ASYMMETRIC TRADING

“I’m really good at cipherin’ too!”

“Sure, I know how to trade, I spent last night at a Holiday Inn Express … how hard can it be”? Well, if you’re a complete doofus putz like me, and put the wrong order in to start the day, it’s got potential to be rough; long story short, an early USDJPY trade became a EURJPY trade, and promptly went south. A gold trade later at the RM=1 exhaustion line erased most of the mistake trade; if I could read an order box … well, you know the rest … this is the kind of trading day [Friday no less], where a lot of things can go wrong quickly … I don’t really care about the $20 something bucks I dropped for us today collectively … really, for me this is mostly a “scratch” day that doesn’t mean anything other than getting you late to your millionaire party by a day … what is grating on me like sandpaper are 2 things; 1) stupid poo poo that infuriates me to know end [like this morning], and 2) accepting market risk in extremely thin market conditions commensurate with reward [as in, “there ain’t much”].

I’ve said this before, but it bears repeating; “When Asia bids it higher along with Europe, New York is going to go down at some point later in the day; when Asia sells it off overnight, and Europe does not bring it back up, look for New York to put in a good rally at some point; and when Asia & Europe do nothing and HVALUES ARE PUNY … well, anything can happen”. This is very much a market where “waiting” for the downdrafts [to get long] is preferable to about anything you can name; and if you get near the high of the day, being short with a stop will be an adventure you might not ever forget.

In case you’re wondering why I have traded very light this week, in terms of volume size of a trade versus capital, it’s for this very reason; especially in gold, the market can turn on a dime, and go very fast in the other direction. If you get caught with size, the dealers will kill you; and really, USDJPY isn’t much different. It would really help, though, if New York trading ranges were consistently higher than what we are seeing now; even with the “sell grenade” that took us down to the 1253 level earlier today, for the rest of the day you’re looking at a $5 range basically, which isn’t very good, certainly when taken in context with going down $5 in 5 M1 candlesticks and then followed by the Friday cricket parade.

I’d love to “position scale” gold, but the ranges we see make it almost impossible; for example, if I get long at 1253, and another at 1256, and another at 1259, if the market could move up into the 1260’s it would be a huge profit with little risk. However, look at today; during the “blitzkrieg” lower on the USDJPY “rip your face off” rally, I'd be forced to sell into a falling market my entire position; who knows where my fills will be in this mess at 3 times the size. There simply needs to be better intraday volatility in the New York session before I do this [$10 - $15]; something we aren’t seeing right now for sure. [But don’t worry, there will come a day.]

What I mean in today’s title by “asymmetric trading” [besides it goes down a hell of a lot faster than it goes up], is the shape of the M1’s; what we are seeing with increasing frequency is either bat excrement volatile M1’s that spike [up/down makes no difference] $2 - $6 in less than a few seconds, and M1’s that have a range of about 30 – 40 cents; in other words, the “barbell” chart, and what I’ve been saying for a while now, which is “speed of light trading” & crickets with almost nothing in between. I have no idea what “normal” trade flow is anymore with gold, cuz right now it’s everywhere & nowhere with your stop at risk.

And as today’s trading proves with that $8 dive in 37 minutes, nothing is safe in this market; and worse, if you got caught in that, where is the “give & take” in the market for you to get it back? Well, the LP isn’t going to give you the chance; and if you decided to liquidate during one of the downdrafts, your fill is on the bottom waiting for you. Which is why, anytime this stuff gets within a few dollars of the high or low of the day, you have to be extremely careful about being on the wrong side of this hand grenade or the loss has the potential to be a lot bigger than you would want.

 

Over the weekend I’ll have a special blog update on Sunday night; I’ll detail the changes [and why] I’m making with the algorithm to deal with the “barbell” markets we are witnessing on a daily basis. PAMM/MAM spreadsheet will be up and current tomorrow; tonight I’m upgrading the Excel spreadsheet software. “And yes, I’ll have ‘Post It’ notes plastered all over my screen Monday morning reminding me to trade the right market; right along with the ID draped around my neck with string that says ‘return to the Mrs. if he appears lost’. I'd go have a drink, but I'm afraid I might drown myself ... it's not easy being me”. I'm so outta here.

Have a great weekend everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!

 
 

DECIPHERING WHICH WAY THE WIND BLOWS

NOBODY “CIPHERS” BETTER THAN JETHRO

Gold has/is/always will be one of those markets where one day you swear there will never be another down tick [let alone a move lower], and literally hours later you swear there will never be another uptick. It’s tricky business “ciphering on the fly”, and more often than not, your brain, guts, or both will get you into serious trouble in this market.

Which brings me to the daily white horizontal line we calculate every day when we turn our computers on to trade [see the manual for calculation, which you can view or download for free in the “Download Links” section of the website over in the right hand column]; it’s there for a reason, and that reason is to place a “price point” as our “line in the sand” on the M1 candlestick chart for determining which way the bullish/bearish wind is blowing at the moment. Above the horizontal white line has bullish implications, and below the white line has bearish price implications; more importantly, above the white line has a different set of algorithm rules for buying than when price is below the white line. These rules validate the first priority of the algorithm, which is to keep your donkey out of trouble and totally prevent large losses.

