Oct 31st 2019, Silver Chartbook

Be right or be rich

That is the question. Most predicting publications in the money market niche sound something like this: “The trend most likely continues, or prices might go sideways, possibly decline”. Prices can’t do much else than go up, sideways or down. Predictions conveniently put like this are always followed up with another publication stating:”we were right, …”. How much use is that to the reader? The need for being right is quite a strong one though. Each investor tries to make sense out of the market. You see a vast array of social media where people discuss why prices behaved in the past the way they did. Nobody will ever know why a technical triangle formation broke up or down. In principle literally a single trader might have made the difference to these opposite outcomes. And still there is endless debates about who is right and why. Be right or be rich.

As humans we simply have no true sense for thinking in probabilities, thinking in a group of events versus individual occurrences. This is the only meaningful way to perceive the markets since individual trades are merely random. Trying to find reason within one trade is nothing but a waste of time. And it is time that is so scarce in the path of mastering this field. Due to the nature of a seemingly endless stream of data. Data needing to be computed. There is no such luxury as to engage in the battle of who is right. You literally can’t afford to be right if you want to be rich.

Be right or be rich.

Why do we want to be right so badly. Because it feels good. A reporter once asked Thomas Edison of how it felt to fail a thousand times in trying to invent the light bulb. He replied:”I haven’t failed, I just found a thousand ways of how not to make a light bulb.” This is where the energy of a market participant needs to be redirected towards. A process far less emotionally rewarding than feeling right. A tedious process of back and forward testing of probabilities to extract an edge. A truly different approach of satisfying ones needs in admitting to know little and leaving room for the market to be right, rather than oneself. This isn’t easily done, but it is one of the few way to riches in market participation.

With a more neutral attitude one could participate in the silver market this week without being deterred by the many debates of the precious metal sector going up or down.

We simply stacked the odds in our favor and took a position based on probability:

Daily chart, silver/US Dollar 10/29/2019, “long entry” :

Silver in US Dollar, daily chart as of October 29th 2019

Silver in US Dollar, daily chart as of October 29th 2019

Silver retraced right towards its directional support resistance zone (yellow line on daily chart above). We anticipated that move and warned our telegram members ahead of time.

Be right or be rich, Gold, daily chart, 10/29/2019, “relative weakness”:

Gold in US Dollar, daily chart as of October 29th 2019

Gold in US Dollar, daily chart as of October 29th 2019

Gold at the same time was much weaker. Even though it had closed twice above US$1,500, it fell sharply retracing almost 100% of its prior leg up. With a sector leader that weak, it is important to time the silver entry sensibly on a lower time frame.

Silver in US Dollar – October 29th 2019, 15 minute chart, “eliminating risk”:

Silver in US Dollar, 15 minute chart as of October 29th 2019

Silver in US Dollar, 15 minute chart as of October 29th 2019

The 15 minute chart above illustrates how we took a confirmed late entry on silver, once gold had stabilized. This is a time where one doesn’t want to be right with aggressive early entries or precision price levels. A passive approach is the risk averse one. In addition only 90 minutes later we took partial profits based on our quad exit strategy.

It is important again to not insist on “being right”. With gold being “heavy”, taking out the risk of this trade quickly is imperative.

Now, just 90 minutes after your money had been exposed to the market, your mind is clear. Since we are now trading with the markets money only, less emotional bias deters from seeing the market behavior clearly.

Silver, daily chart, 10/31/2019, “leaving room for retest”:

Silver in US Dollar, daily chart as of October 31st 2019

Silver in US Dollar, daily chart as of October 31st 2019

When the markets show relative weakness in the sector leader, it is wise to not trail the stop right after the first profit taking spot has been reached. More often than not entry and or support resistance levels get retested. In our case this was precisely what happened the next day.

The market shows a high variety of possibilities since it has many parts and many participants. Reducing data and more importantly triggers for emotions that support a wrongful perception of what the market is actually doing, is helpful for the execution process. One such core reduction is to surrender ones ego in regards to opinions. Focusing and refocusing on ones system, ones rules and strategy to execute versus having an opinion and defending it, is the key. It makes you feel good to be right in the short run but in the long run it makes you feel even better to consistently extract money from the market.

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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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