May 4th 2019, Silver Chartbook

What not to do

When reading weekly publications in the finance sector one mainly stumbles upon opinions. What to buy, when to buy, and reasons on why these recommendations make sense. A very important factor in  trading and investing is to know what not to do. You might hear a phrase like “cash is king”, or “let your winners run”, but are rarely illuminated by underlying principles that would support such statements on how to truly act. What not to do could be the headline to a long list of things market participants should avoid. We want to point out one topic that would rank high on such a list.

A week ago we had a silver long entry signal filled that we had anticipated and planed on April 13th, quite a while earlier, in our chartbook release at that time.

 Zone A silver entry on small exposure size:

Silver in US-Dollar, daily chart as of April 26th, 2019

Silver in US-Dollar, daily chart as of April 26th, 2019

This trade quickly moved into our favor and we took half of the position size off and raised the stop to breakeven.

On May 1st 2019 the other half stopped out at entry levels.

Small profits on weekly silver trade attempt :

Silver in US-Dollar, daily chart as of May 1st, 2019

Silver in US-Dollar, daily chart as of May 1st, 2019

On the same day where we got stopped out on our first attempt to catch a weekly silver turning point, we got filled long for the Zone B entry. This trade was planed three weeks ago and executed on a full position size.

Silver Zone B entry on May 1st 2019 :

Silver in US-Dollar, daily chart as of May 2nd, 2019

Silver in US-Dollar, daily chart as of May 2nd, 2019

Shortly thereafter initial profits were taken for a two percent return on half of the position. The stop was raised for the remainder exposed capital to entry levels.

You can find these real time entries and exits in our Telegram channel.

Low risk due to anticipated quick reversal and aggressive entries and profit taking:

Silver in US-Dollar, daily chart as of May 3rd, 2019

Silver in US-Dollar, daily chart as of May 3rd, 2019

Here is the important fact to take away from these two long entries.

  • Both trades were planed way in advance.
  • The trades were independent with individual reasoning and edges.
  • Each position size was calculated based on risk reward ratio factors. Sensible money management based on these risk reward factors was applied.
  • Both trades were executed with utmost discipline as planed.
  • Zone  A trade was closed out before Zone B trade was entered.

In short these trades are unrelated and the Zone B trade could just as well have been triggered weeks later or not at all.

We point this out since at first glance it could be interpreted to be a martingale strategy approach (averaging down). We strongly belief that only Anti-Martingale strategies are to be used for viable systems. So when we spoke of what not to do, we were referring to not use a Martingale strategy approach. These trades are very emotionally and in a loss scenario very hard to recover from. Furthermore they can be severely damaging to the psychology of an investor’s or trader´s mind. They also do not provide a solid mathematical edge to rely on for consistent returns in the markets.

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About the Author:

Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent.Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.

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