Oct 11th 2019, Silver Chartbook

Reload me

To take advantage of a directional edge the most common methodology is pyramiding. In its purest form, it is added trades to a core position as breakout trades, one counting on the directional edge. The goal here is a “home run” trade that is large in size and can create a huge profit. From a risk perspective this is far from ideal. In principle the steeper the move the likelier the pyramid breakouts work out. These steeper moves occurring most often late in the trend, that is where also the to be expected retracement is the largest. That is equaling highest risk. Therefore, one can often hold the bag by having a huge position going against oneself. However, a more elegant approach would be Reload me.

We recently shared two trades in our telegram channel that are relevant to this approach :

60 minute chart, silver/US Dollar 10/02/2019, “reloaded” :

Silver in US-Dollar, 60 minute chart as of Oct 2nd, 2019

Silver in US-Dollar, 60 minute chart as of Oct 2nd, 2019

On the 1st of October we had a very low risk opportunity on a smaller time frame to participate in the silver market, as shown in the above 60 minute chart. We instantly took half of the position off for securing profits and eliminating risk. Twenty four hours later our next target was reached and we again took some money of the table.

Reload me, Silver, daily chart, 10/07/2019, “reloaded, again”:

Silver in US-Dollar, 15 minute chart as of Oct 7th, 2019

Silver in US-Dollar, 15 minute chart as of Oct 7th, 2019

On October 7th, another lower time frame opportunity was taken advantage of. Similarly, we did not give risk much of a chance and as soon as small profits offered themselves, we cut the position in half. This is what we would call an income producing trade.

But that is not all. These trades are taken in a larger context and in a principle based top down approach manner. They do not only provide additional profits towards the larger time frame trades but take advantage of the overall trend condition. That is to say they grow the size exposure through our quad exit strategy by holding on to the runners (last 25% of a position). In other words they hip pocket themselves to the overall long term hold.

Silver in US Dollar – October 8th 2019, daily chart, “how to grow with low risk”:

Silver in US-Dollar, daily chart as of Oct 8th, 2019

Silver in US-Dollar, daily chart as of Oct 8th, 2019

Let us try to simplify the underlying principles of the reload approach. with the daily chart above! The various green arrow up points are actual trades taken in the recent past:

  • White lines show the initial risk reduction by quickly taking profits and reducing exposure by half . Additionally at that point stop levels for the remainder positions are set to break even entry levels.
  • After the green arrow up purchase point an up leg in price develops, represented by the yellow arrow up line marked “A”.
  • A retracement follows, marked with a yellow arrow down line, “B”.
  • A new entry follows.

The idea here is to take advantage of the directional edge. No one knows how long a trend persists. Where a statistical edge presides, is in the likelihood that after a retracement, at least a small bounce might occur. This is based on the action/reaction principle. This edge carries enough value to initiate a trade with a higher likelihood of providing an initial profit (white lines).

Now you can see the profits on that first part of the trade aren’t staggering (dollar numbers in white font). The remainder position is a free ride to possibly catch a large move. It can be managed in all sort of ways from a money management point of view, to extend its initial profit expectations by far (if you take like we have, 15 minute or sixty minute setup entries but have the possibility to transfer the runners from the quad exits to weekly or monthly time frames, you end up with phenomenal risk reward ratios on these trades).

Reload me:

While with pyramiding you easily risk the farm when you are wrong, the reload strategy has a vastly different risk profile. Due to the fact that reloads are in their risk profile and psychology stand alone trades, they are truly conservative. In short, they allow the market to dictate if the trader is right or wrong with his/her directional assessment. And this without a heavy price to pay, should the investor be wrong. In addition one is not as limited from a money management perspective and strategy for exit points. The initial conservative profit taking allows for a much more aggressive management of the remainder of the exposed capital within each reload.

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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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