ASYMMETRICAL TRADING

                                         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.

-vegas

IN THE LAND OF THE BLIND

                      Treat Failure as Information, Not As Emotion.

You stand in a pit where the world comes to do business. In the course of every day, there are going to be winners and there are going to be losers. When you exhibit emotion when you lose, what are you really telling me and the rest of the trading world?

              I leave You To Trade & This Is What You Decide To Do?

The emotion comes from the insecurity in what you just did. Let’s face it, you didn’t have a clue why you bought gold 2 hours ago and your stop was the low of the day and it just got hit; and now we are rallying like there is no tomorrow and you are scared to death to do anything.

If only you had one more indicator, one more news bite, or one more little itsy-bitsy piece of information that could have prevented this. Ohhhhhhh, the heartbreak, and the emotions escape whether you want them to or not.

                 Yeah Champ, That’s The Ticket To Trading Success!!

Rinse and repeat; sooner or later there is no more money.

                        Anybody Can Manage Winning Positions

I remember it well, those 10 days in January [a long time ago] when the S&P 500 futures did nothing but go straight up. I was managing a little over $12 million and the phone calls from people in my funds were coming fast and furious.

“Do something!!”

For 10 solid days, the stock market went straight up, with no corrective action that generated a buy signal for me to initiate a long position. I simply stood there and did nothing.

“He’s crazy.” “He’s lost it.” “The guy has no clue” “Doooooo something!!”

When it did finally correct, it went down and took out 2 weeks of price action in 30 minutes. Needless to say, the phones stopped ringing.

When you know something is the right thing to do, you don’t waver from your trading principles. You don’t buy and sell just because it is something to do. I’m not here for anything other than making money. I have seen too many people trade for other reasons than money. Not here, not me.

Now, I am not so presumptuous to suggest or imply that my way is the only way. Goldman Sachs, JP Morgan, and many other successful traders have their trading algorithms that make them winners as well. Thing is, I don’t see them offering you a place on their team.

In the land of the blind, the man with one eye is KING.

Today’s Action & Wrap Up

We started the day already seeing a bloodbath in the Asian session. What have I preached about stops? Gold went down $15 in about 5 seconds last night taking stops to the proverbial woodshed.

Starting around 6:25 AM [Chicago time], and lasting until 7:00 AM [Chicago time] the algorithm played the “DIP’s” game, darting slightly over and then slightly under the market giving a “sell signal”. Depending on what you did, most probably got short between 1680 and 1681.

However, a clear sell signal came 5 minutes later at 7:05 AM [Chicago time] at between 1679 and 1678. For purposes of recording the algo’s performance, I’m going with 1678, just to frustrate Skeptic Cat and his crowd.

A couple of bars later, the algo appeared to give a bottom; however, as I state in the manual, I’m looking for confirmation after an extended time period or price run. I don’t consider 15 minutes or 4 dollars an extended run for either. If you took profits there, then fine. You had about a $3 - $5 / oz profit.

As the market dived to the 1662 level, I lowered my stop to 1669. I was willing to let the market play games down here, but not willing to let good profits slip away. Twenty minutes later they stopped me out near the recovery high. Ask me if I care about the fill?

Short at 1678 and out at 1669, for a profit on the day of $ 9.00 / oz.

Ka-Chinggggggggggggggg [Again]

Have a good day everyone.

-vegas