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An amateur starts a thread

chompdown

Hello all. I am starting a thread here which will most likely end in a balance of zero, but I want to give it a go and see how it works out.

I will start with a balance of 1,000 and my spread betting positions will all be with a common theme of stock markets & commodities rising, and the dollar dropping.

I receive guidance on trades from a very successful traders club I am a member of.

The biggest killer of any amateur trader is a lack of discipline, and I am certainly guilty of that. Using boards.ie as a way to track my progress has been a great way to curb my over-enthusiasm on the gambling forum, so I will try it here also. Some basic rules for me to follow:

Starting balance July 2016: 1,000
Additional deposits: Max 500 per month thereafter
Markets: strictly limited to the S&P, Dollar index, Gold, Silver, Oil.
Positions: Strictly limited to one at a time.
Limits: my first position will be in the dollar index and my max stake is 1 point per 1,000. Other limits to follow.
Trades: Absolutely no day trading allowed. Buy and hold until I am advised to sell.
Long/Short: If I am long and advised to close a position as it is about to turn, I will simply close the position rather than be greedy and attempt to short it.

I receive guidance on trades from a very successful traders club I am a member of.

These positions are 'old turkey' which means I want to hold them longer term. I am sticking to markets with no funding charges.

I will post balance updates to this thread, and comment on any thoughts / challenges I have.

This thread is an exercise to attempt to improve my self discipline.

If my balance ever reaches 5,000 I may alter the rules slightly, but not before then!

I will have no stops in place

I will probably place my first this week!

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chompdown

Is that the bounce in the dollar done? A beautiful reversal today, and the icing on the cake was my second and final stink bid in the Dollar was filled almost at the high of the day.

I am not going any deeper here even I have 13 extra points to work with if gold gets oversold (I doubt it will though)

My balance has swung by about 800€ already today which indicates I am still too overleveraged.

chompdown

Indeed it does like the dollar bounce is done! After the worst January in 30 years, the dollar had a good little run from the start of Feb, but surely after that reversal yesterday there will be another leg down now. I managed to avoid most of that Feb rally and I am fully short as it hopefully will move down gradually until this new cycle ends around late March. Targeting 95-96 area

Gold never made it down to oversold on the 5 day RSI so on this occassion my impatience was rewarded. At that 1240 resistance zone now.

There are always good and bad days in this game, and this is certainly a good day!

chompdown

A bit of a turnaround for the Dollar (and gold) on Friday means I end the week with a lower profit than expected.

The most interesting thing to see during the week was the reaction in the market to the high inflation number. Year on year inflation in the US hit 2.5%. Historically, a higher inflation number than expected would cause the currency to drop, but not recently with the Dollar. The reason being that traders see that as fuel for rate rises, but on this occasion the dollar sold off on those numbers. Maybe there was other news that I missed... that was a pleasant surprise for me!

Are traders starting to understand that the Fed's hands are tied and they will not increase rates fast enough to keep pace with increasing inflation numbers? That should be very good for gold and bad for the dollar. And that is good news for me!

The only worry I have for next week is that Gold may still have to take a trip down to oversold levels. Not too worry though as I have a pretty good buffer to ride any trips south.

Sentiment is so low for the Euro now also. Everywhere I look people are talking about how doomed it is, but I don't agree. The time to buy is when sentiment is low. Speaking of which, does anyone here use sentimentrader.com?

Anyway, here are my numbers for this week. My balance is the highest it has ever been, and I still have that 500€ ready to add (and lose!) if I am feeling generous.

End of week update
Position 1: Long Gold 37€ @ 1227.2
Position 2: Short USD 0.8€ @ 100.688

Current balance: €5159
Total deposits: €4685

Total P/L: €474 / 10.1%

For ever odd

A nice candle on the daily gold (possibly a 'dragonfly doji'), might see a bit of action in the next few days as direction is usually decided soon after.

chompdown

Indeed. Gold has remained relatively strong considering the strength in the dollar these last few days. Still knocking on the door of 1240. Dovish FOMC minutes would help! It didn't get oversold and that should have happened or be happening around now so I'm not feeling too confident.

chompdown

Another very nice day yesterday where Gold got through that resitance at 1240 and now this morning some follow through to get it above 1250. It's looking like Gold will have 8 up weeks out of the last 9, and nobody is really talking about it yet. Silver will be 9/9.

Bullish sentiment is not yet near the level where I will be reducing my position size, and it looks as though the drop pre FOMC minutes was as close to the cycle low that was going to happen. (the miners just about touched oversold on the 5 day RSI). So this should now be the start of the next leg up towards 1300.