Ok, so today we come in and gold has been drifting lower all night; my calculation for the white line as I start the day is 1346.37, and it doesn’t take long for the low of the day to get taken out and the daily range expanded. Directly below is the trade of the day, as the market moves down to the exhaustion line for a buy signal shortly after the 15:00 cash open in New York.

  

[Note: click mouse on chart once to enlarge]

Now, since we are below the white line in price, we have to use the subsequent short covering rally after the retail stop hunt to liquidate; at this point we can’t hang on because at the moment market momentum is not on our side. Overall, we make about $2 per Oz. on the trade.

Now, there are 2 things here you need to pay attention to, as I have said this before; 1) moves in Asia and Europe are reversed in New York the majority of the time, and 2) after gold moves down from a starting point of around $10 or greater, usually the majority of the time price puts in a “double bottom” on the M1 candlestick chart before trapping shorts and going higher in any significant way.

Well, gold did both of these things today. Now, please don’t misunderstand and think I’m telling you double bottoms are buy signals; from the algorithm manual there is no scenario for initiating a long position from a double bottom; what I am sharing with you here are observations honed from almost 40 years of trading! [Don’t worry, I’m young at heart and got 40 more years of pulling money out of markets like it’s my own personal ATM; especially gold.] Throw in the fact that the plum line had been under the yellow for about 2 hours and 20 minutes right after the double bottom, and you got yourself a recipe for shorts to hit the panic button [which they did, culminating in a price move to the upper exhaustion lines right around the white horizontal daily line]. Directly below is the start of this phenomenon.

 

So, Newbies out there might be thinking, “so how come we don’t buy these?” Short Answer: the probabilities of success over the long run aren’t high enough for me to justify the risk. The reason? There is no such thing as a triple bottom, and if the double bottom fails, your stop gets run like hell and losses may be a lot higher than you planned.

Now, before I finish for the week and hit the beach [and man, is this a Chamber of Commerce day down here in Paradise or what?] I want to leave you with something to think about over the weekend; who among you reading this would have liked to have bought gold 30 years ago when it was about $250 per Oz. and are still owning it now at roughly $1340? Let me see a show of hands for those who say no; “hmmm, I’m looking at the 6 billion people in the world over the internet and funny, I don’t see any hands in the air.”

Ok, 30 years = about 7,200 trading days, and gold has appreciated about $1090 per Oz. during that time. That works out to an appreciation of approximately 15.14 cents per Oz. per business trading day! Remember, this is 1X leverage; you went down to that coin shop in town and bought some 1 Oz. Maple Leafs [or something similar] and paid full price for it, so you have no leverage here.

Now, day in and day out, gold presents buying opportunities for profit; the reason I and our PAMM [which will start very soon by the way] only trades from the long side, is the fact that it is very difficult to make money from the short side even in bear markets. Why? The short squeezes are fast, nasty, and to put it bluntly pure murder. In other words, you have to be the “perfect trader” to make consistent money on the short side of gold, and make no mistake, there are no “perfect traders” anywhere to be found.

So, you are one of the lucky ones who bought gold back-in-the-day and still own it; and your appreciation is about $0.16 per OZ. over the long run. The volatility gold algorithm will on average over 95% of the time [based on historical research] capture AT LEAST $1 - $3 per Oz. at 10X leverage; that’s equivalent to you buying your Maple Leaf and getting $10 - $30 per day, not the $0.16 per day you find amazing.

Now, if life prevents you from trading the algorithm on your own, I of course, have the solution; even taking away my 17% incentive fee on PAMM profits, the PAMM has an extremely high probability of returning to you 100 TIMES YOUR MONEY VERSUS PHYSICAL OWNERSHIP.

Don’t misunderstand, I’m not advocating for anybody to get rid of physical gold or stop from buying more. But if you think somehow that gold is going to be the “medium of exchange” when SHTF and the world collapses I got 2 big news flashes for you: 1) never underestimate government’s ability to change the rules, and 2) there isn’t enough gold in the world to even come close to using it as money, and I mean you’re looking at a physical deficit of at least 100 to 1 to fiat.

So, what that means is that gold is a commodity and will be priced in Dollars far into the foreseeable future, and right now, and most likely next year and the ones after that, the only way you can eat and live is to spend Dollars, not grams of gold. Last time I checked, Albertson’s wouldn’t take a 1/10^th ounce gold coin [valued at about $134] for payment of some groceries at the checkout; nope, they wanted Dollars.

I’ll have more details on our LMFX PAMM next week; all the “nitty gritty” details potential investor clients want to know. So, if you can’t trade yourself because you’re still stuck in the “Pudding Business” and want to change your financial life for the better, consider joining the PAMM.

Ok, I’m outta here; the waves await!

Have a great weekend everybody!

-vegas

OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

OUR LMFX GOLD TRADING PAMM WILL BE READY AS SOON AS LMFX GETS THROUGH WITH UPGRADES TO ITS PAMM SOFTWARE! WE ARE VERY CLOSE; OPEN YOUR LIVE TRADING ACCOUNT TODAY, FUND IT, AND BE READY TO PARTICIPATE!