Profitable gold and silver – missed USD CAD

A good week with profitable trades in gold and silver. The week did come with a small loss and missed an opportunity in the currency pairing USD CAD. Also, we were out of the money for much of the week in crude oil only to grab a brief break-even buyback. Overall, a good week.

Silver daily chart: each bar represents one day’s worth of trading. A black bar means the price closed lower than the open. Each candle shows the open and close price and the wick (either top or bottom) shows how high or how low the price went between the open and close times.

Snip20160521_1

We shorted silver at the red arrow, and we bought back that short at the green arrow. Just over 80 pips of profit for us; a pip is the smallest upwards or downwards movement. (In stocks and shares it is called a tick.)

Gold daily chart:

Snip20160521_2

We went short at the red arrow and for a profit at the green arrow. Gold trades less than silver per ounce and therefore our gold movement this week represented only 30 pips. Offset, however, by the trader’s equation: based on probability, our profit target, how far away our stop is and the representative amount we’re prepared to lose.

USD CAD daily chart:

Snip20160521_3

Over the last few weeks we went long at the larger green arrow and took our profits at the larger red arrow.  We went long again a few days later at the smaller green arrow only to be stopped out of the trade (within a couple of pips!) at the smaller red arrow for a small loss. I then missed the subsequent move up. That is trading. Did I set my exit stop at the wrong place? Maybe. Hindsight is a wonderful thing, and a few more pips below the moving average would have been sensible. But my overall judgement was correct, in that the price was going to go up – and I take confidence from that.

Crude oil daily chart:

Snip20160521_4

My best trade of the week without making any profit. Let me explain. We entered short at the red arrow and were out of the money all week to the tune of 200 pips at one point. We bought back our short at break-even price at the green arrow. Best trade because although we were out of the money we did not reach our stop position and we managed a break-even price. Ready for the next one!

Copper, Gold, Silver, Crude Oil and USD/CAD this week

Copper has had an intense week and finished high. Silver, in particular, has spiked up. Gold also increased but ended the week more or less even. Crude oil has finished the week reasonably strong. USD/CAD is still some way from turning up and will need careful management.

Here they are in slightly more detail:

Snip20160423_2

My premise on Copper has changed. Copper, I feel, is some way from a big turn down. I would consider a small increase in price before a drop to our low two weeks previously – and then a possible climb. We will look for the best price to exit our copper trade.

Snip20160423_4

Silver has had a dramatic couple of weeks. Two strong weekly moves up taking silver from the one-year trend line to the, higher, 10-year trend line; indeed, the price of silver bounced precisely off this line – marked with a circle. Always challenging to short when everyone else is long. But that is what we did. Of importance, and supporting our case, the COT for silver shows commercials at an 8-year record with the number of shorts compared to longs. Hold onto your hat!

Snip20160423_5

Gold has not been as dramatic as silver. Up in price all week, gold finished low for the week supporting our prediction of gold progressing further down in price over the coming weeks.

Snip20160423_6

I’m a supporter of a drop in price again in crude oil, but it may take its time. Price was possibly getting to somewhere marked by the red circle. For now, we remain on the sidelines.

Snip20160423_8

USD/CAD price mirrors that of crude oil. Therefore, a trade on both is double the risk and significant consideration. As with crude oil short, it is early days to consider USD/CAD long. A turn somewhere in the green box, however, is a good probability. But risk-reward is excellent when we catch a trade early. Probability is the other major player in the trader’s equation; moreover, proper management of early trades is essential.

Trading methods that suit

A keen trader or investor has to use a method that they understand and that gives them an advantage, an edge – no matter how small.

That method, or way of trading, has to suit the trader’s personality. The technique could be fast-moving, lower time frame, or slow-moving, higher timeframe. Or a combination of both.

Emotionally, the method has to suit too. For example, most traders are comfortable trading relatively large positions on slower moving, higher time frame trades such as daily, weekly or monthly charts; however, are less objective with such trades on lower time frame situations such as intraday (day-trading) opportunities.

Once we sort our emotional tolerance, we then need to consider our ability to manage such trades. Do we have the time and the skills necessary to trade lower time frame situations? Where a trade entry and exit on a ‘swing’ trade can play out in 10 chart bars or less – which on a 2-minute chart is 20 minutes. The same trade using a daily chart would take some two weeks.