The dollar is still hanging in there with a 100 handle (100.96 as I type) but there is talk that it is forming a head and shoulders on the daily chart. Hopefully it is! Very much looking forwqard to my end of week update of the numbers. If there's no major reversal of yesterdays moves I will be sitting pretty

For ever odd

Indeed. It's a Friday, can only imagine peeps will take profits around the s2 or a bit lower if neckline is broken. Conversely r3(weekly) on gold.

chompdown

Starting with this week's update

End of week update
Position 1: Long Gold 37€ @ 1227.2
Position 2: Short USD 0.8€ @ 100.688

Current balance: €5798
Total deposits: €4685

Total P/L: €1113 / 23.8%

The steady march upwards is continuing after another weekly gain for gold. The dollar was actually up this week, but I still managed to post a gain of €639 which indicates the strength of this gold rally. My margin rate is currently 1494%

According to the "guru" we are now just starting the next short term cycle for gold and it should gradually rise over the next 2-4 weeks. The first bit of resistance for gold will be a battle to get above and stay above the 200 moving average. Silver is already there.

The mining companies were actually down over the last few days despite gold's rise and there is debate whether that is an indicator of one of those big gold drops being around the corner. It remains to be seen if that car crash will happen for me. I will be in the car anyway!

A significant drop in the dollar would be more than welcome next week. It was showing some strength yesterday after reversing and closing at the high of the day. There is a little uptrend on the daily chart that is still in place and I will be watching next week to see if it break down below and out of that.

For ever odd

Good stuff.

Maybe no harm to introduce the old idiom 'Hope for the best prepare for the worst' into the trade plan.
A few safeguards in case of a car crash or indeed a rocket in your favour.

It's very hard to make a rational decision in the heat of the moment. Trust me on this one.

chompdown

Thanks odd. Wise words for sure. Heat of the moment stuff is absolutely where I fear messing everything up. I don't particularly like the idea of tight stops though and I am just following the guy. He is not a day trader. I am happy to ride down days, but those old sharp drops are the real killers when on leverage like I am.

When he sells I will sell. He has actually dialled back his positions a little so I will do the same (dollar position at 0.8€ is right at my limit now)

For ever odd

chompdown wrote: »

Thanks odd. Wise words for sure. Heat of the moment stuff is absolutely where I fear messing everything up. I don't particularly like the idea of tight stops though and I am just following the guy. He is not a day trader. I am happy to ride down days, but those old sharp drops are the real killers when on leverage like I am.

When he sells I will sell. He has actually dialled back his positions a little so I will do the same (dollar position at 0.8€ is right at my limit now)

Define - 'tight stops'.

why don't you like them?

http://www.financemagnates.com/trading-room/education-centre-2/day-trading-101-tight-stops-wide-stops-which-one-should-i-use/

chompdown

That's a great question and I'm glad you asked as it will give me a chance to write this down. The first thing I will say is that this is all this is assumming gold is in a secular bull market. That's the very heart of this whole experiment. If it's not in a bull market, I am going to end with €0.

I think the only way to lose money in a bull market is by being over leveraged and by having tight stops. Let me concentrate on the stops here.

Most amateur traders will only buy breakouts. They will look at charts and buy when everyone else is buying. Their emotions will only let them buy when the market is moving up. In my defence, I am actually not guilty of this too much. I feel like I am a contrarian at heart and can buy dips, when sentiment is low.

Anyway... so they buy breakouts with tight stops in place. Then when the market corrects and breaks below support levels they get stopped out. As it's a bull market, price will then recover, breakout again and the amateur re-enters at this point with another tight stop in place.

Rince and repeat this all the way through the bull market and the amateur has found a way to lose money while being long in a bull market, i.e. by buying breakouts and getting stopped out during the inevitable short term correction.

So what is a tight stop - I don't really know! I believe that the bull market in gold started in January 2016. I believe every long trade of gold from January 2016 will be a winning trade as long as it is held through the course of this this secular bull market, even those summer highs from last year and the spike on US election night.

Now that doesnt mean there should be no stops in place at all and that profits cannot be taken.

For instance after I got wiped out in this thread last year, gold continued to drop for the rest of the year. The guru held during the first two months of that drop with no stops in place (September and October). There was a mini correction upwards but gold failed to break out above 1275 so at that point he sold and then re-entered in January this year.

So, in this instance he held through a drop from a mid summer high of around 1380 to the point he sold at around 1265. So I could then deduce in an extremely amateur way that anything less than 100$ is a tight stop!

