KISSING YOUR SISTER

                                       Luck Is Not A Strategy

I came into today’s trade in gold hoping there would be some profit taking off the reversal day we saw yesterday. As the Asian session came and went, there wasn’t any price move lower of any significance. Europe too saw very little action, and by the time the US session opened at 7:20 AM [Chicago time] we had ourselves about a $9 range on the day.

I knew instinctively that this day was going to be trading trouble. Not only from a small range standpoint, but it is a Friday as well. [Have I mentioned before just how much I hate Friday trading?] No profit taking in Asia or Europe meant the market was being set up; the only question was from where?

The fake upside breakout at 7:30 AM meant trouble when the low of that candlestick got taken out. The algorithm is in “buy mode”, so I can’t sell it; all I can do is wait for a buy signal from lower levels.

The first buy signal came at 9:15 AM around the 1726 price level. Why didn’t I take the position? Two big reasons.

The first reason had to do with volatility and the days range up to that point. The low that got put in that led to the buy signal meant the days range at that point was about $13. No way are we staying here at $13, so one of two things has to happen; 1) either we continue lower and put in bigger range on the downside, or 2) we are looking at another reversal day.

I’m not buying two reversal days in a row, especially given the time of day, and the first reason makes a long position unprofitable.

The second reason has to do with the stop level of the position; if I take it, my stop will be almost $5 away from my position. At this point in the trading day, can I recover from a $5 loss and still be profitable for the day? I don’t think so. As it was, the position would have lost $5 / oz.

The second buy signal comes at 10:20 AM around 1720, maybe 1720.25. Why didn’t I take the position?

The main reason is time of day. I’m asking a lot of the gold market to put in a rally, which it hasn’t done all day, to save me here at the end of the day and week. We could get some short covering into the weekend, but if I’m wrong, I have absolutely no chance of recovery into profitability.

I also know that the first buy signal was a bust and would have lost $5 / oz. Each and every day I come into trading, my goal is to beat the algorithm, not match it. I know if I can do that, then my long term profitability will be beyond your imagination.

So, the question becomes can I get a $5 / oz rally, or better, as we move into the close? Again, my experience is screaming “I don’t think so!”

As it was, if I had gotten very near the high bid print at 12:25 PM, a little over 1725 at 1725.33, I could have maybe recovered the first trade and had a breakeven day. That’s if I was very lucky.

Luck is not a strategy.

In reality, I would have probably gotten out as the market went back down through 1724 and ended up with a $1 / oz loss on the day.

So, by not doing anything, I beat the algorithm today.

There are times in our lives when we are given choices and have to choose between outcomes where there are no desirable choices to be made. Today presented a classic trading example of this.

It certainly is no fun to sit with your hands folded and watch an entire day go by and do nothing. However, it is less fun to lose money. And as I have stated before, every day you don’t lose money, you are 3 days closer to financial freedom.

I never had to kiss my sister, but it would have been better than my gym teacher in 8^th grade with bad breath.

Have a good weekend everyone, and I’ll be back at it Sunday night.

-vegas

OYYY !!

                               Hey, I Said I Changed My Mind!!

 "Oy vegas, why’d I do that? Oy crap, ohhh no. vegas, why did you let me do that?”

Crazy markets get you to do things you otherwise wouldn’t do. I used to stand next to a guy in the gold pit [later in the S&P 500 pit] who blamed me every time he made a big boo-boo. I helped him often because he reminded me almost every day to stay disciplined; something that is easier said than done.

Today gave everybody something to be happy and sad about almost at the same time. Gaps everywhere, prices flying all over the place, $2 - $3 / oz. moves in seconds, and that’s the good news.

The bad news is that if you got caught up in this uber stop hunt, and made the wrong move, you got metaphorically taken out back of the woodshed and shot. And as succinctly as I can make it, this is the reason non stop “scalping” is a chumps game.

Not only do you have to make the spread, you have to be right also. Do it over and over, and one mistake – JUST ONE – and those 5 scalps in a row where you made a little money just got obliterated.

I came into the day bearish, but volatility was so bad before 7:20 AM [Chicago time], signals giving buy/sell every time the market goes 50 cents, that I sat on the sidelines looking for some direction.

