worked today, it didn’t mean much to us as it only gave us a few pennies per oz.

Do not be surprised if you see some AUDUSD trading coming here, along with some comments. Volatility has been good and ranges high as this has very much become the play on “China” and is considered a “risk on” commodity currency because of the large mining economy in the country.

For those who wish to trade AUDUSD, there are no real limitations as to time of day. It trades well in all 3 major market sessions.

Have a good day everyone!

-vegas

SKEPTIC CAT IS HAPPY TODAY

                                         Your Day To Smile

Today was the first day since early October that the algorithm lost money trading; we lost about $305 or about a hair more than 2%. No big deal; we just drew the wrong marble out of the bag.

Everything that could go wrong today did go wrong today. We had 4 different buy signals from Midnight going forward, and the last one theoretically would have made some of the losses back, but not enough to show a profit. If I had followed the algorithm exactly, I would have traded 170 oz., had 3 trades that lost about $3.50 on each [total of

-10.50 / oz] and the fourth trade would have profited by about $ 5.00 / oz.

That would have been a loss of -5.50 / oz times 170 oz = -$935. So, I lost about one-third of what the algorithm did and basically outperformed it for the day.

How did I do that? Well, I used lower leverage because I didn’t feel comfortable with the volatility action. The low of the day was a mystery tick that I never saw; it was just there and then it wasn’t. In addition to the mystery low at the algorithm exhaustion point, I got stop hunted the entire day. So, for all of you that think I have a magic touch when it comes to stops, just remember I told you so and that I have days when they come for me too; and today was that day.

Add to all this really bad spreads trading most of the day, and you have a recipe for losses.

I’m not a trader that dwells on losses, except to ask if I outperformed the algorithm. If I didn’t, it’s time for some introspection; if I did, then I just forget about the day and move on to tomorrow.

Nobody bats 1.000 but we come close.

Have a great day everyone!

-vegas