Nov 15th 2019, Silver Chartbook: Betting against consensus

Betting against consensus

Mother Theresa was once asked, if she’d be joining a demonstration against war. She refused and stated, that she gladly would follow a rally that would be for peace. This based on the underlying principle, that being against something weakens us while being for something strengthens us. Typically, market play guiding principles do not align with intuitive behavior like that. Price reflecting the public’s opinion means for the investor only having an edge if betting against consensus. As much as rewards can be huge (high risk reward ratios), this results in often being wrong. Consequently one of the most important traits of a speculator is handling failure well. Something most of us do not get taught in our early upbringing. It is imperative to bet against consensus. The only true edge!

Monthly chart, silver/US Dollar 11/13/2019, “negative consensus” :

Silver in US Dollar, monthly chart as of November 13th 2019 b

The monthly chart above shows monthly consensus to be negative. Twice higher price levels got strongly rejected.

Gold, monthly chart, 11/14/2019, “trend intact”:

Gold in US Dollar, monthly chart as of November 13th 2019

Looking beyond the obvious, in this case to the sector leader gold, presents a more optimistic view. We only enjoyed two legs up yet (a,c) on the monthly time frame. Very modest retracements (b,d) indicate strength in the trend and assume a continuation.

Silver in US-Dollar, Betting against consensus, November 13th 2019, weekly chart, “sideways to down”:

Silver in US Dollar, weekly chart as of November 13th 2019

Dropping down a time frame to the weekly chart shows a sideways market at best. Again following emotions and instinct here, one most likely would feel hesitant if not bearish.

Betting against consensus, silver in US-Dollar monthly chart, November 13th 2019, “truth revealed”:

Silver in US Dollar, monthly chart as of November 13th 2019

By removing oneself from a crowd viewing perspective to the larger picture and its potential, opportunity might reveal itself in a vastly different manner. The silver market, while potentially building a substantial double-bottom, offers a significant risk reward ratio. Opportunity like this doesn’t come around often and as illustrated in the chart, this based on very acceptable risk for the long term speculator. We post entries and exits to such principle based trades live in our telegram channel. You can also find other principles like these in our glossary.

Typical human reactions to the basic human need of feeling certain and being right, is looking to the left and to the right of how others handle a situation. With market play stepping away from such intuitive behavior and rather creatively measuring opportunity versus risk costs in looking at the market from various angels pays the better dividend. As a contrarian one needs to live with setbacks and the acceptance of being wrong with ones opinion more often than not. When fading the crowd succeeds though, the rewards can be more than plentiful.

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About the Author: Korbinian Koller

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.