So in summary, I will certainly be taking profits, but won't have tight stops in place. I am still highly leveraged so I am hoping (hope is a good strategy!) that I will have enough in my bank to ride those inevitable corrections and let the bull market do its thing.

For ever odd

If you truly believe that, then long dated options might be a better choice for you.

http://www.investopedia.com/articles/active-trading/052014/how-buy-gold-options.asp

chompdown

Yes, good shout. I like spread betting as it is tax free but yes it means I have to survive every big drop. I will have to look into these. Thanks again.

I read the article you linked to above... The final paragraph is particularly pertinent

Last but not least for you traders “who don’t believe in stops: or use “mental stops” – as a broker who has been in the business and observed many traders, 99.9% of those traders who do not use stops or use mental stops sooner or later simply blow up on that one crazy day….

You may escape many losses on the range bound days but that one day where you do not place a stop and the market keeps going against you in a strong trend, may be the one day where you lost all of your account.

The sad truth is that this will likely happen to me (again!). The only way I will avoid it is if (1) I have timed the bottom, (2) don't over trade (3) never increase my leverage as the balance increases - the rate of leverage should decrease, and (4) if this is actually a secular bull market.

If I can somehow manage to avoid the first big drop, get an opportunity to lower my average price and ride it back up, then I will start to feel confident that I can survive this.

There is a lot happening next week so I am looking forward to being in the front seat of the rollercoaster again.

chompdown

I will start this week by reducing my gold position down to €30 per point (from €36). That weakness in the miners is a bit concerning so I will be keeping a close eye on it.

Not too comfortable holding the full stake in the Dollar short for this long but it has yet to really move down to oversold and I would like to wait until it gets closer to those levels.

A lot going on this week so a little less leverage seems appropriate!

chompdown

I have taken profits on that €7 worth of Gold long positions as planned (stake was €37, not €36 as stated above)

Updated positions:

Position 1: Long Gold 30€ @ 1226.1
Position 2: Short USD 0.8€ @ 100.688

chompdown

"Sooner rather than later means in the near future"

This is what moves markets now!

They are the wise words of the Dallas Fed president Kaplan. A lovely move down in the dollar and up in gold this morning after terrible housing numbers but then this guy comes out to continue the dog and pony show that is the Federal Reserve and a complete reversal ensues.

I can accept reversals if it's based on hard data but this kind of stuff is terrible. It was Fischer last time and now we see the same happening again.

chompdown

Ok so a little update. The guy moved out of the leveraged miner ETFs on Friday, so I lowered my stake in Gold from 37 to 30.

Yesterday, quite early in the decline, he went completely to cash so I reduced further down to 22. I was slow to do this as I found it mentally hard to sell after seeing v nice moves earlier in the day but glad I eventually saw sense and moved it down.

The miners were absolutely hammered by the end of the day but Gold held up surprisingly well.

Sentiment, at least in the miners, should be extremely low now and it remains to be seen if that was a little tactic of the big players to increase their positions in the mining stocks. A lot of stops would have been hit yesterday.

The next step is to sit and wait for a potential full re-entry into Gold when it looks like the bottom has formed.

I would love to short the Dow here but it is just way too dangerous!

chompdown

It's been nagging at me for a while but now I can see a bit more clearer that there is a battle going on between Talk and Data. Yesterday, a series of comments (talk) from Fed board members about interest rate hikes this month battered gold and gave a big boost to the dollar. I think every major down day I have experienced has been directly related to comments from a Fed official.

Unfortunately I had just re-entered my gold position as it has recovered very nicely already by the afternoon. But I was too early as the Fed speak meant that I had re-entered almost at the high of the day.

More talk from Trump last night about his plans but still no concrete information about what exactly is coming and the stock market is booming again today. I thought that was all surely priced in already. When it appears the SM cannot go down, it's making gold a lot less attractive.

Then today we get actual economic data - actual facts - and these are almost all negative for the US economy, and the dollar is giving back some of its gains.

I am still shocked that the market pays such attention to the Fed officials - they have such a massive effect on the market. I still belive that they will lose credibility, hopefully starting this month when they do not raise rates. I suspect, hoever, that the dog and pony show will start again right after that, and they will continue to move markets with their vague statements.

All that said, I am really enjoying this rollercoaster ride!

For ever odd

Your guy moved to cash on Monday ( I assume this means he closed his positions), are you in cash? What the Fed or Trump says, matters little, if you are going to sell when he sells and buy when he buys.

No disrespect intended, It's a discipline issue.

chompdown

For ever odd wrote: »

Your guy moved to cash on Monday ( I assume this means he closed his positions), are you in cash? What the Fed or Trump says, matters little, if you are going to sell when he sells and buy when he buys.

