Tag: silver

Brexit, are we going to trade it?

Before Brexit here’s gold and silver last week.

You will recall that we are only looking for short positions in gold and silver. We took profits in both nearly 2-weeks ago and have been looking for an opportunity to take a short since then. Although both gold and silver crept down and tempted everyone to jump on board, this would have been hopefulness.

Here’s silver: silver provided a short signal which I missed, and mentioned last week. That would have given us a profitable move down and exit at the blue arrow. However, without a clear ‘short’ context the danger was always the strong pullback, which happened yesterday, and that is why it was correct to not hold our original short too long. The pull back may just be to the moving average, shown by the blue line, or a move to equal the previous high at 1,800; or, significantly higher with a measured move of the previous leg. We will need more information before acting.

Gold below shows the short that we exited on 19th May. I was somewhat quick as the second leg down would have doubled our profit. However, the move up yesterday (similar to silver) has brought the price back to our ‘buy back’ position on the 19th. As the climb yesterday has closed above the moving average I’d expect more upwards movement next week before providing a short opportunity.

How will Brexit affect our trading? As an aside, one issue we have with trading gold and silver, particularly with a reasonable sized fund, is the size of the average bars (potential movement of price on average over a certain time period) in respect to spread. If you have bought shares in a SIPP before you will know that your broker charges you anything from £5 to £14 per trade. That is why you need to buy a certain amount of shares otherwise your broker’s fee represents too high a percentage against you. The same is true in reverse with spread betting.

Silver, for example, has a spread of 3 pips. That is, for your buy/sell you will pay 3 pips at whatever price per pip you trade. If you trade £1 per pip, then, from the broker’s perspective, you are charged £3. (Not actually £3, you will notice that your entry line on your chart is 1.5 pips to the negative as will be your eventual exit line – with both together equalling 3 pips). That’s fine at £1 per pip, and actually a good deal. However, you ain’t going to retire soon on £1 per pip in silver. Our fund trades more in the region of £10 to £20 per pip; and that represents a high broker’s fee if the trade goes against us.

Far more representative of average bar size – when compared to spread, and also compared to the amount we wish to trade – is the currency pairings GBP USD and GBP JPY. The spread on these are about 2 pips and 3 pips respectively (I say ‘about’ because they do fluctuate, particularly in times of high volatility). However, typical corresponding bar sizes of the above currency pairings (GBP JPY being the biggest) are 10 to 20 times bigger than say gold or silver. And that is why we need to move most of our fund trades to the currency pairings.

That brings me to the initial question, how will Brexit affect our trading? Clearly we all know that it will be a time of high volatility in GBP and anything in association with GBP. To that end, the spread will increase significantly. This will need to be carefully monitored. But spread increase is okay if average bar size increases in unison. Brexit could provide a lot of barbed wire (bars that bounce up and down but close fairly tight and don’t actually go anywhere) or, of course, it could set-up a great trend. My own thought is that it is going to be a bit of both and we need to read the movement well to take advantage. So are we going to trade during Brexit? probably not on the 23rd June, but for the run up – most certainly we are.

June 4, 2016
A neutral few days

A neutral period looking for re-entry opportunities, but nothing taken this week.

USD CAD seemed to take-off only to pull back to the weekly support line. A good buy opportunity now – or a few pips lower.

Brent crude oil is at a position – that we projected a few weeks ago – that is ready to short. We will take shorts from the hourly chart (rather than the daily) as we feel oil is more easily managed from the hourly (rather than the daily) chart.

Silver provided a reasonable re-entry short opportunity on Thursday. Missed that, but a second chance may present itself again this week.

Gold has dropped just over 30 pips from where we took profits at the end of last week. Now likely to drop a further 20 pips before meeting a monthly resistance line. If we get a retrace we will take a short as gold has the potential to drop a further 70 to 150 pips over the next few weeks.

We have listed a new page called strategies. This is written (and added to and changed most days) in a short format – as if we are preparing the ground for a computer algorithm. Therefore of little meaning to a non trader. However, it provides an idea of the precision involved.

May 28, 2016
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 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 buy back moment. 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 (as they are called) shows the open and close price and the wick (either top or bottom) shows how high or how low the price actually went between the open and close times.

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:

We shorted at the red arrow and bought back our short 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. However, the smaller size is offset by the traders 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:

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:

My best trade of the week without making any profit. Let me explain. We shorted 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!

May 21, 2016
gold and silver – are prices ready to drop?