What happened at the open in the US session was a classic bear trap: prices gap down, come roaring back literally in seconds, and leave big players scrambling for the rest of the day. Be thankful you’re not the guy whose order started the avalanche; filled at the bottom and cover the rest of the day at successive higher prices.

And lest you think I have the “inside skinny” on stops, today was my turn to “feed the beast”. I got long on a break and when the market rallied, I raised the stop to insure a “free trade”. Within seconds, prices broke down exactly to the penny on my stop before roaring higher. I don’t mean almost, I mean the exact low before going back up big time.

Do I care? No. Why not? Because when you trade over a 30 year period, everything the market can throw at you, you will see and experience. Again, I don’t mean almost, I mean everything.

So I leave the day both happy and sad: happy I side-stepped a potential bloodbath, and sad it was my day to feed the dealer. In the final analysis, it doesn’t matter if I’m happy or sad; what matters is am I up money? Amount doesn’t matter, am I up cashola?

Why yes I am, getting rich $1 at a time.

Have a good day everyone.

-vegas

THE SHARK ZONE

                                   There’s Danger Everywhere

You’re sittin’ there just mindin’ your own beeswax and BAMMMMMMM!

“Whoaaa, where’d that move come from? Geesh, I’m just tryin’ to make a little cashola here, and outta the blue here comes a $6 drop [or rise, whatever the case]. Where did that Gold Shark come from?Heyyyyy, I’m missing my legs!!

Welcome to Gold Shark trading.

As I said earlier in my other post, just 3 candlesticks on the 5M represent 80% of the daily range in gold. The rest of the day? A bucket of slop.

A somewhat different story in AUD, as the market put in a nice 100+ pip move before topping and rolling over.

I’m very cautious here in gold, as the market has become very choppy with a “stop hunt” mindset. Prices are very quick to reverse, and the “Johnny come lately” longs or shorts get squeezed unmercifully. What is literally there one second, is gone the next and a buck or two lower to boot. Hesitate, and you missed the train leaving the station.

“OK vegas, I get it; so why not just scalp these rises and drops for a buck or two all day long?”

We simply don’t know it’s going to continue for the whole day. Remember, this kind of action only represents 6% of trading action over the long term, and secondly, if we get in trouble on the wrong side of the market, our success rate can exceed 90% and we still lose money! All it takes is one of these “simple” scalps and you’re out $5 for you to gain religion.

Algorithm signals are great if you can get them without being $5 away from a decent price. Isn’t it amazing most of these spikes/drops occur right around a signal? The issue here becomes your stop level; where do you put it if you get in on a crazy spike/drop?

So, we slowly accumulate capital [via profits] and let the market sort itself out and get back to normal.

“Errrr vegas, when’s that?”

You will know it when you see it.

We made a little over a buck an oz today on the first price spike that expanded the range. At the first sign of price erosion I hit the liquidate button and took the profit. That’s all you can do in this kind of an environment; waiting for liquidation signals will lose you money.

Have a great day everyone.

-vegas

STEP RIGHT UP

                                                 Trade Here

 Some general thoughts on today’s  trading; I didn’t like it much. I can only hope this kind of day only comes back in 2014. What a mess; new highs, new lows, rinse and repeat. The algorithm got chopped up pretty good today, as pretty much every signal would have been a small loss.

I did everything I was supposed to do with respect to trading the algo; it was just one of those 6% days that happen. Nothing really to reflect on. Stuff happens.

Ditto with the AUD, as for most of the day it was a very quit affair; a late afternoon break put in the range from pathetic to tolerable. When I get a trade in AUD, I’ll get in more detail with the pair.

If I didn’t do anything I wasn’t supposed to do, I usually won’t reflect on a losing day. Why, I can’t control gold or AUD, so why worry about it? I only lost a few hundred bucks, so the damage was very minimal; easy to recoup hopefully tomorrow.

Have a good day everyone.

-vegas

SURVIVING BOREDOM

                               What Could Possibly Go Wrong?

A day like today will test your mettle as a trader. In what can only be described as mind numbing boredom, gold put in a $17 range [really $13 if you take out the mystery tick low].

There isn’t really much to say about gold or AUD [they correlated very well today]: boring comes to mind. It felt like the whole day was a stop hunt with no real dynamic.

I took one trade today in gold; it went nowhere with a few pennies of profit. Let’s hope tomorrow has more volatility than this. We’ll see.

Have a good day everyone.

-vegas