No disrespect intended, It's a discipline issue.

Hey odd, yeah he sold out of the 3x leverage miners on Monday as they started their decline. Then on Tuesday as Gold and the miners recovered, he made the decision to buy back in so I did too. Gold turned back down shortly after that so he was wrong on this occasion.

Good is actually hanging in there fine above 1240 which seems the new support level - it's the strength in the dollar that is hurting my balance.

Anyway that is the name of the game, slow rise and fast drop. I was just really hoping to avoid this first one but not to be.

For ever odd

Ah yeah, we all get it wrong sometimes.

chompdown

That's the end of a very interesting week. It was a week where my account balance started with a 6,5,4 and 3.

So after starting the week with a lower stake in Gold, it fell on Monday and I reduced further in anticipation of a further drop. Unfortunately there was a suckers' rally on Tuesday in which I was the sucker. My guy bought back in believing the big sell off on Monday was just a run at stops in the mining stocks.

Right after buying in, with a balance around €6k, gold and the dollar went against me all the way until today. A massive turnaround after Yellen spoke today which saved me from a closing balance starting with 3.

I timed the exit very well, but that rally sucked me back in and spat me out!

I actually didn't understand why the dollar dropped so much even though the Fed rate hike odds actually increased. And it was a big sell off. Perhaps a buy the rumour sell the news scenario, but if anyone here can shed some light on it, it would be appreciated!

I took that chance to take some losses and reel in my gold position a little.

A messy week!

End of week update:

Current balance: €4683
Total deposits: €4685

Total P/L: €-2 / 0%
Position 1: Long Gold 30€ @ 1233.2
Position 2: Short USD 0.8€ @ 100.688

Margin rate: 1353%

For ever odd

The Fed had given a "fairly soon" statement, and removed talk of "data dependant". As you noted Fed officials came out during the week promoting a hike at the next meeting.
The markets then aggressively priced in a hike after Trumps speech. Yellen then spoke yesterday but introduced her get out jail card... a rate increase at next meeting "would likely be appropriate" if Fed determines that data on employment and inflation are continuing to move in line with expectations.... so instead of a clear signal, she has hinted that they have not in fact decided to raise.
This means the NFP on Friday comes into play, and big money does not like uncertainty.

That's my take on it anyhow. I'm sure there are other reasons, but that's what I'm going with.

Now, I wonder what the last 20 March NFP figures look like.

dasdog

"...generally envision that economic activity will expand at a moderate pace in coming years."

First speech I've seen in a while and aside from being hidesouly dull when the long term was referenced the herd seemed to move. I'd wait like slow breathing, low heart beat sniper for the job numbers.

dealhunter1985

Curious as to why there was so little reaction by U.S stocks on the back of Yellen guiding a hike in March ? In the past , a sell off would usually follow ?

chompdown

For ever odd wrote: »

Yellen then spoke yesterday but introduced her get out jail card... a rate increase at next meeting "would likely be appropriate" if Fed determines that data on employment and inflation are continuing to move in line with expectations.... so instead of a clear signal, she has hinted that they have not in fact decided to raise.
This means the NFP on Friday comes into play, and big money does not like uncertainty.

But the odds on a rate hike shortened after her speech and now the market has basically fully priced in the rate hike. Very strange reaction with the dollar falling so much. Perhaps there were longer term comments that I didn't spot but it seemed like she was suggesting more. Anyway, if you check the price of gold after the last two hikes there was a big jump. I'm not complaining

BrokenArrows

Its not been a good few days for your gold position.

chompdown

Yep, a steady decline since the market reopened on Sunday night. I was hoping to avoid this longer term cycle low but it looks like I will have to ride it down without trading in and out.

I have plenty in the tank after the nice rise since January so I don't expect too much pain. Gold is clearly in a trend downwards now and I'm just waiting for the spark to send it higher again. It rose after the last two rate hikes so perhaps it will do the same again this time.

A bad jobs number on Friday (which I don't expect) could cause a lot of grief for those shorting gold right now.

iainBB

chompdown wrote: »

Yep, a steady decline since the market reopened on Sunday night. I was hoping to avoid this longer term cycle low but it looks like I will have to ride it down without trading in and out.

I have plenty in the tank after the nice rise since January so I don't expect too much pain. Gold is clearly in a trend downwards now and I'm just waiting for the spark to send it higher again. It rose after the last two rate hikes so perhaps it will do the same again this time.

A bad jobs number on Friday (which I don't expect) could cause a lot of grief for those shorting gold right now.

Ya expecting gold and miner's to rebound after rate hike