Copper – An uneventful week for the commodities. All except copper which moved down without us and with gusto. Copper, however, had an unclear read on the COT (often the case with copper) and an unclear read on the daily charts. Therefore we are correct to be out – as to stay in would have been to rely too heavily on hope.

Crude oil and USD CAD – We hold a small position on crude oil short. But a 200 pip climb is likely and at which point we may add to our shorts. USD CAD, which often reflects a delayed but exact opposite price movement to crude oil, shows a clearer picture. Too much reliance on the difference between these two charts (crude oil and USD CAD) is, however, a ‘chicken and the egg’ question and should be considered but not relied upon.

Gold – Having taken some profits (short) from gold last week we continue to hold a small position short. Expecting to add to shorts anytime this week. Net position of the commercials remains at a 5-year low. This will provide great momentum to a drop in the price of gold if gold price per ounce falls to the $1,200 region.

Silver – Similarly with silver. We took some profit last week and continue to hold a small position short. Looking for a price climb to $1,730 before adding to shorts. Silver, however, has an even more dramatic picture on the COT as the net position of commercials is at a 10-year low. As with gold, any significant reduction in the price of silver will probably result in an exaggerated acceleration short.

Intraday strategy – As an aside, much work has been done this week developing our short-term momentum strategy (namely using GBP USD intraday charts) on trading range breakouts and subsequent channels. I know this doesn’t make a lot of sense to the investor, but to a trader it is a high probability strategy with measurable risk and reward. And possibly the most lucrative of intraday strategies.

May 14, 2016
We take some profit from gold, crude oil and USD/CAD

Until now we have traded the commodities: gold, silver, copper, crude oil and USD/CAD on a weekly basis. That is referring to weekly charts and a weekly COT report. We have also, as discussed last week, considered introducing the fund to intraday trading.

Each of which (weekly and intraday) are rather on the extreme. On one hand, we have the overly slow weekly chart market, and on the other, the rather demanding intraday market.

The balance for the fund is daily charts. Why? …weekly charts are emotionally difficult as we see good profit generated only for that profit to disappear as we remain invested in order to reach our target. There is no compromise here, because to take profit before a target, unless our premise changes, does not provide a traders equation (that is: the trade had more risk than reward). Over the longer term this would be a losing strategy.

Gold and silver have emphasised this over the last few weeks where they dropped in price to provide us with good profit potential, only to extend higher than I considered.

Daily charts, rather than weekly charts, usually means tighter stop positions and therefore lower risk, but in contrast our targets are shorter. Timing wise we are in trades for a week or three rather than several months.

The COT suits the weekly charts, but often goes against my daily chart readings. This of course happens at all levels of chart, for example, the difference between the daily and the 4-hour chart or between the 5-minute and the one-minute chart. However, I report weekly and to have a profit at the end of one week only to know that profit will go away as we wait for the bigger (targeted) profit seems emotionally foolish.

With moving to daily charts, our targets are closer and therefore we can take profit more regularly (if available) and wait for the next entry. This means that we will occasionally miss the big move – but trading is rarely perfect.

This week we took profit from our short in gold as it sank from its high of the previous week – and before Friday’s monthly non-farm payroll brought it up again. Also, we took profit from a short in crude oil as it came down over the week and from our long in USD/CAD as, conversely, it climbed nicely over the week.

May 7, 2016
Gold and Silver finish week on a high

Silver finished the week on a strong move up. Silver is at, or slightly above, a three-year trend line. The COT shows the net position of commercials at a multiple year low; meaning the majority of commercials (the big buyers and sellers) have short positions on silver. As do we. Difficult to hold through, but that is the strategy.

Gold provides, as it so often does, a similar picture to Silver.

Crude oil ventures up towards the position suggested on my charts last week. A possible short on crude may present itself this coming week.

USD CAD had little movement in weekly chart terms.

Copper dipped early in the week and gave us a reasonable out position. Copper reversed back up by the end of the week as anticipated.

The strategy on commodities is to go long or short reasonably early based primarily on commitments of traders (COT) information and supported by analysis of weekly charts. We use weekly charts as that corresponds to the weekly COT release. The COT is released UK time late Friday evening and is based on the previous Tuesdays collation of information by the CFTC.

This strategy often calls for a significant period of time, several weeks or even months, where the trade is out of the money. Treat the COT as turning a large tanker ship analogy – it ain’t quick!

To balance this ‘slow’ strategy we’ve decided to include a portion of the Slow Trader fund in our intraday trading. That sounds fancy, but is just a way of saying we trade with charts that are incorporated within the day. In our case 1, 2, 15 and 60 minute charts.