I use three clear trading methods with clear time frames. I feel that in each of the methods I have a small edge, and that is vital. The methods are:

  1. 30-year’s investing using detailed fundamental analysis of company figures. I’m primarily looking here at finding a company that is selling at half price or less and one that has been consistently excellent for many years (usually ten years). The company, importantly, needs to be a company that will still be here, and profitable, in 30 years. The calculations took Nick and me over 9-months to develop.
  2. I trade gold, silver, copper, crude oil, treasury bonds and USD/CAD both long and short, and only trade on precise signals. Each trade held for several weeks; this is where I mainly trade the Slow Trader fund. The strategy here is sound, tested and profitable.
  3. Intraday trading of any stock, commodity, index or FX that suits – my favourite is GBP/USD. Skilfully, managerially and emotionally intraday trades are the most difficult. Intraday is also immensely time-consuming and takes many years to become consistently profitable.

You will notice that each method avoids the market crash timeframe of 5 to 15 years. Yes, the 30-year plan will go through a few crashes during its investment period, but over 30 years the crashes provide a ‘dollar-cost-averaging’ opportunity to invest more. The only important crash in the 30-year method that is of concern is the last one. I appreciate that as its 30-years it may not be me making this decision!

Our medium term strategy holds good, for now

Here is a snapshot of our (open) results for the last week. I won’t usually show this detail as it can be misleading when we have a mix of recent and longer-term open trades. But as all our trades have similar creation dates, I felt it was okay to include.

Snip20160401_2

We have a medium-term strategy for these trades. Meaning from 6 to 12 weeks. Part of the plan is to open the trade early. If an early trade is not close enough to the extreme (a top or bottom), then we will manage the trade to achieve better entries. Being early is difficult for many as it is nearly always contrary to popular opinion. Also, being early can provide excellent gains only to see those gains retrace to a loss – which is emotionally challenging and the reason why many traders cash-in too soon.

By early trade, I should mention that we should also not be unreasonably early (it’s never that easy!). Patience is still key. For example, I think, a short in crude oil, currently, is too early. Crude has started to decrease in price this week from a recent up, but to take crude short now is premature. The picture is similar to long-term Treasury bonds that have a potential near-term short opportunity.

Slow Trader Fund Update

Slow Trader closed to any new funds until next year. Here are the amounts:

Snip20160305_1

For the sake of simplicity, percentage gain or loss refers to original funded amounts.

We are now ready for 2016. Our attention this year is on gold, silver, copper and crude oil. We will also trade from time-to-time the SPDR S&P 500 ETF fund (all sessions) and currency: namely the Euro against the US dollar. We may trade the occasional stock.

We have an excellent short signal developing for silver. That is, we consider silver will drop again in price. Signals for each of our commodities happen no more than a couple of times a year. Therefore, when we get them, we need to take full advantage.

The S&P and EUR/USD are not cyclical like the commodities – therefore we will trade these via lower time frame charts (one or four-hour chart and, occasionally, as low as the 15-minute chart).

Commodities are traded through daily charts and in conjunction with the COT report.

For those building funds for grandkids, or looking to buy the Aston Martin DB11 – then here we go!

Slow Trader Diary

Slow Trader fund up this week to + 5%.

To report the fund each week encourages trades to be cashed too early to show a profit. That is silly. Therefore, I propose to provide the fund report, whenever possible, the first Saturday of each month.

The diary of trades taken, wins and loss, and those trades that are on the radar, will be discussed each week as usual.

These are considerations coming up:

Crude oil (WTI)

Snip20151017_8

We have a buy signal on the daily chart shown above. A 60% probability of WTI climbing to $50. After that, the price may descend into a trading range or may continue climbing for a measured move up to about $55. Whether we hold or not at the $50 line will depend on price action and momentum when, and if, we get there. Also, the COT is in our favour for this trade.

Gold

Snip20151017_11

Gold has provided a measured move up, in agreement with the COT. After a breakout on 2nd October, gold is now in a short-term bull trend (a bull channel on the daily chart). It has reached a resistance level, however, and the likelihood is that price will fall back slightly (XAU USD) to $1150. A trading range above its 5-year low? If this happens, we will look for a buying opportunity if price action and the COT agree.

S&P 500

The S&P 500 has broken above the resistance level that we discussed last week. The ratio has now swapped to 60% probability of the price climbing. Indeed, a new high could result in the coming weeks.

This positiveness in the S&P puts a good light on stocks within the index. We will look for opportunities to buy ‘fundamentally’ good stocks as and when they provide price action buy chances.