In this instance we take as many as 9 to 15 trades a day and normally complete all trades before the end of the day. I’ll discuss our strategies for intraday trading in next week’s blog.

April 30, 2016
Copper, Gold, Silver, Crude Oil and USD/CAD this week

Copper has had a strong week and finished high. Silver in particular has spiked up. Gold also increased but finished 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:

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 2 weeks previously – and then a possible climb. We will look for the best price to exit our copper trade.

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 exactly off this line – marked with a circle. Always difficult to short when everyone else is long. But that is exactly 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!

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.

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

USD/CAD price mirrors that of crude oil. Therefore, a trade on both is double the risk and a 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 traders equation; moreover, good management of early trades is essential.

April 23, 2016
Achieving excellent trade entries helps alot

How our trades have progressed this week:

We are short Gold. We shorted at the red arrows. That is, we expect the price to go down. If Gold goes down in price we gain. It is always difficult to find the best price and often it is simply ‘good is good enough’. But our first take here seemed excellent. Price this week had risen giving us a chance to add to our short. Again, this seems to be at a near top. We now have a lower high (the difference in height between the first and second arrow) and, therefore, the possibility of a continued drop in the price of gold, at least for a few weeks.

We went long USD/CAD at the blue arrow. That is we want the price to increase. Our strategy starts with a major trend reversal, and that is often a difficult call. Probability of success is low at this stage, but reward, if it goes our way (up), is worth a trade. Our target is near the top of the screen shot.

We first took Silver short at the left red arrow. Price went nicely our way – down. This week, however, has seen a good recovery in price. We entered again, short, at the second red arrow. This is a higher high – often not ideal for a short – but the three pushes up is good context for a trend reversal. From being nicely in the money, to out of the money, is part and parcel of our strategy. We hold until something tells us different, or until we get to, or near, our target. Our target is at the bottom of the screen shot.

We shorted Copper at the red arrow position. That is we want the price to go down, and so far, Copper has obliged. We continue to hold until target. The recent retrace in price this week was not sufficient for us to add to our short trade.

April 15, 2016
Trading methods that suit
A serious 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 traders personality. The method 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. This is where a trade entry and exit on say 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 2 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 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 10 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 very specific signals. Each trade is 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. Intra day 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. Where most investment and pension portfolios are positioned. Yes, the 30-year method will go through a few crashes during its investment period, but over 30 years the crashes simply 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!
April 8, 2016
Our medium term strategy holds good, for now

Here is a snapshot of our (open) results for the last week. I won’t normally 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.

We have a medium term strategy for these trades. Meaning from 6 to 12 weeks, we are 10 or so days in. Part of the strategy 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 difficult 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 for long-term treasury bonds that have a potential near term short opportunity.

April 1, 2016
Current short trades in Gold, Silver and Copper.

We have open trades short with Gold, Silver and Copper.

Our strategy here shows promise. The aggregate of these trades has seen us in the money by some £1,000. Soon followed by us being out of the money by about £900. The latter was a consequence of the last FOMC meeting and interest rate announcements.

Higher prices, however, allowed us to add to our short trades more favourably and, later, as the price dropped again, to break-even on a our lower priced, original, trades.

Our open trades (taken from eleven days ago) currently stand at over £3,000 in profit reasonably distributed between each of the commodities. Early days, however, as we hold through (as long as our premise remains the same) to somewhere near our targets.

The following is an update of our trade watch list for Slow Trader fund:

No change in – Gold, Silver, Copper and Crude Oil.

In preference to the S&P, I’ve included the 20+ Treasury Bond ETF.

Moreover, in preference to the currency EUR/USD we will take GBP/USD.

March 29, 2016
Slow Trader Trades

In our fund (Slow Trader) we recently invested short – that is to say, we want the price to go down – in Gold, Silver and Copper. (This strategy is a one to three-month trade, but varies slightly for each commodity).

Fund exposure is currently £70,738 (we are leveraged)

Silver stop risk is £1,953 – between 4 trades.

Silver target is £4,633 – between 4 trades.

Gold stop risk is £1,252 – on one trade. (A limit order is in place to short more if gold price rises).

Gold target £2,518 – on one trade.

Copper stop risk is £1,929 – between 2 trades.

Copper target £2,918 – between 2 trades.

We use the Commitments of Traders (COT) report to give us a small edge. The COT is, other than cyclical analysis, probably the only indicator that is not price based. And, therefore, an independent view-point. We combine the COT with our own technical analysis of each commodity.

Here is an example of the COT released last night. The same information is available for each of our commodities. My attention is on what Commercial is doing.

The importance of getting the technical analysis right is due to the COT being in lag by nearly 2-weeks. Which, based on our strategy, is between a half and a quarter of the expected trade duration. In other words, we need to use a good amount of interpretation (and rely on technical analysis) for a significant chunk of the trade time.

More specifically, COT figures are from each Tuesday but are not available until late evening (UK time) on the following Friday (i.e. 10 days). As the markets are closed till Sunday night (UK time) it puts the COT information nearly 2 weeks old. But even with that considered it’s still the best, broad, indicative information we have – other than our own technical analysis.

March 19, 2016
Slow Trader Fund Update

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

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 grand kids, or simply looking to buy the Aston Martin DB11 – then here we go!

March 5, 2016
Weekly Diary – Slow Trader Fund

A week of lessons and some missed trades.

A few areas that I’ve traded this week have been disappointing. Not by judging the trade correctly, far from it, that has been good, but by being stopped out too soon. A novice trading error possibly. It’s a great lesson to take forward.

Here are the trades in question:

Silver. We had a good ‘short’ signal for silver. Both on the chart and the COT. The COT was a little early, so I set what I considered to be a good size stop. A stop is the exit point, the point at which we get out and accept our loss if all goes wrong. Notice on the chart below how the price climbed to almost the exact position of my stop. A stop twice this distance with a reduced trade amount was the answer. We may have a second chance if price retraces as I’ve indicated with the blue arrow.

Notice the COT below for silver. It is at a 3-year low shown by the blue line. Once this turns up, and remember that the COT is big picture only, this will support a short for silver. Gold has also come down with a similar, although not quite so pronounced, COT picture.

EUR USD. The currency pairing of EUR USD is one that I trade day-to-day. Notice how volatile this currency has been of late. I have provided the 1-hour chart to illustrate this by showing several recent spikes up.

The spikes may not look like much, but to a day trader (trading an intraday chart) they are a challenge. Again a significant stop distance (about 40 pips) is necessary. However, this makes for difficulty achieving a traders equation of 2:1 on a 40% probability trade, which is the minimum requirement for most swing trades.

Crude Oil. A wide trading range has developed for WTI. The Price of WTI moved down to coincide with the top of the first daily breakout. An expected phenomenon . The (buy) signal, although bearish on the daily chart, was good in hindsight; however, I will look for a second entry opportunity to go long if price retraces back to the lower trend line and again provides a good buy signal. After that, I’d expect price to climb to the top of the channel that I’ve drawn with a 40% or 60% probability of ascending or descending respectively.

We remain in Ashtead Group PLC with a target shown by the blue arrow below.

Finally, A reminder that Slow Trader values will be provided every first Saturday of the month.

October 30, 2015
Slow Trader Diary – week 35

We are open with gold.

Broker charges for the week were a credit of £9.48.

Here’s our gold trade:

Our target is in the region of 1212. This is in-line with the COT and if the present Up continues it will nicely form a recent Up (or recent trend upwards). However, as we have seen this week, the market remains volatile.

Of the other trades we considered earlier in the week:

Silver moved down lower than expected, did not provide price at a level I could determine. So no trade.

NZDUSD remains a possibility to go up briefly. But it is presently stable below its low of recent weeks. It may move up soon. However, this is an advanced trade as it is against the big trend and is without a recent Up.

GBPUSD, having been quite stable through the initial turmoil of the week, just blew down. It may turn at the 15350 region or continue down to as low as 15190. I’m less convinced of this trade. It has, for now, become choppy which always makes for a difficult read. The COT is still a buy but is weakening, we do not have a recent trend, although the mid trend remains up. Only excellent (daily) price will convince me to take GBPUSD at the moment.

EURUSD is approaching our predicted bounce point. However, the COT is about to turn and we are all aware of the volatility presently associated with the EUR. My own thought is that the bounce could happen but it will be short lived. Price may turn down again before the previous high thus establishing a recent Down (or recent down trend).

WTI, or crude oil, bounced off its lower stop this week. This move is gently supported by the COT, nothing dramatic for the time being. Too early to decide, but it is on the watch radar now.

Finally, the S&P and FTSE have moved up slightly, but the roller coaster might not be over yet.

As I’m away for a few weeks the next diary will be 26th September.

August 29, 2015