Let Me Ride!

Some of the hardest mental disciplines for retail traders to acquire is one that got drilled into my head during my trend trading days: Cut your losers short – let your winners run. Unfortunately our brains are ill wired to deal with the cognitive strains involved in trading the markets. So we often wind up doing the exact opposite – we find excuses to let our losers run and to take profits as soon as we see a bit of green blinking in our trading console.

I enjoy covering trading related concepts via real-world examples. And gold is a perfect one at the current time – if you recall we were following that sideways triangle as it was coiling up, expecting it to pick up a direction and then take off. Which is exactly what happened and if you took that entry near the bottom diagonal then your account should be making you smile right now.

Of course I know what you’re thinking. After such a move wouldn’t it make sense to take profits? Yes – and no :-)

It all depends – let me explain. If it was just a daily setup then I would probably start scaling out right now. However there are other considerations that come to mind – in particular the weekly and monthly panels. The weekly just dropped through some might support level that has been holding up most of last year. And the monthly has gold touching a NLSL for the first time since early 2011.

IF (and of course only if) gold continues downward from here and triggers a monthly sell signal the implications could be significant. A monthly close below 1586.3 would raise the odds that we’re going to visit the 1400 mark and perhaps much much lower. So if you ask me if it’s time to take profits – sure, take partial profits, that’s fine. But I think the long term potential here justifies keeping a few lottery tickets in the running. We got a good entry and we banked coin – which means we can afford to ride out a little snap back if it happens. Should we get stopped out via a snapback higher – well, that’s part of the game.

You will never be able to look at a monthly chart and say – ‘damn, I wrote this sucker all the way doooown’ (or up) if you aren’t able to sit tight and do absolutely nothing. So in the words of the good Doctor – let ‘er ride!

Crude is painting an outside period (OP) and is kissing its 25-day SMA. Interesting and as long as it holds I think I want to be long here for the following reason:

See the weekly panel – we’re right at the 100-week SMA and it’s got decent odds of holding. Also, that sideways triangle looks incomplete and IMNSHO it would make the most sense for a touch of the upper line to complete before we turn back down. If you take a short position on a breach of the 25-day SMA then recall that there’s support waiting near the 85 mark.

The greenback is holding up nicely but it’s got quite a few hurdles lurking ahead:

The weekly is looking fine but the monthly has it right below its 100-month SMA – and that one has been a party pooper for the past few years now. I would love to see it make it above 82.5 but until we get there call me hopeful but very skeptical.

Bonds – we got a little spike higher on the ZB front but it fell back below our diagonal. I think the hourly is a great way to keep in the game right now as the 100-hour SMA lines up nicely with that diagonal near 143’07.

I’m not taking on any positions before Tuesday but the CAD/JPY is looking interesting right now and I recommend you keep an eye on that 25-day SMA which is lining up with an expiring NLSL. If you want to be long here then mind that 25-hour which now needs to hold up.

Public Service Announcement: Monday is Washington’s Birthday (Presidents Day) 2013, and the NYSE will be closed. My next post will be on Tuesday morning – I plan to spend the long weekend working on my new trading system.


This entry was posted on Friday, February 15th, 2013 at 2:25 pm. Both comments and pings are currently closed.

  • Skynard

    Reloaded on the bounce:)

  • ridingwaves

    are earnings over or something?

  • Darkthirty

    bungee jumping on the zero

  • SirDagonet
  • Darkthirty

    didn’t hit my target

  • saltwaterdog

    I thought we got net lines after 3 consecutive higher or lower closes, not intraday/period highs or lows?  Have I been wrong all this time?

  • Darkthirty

    WMT dropped 3%

  • Darkthirty

    Watch em flatline this pig into the close. Know anything about weekly options?

  • http://ibergamot.blogspot.com/ i Bergamot

    Covered half of Silver short

  • ridingwaves

    Last 20 minutes in WEST could be telling, b/ask is strong..

  • http://dartht.blogspot.com/ Darth_Gerb
  • Darkthirty

    lottery tickets for the close

  • ridingwaves

    stop didn’t get hit, roll the dice with monday…

  • Skynard

    Wow, WTF

  • http://evilspeculator.com molecool

    The best counter spike POMO money can buy 😉

  • mothwhoflysbackwards

    I think the “sell the winners, keep the losers” syndrome is caused by people who want to be right more then they want to make money.

    They sell the winner too quickly to lock it in (thus proving to themselves they made the right call) and let the losers run because they don’t want to admit they are wrong.

    This “style” produces a lot of small winners and a few big losers. If having more winners then losers is important to you by all means have at it, on the other hand it is not the best way to build your account. After all a penny saved is a penny earned.

    Ever hear the best defense is a good offense? For trading the best offense is a good defense!

    (p.s. I went through the “syndrome” myself … if anyone else has done this I would be interested if you think it is for a different reason then the one given above just to alert me to other faulty thinking that could produce the “syndrome”)

  • Skynard

     Yep, right at the close.

  • http://ibergamot.blogspot.com/ i Bergamot

     Basically you and Molecool are right.
    As a practical solution, I often do partial exits.
    Case in point – this Silver trade. With SLV at support, I am expecting some kind of buying to present itself. Since I can’t do futures, I need to consider overnight and long weekend risk – hence Half-out and keeping remaining until future notice.
    Alot depends on your trading vehicle and time frame, but turning winner into loser is much worse than selling winner too early, IMHO.
    I know successful traders, who just grind it out with relatively small wins (Skynard? no?).
    There is a book “Pit Bull” by Marty Schwartz – highly recommend – he did just that.
    There is no easy answer, because trading style has to fit traders personality

  • http://ibergamot.blogspot.com/ i Bergamot

     O, I forgot
    “Keep the loser”:
    Stop loss should take care of that.
    If you stop out, you can always re-enter, you know:)

  • AmazingLarry

    Larry’s gettin angry! 😉

  • AmazingLarry

    Word. Risk exposure is hard to learn. Took me a few years to really get it. Fearless has made quite a few points about it on here in the past. We all inherently know it, but as we all know (and Mole likes to point out a lot – which is GREAT!) our stupid thinking gets in our stupid way.

    Last year I had to spend $1 to make $3.75. Really sucks spending that money, but the game is the game – you have to accept the rules if you’re going to play.

    http://oak.ucc.nau.edu/del/stockcalcs/sizer.aspx Don't leave home without it.

    Don’t mean to lecture as I’m in no position to. Just something I’ve learned. Hope it helps.

  • Joe_Jones

    interesting. Can’t wait to get more physical at discount.

  • Joe_Jones

    There is POMO everyday for the rest of the month.  Should be good for a bunch of non trend days. I’ll be on the look out for blue arrows and + div on 5min ZL at about 11.00 am EST everyday.

  • Skynard

    Here is what the US GDP is made of and if sequestion goes through the outlook is not good.


  • Joe_Jones

    Brookings’ propaganda. This is just a scare tactic. Printing will continue regardless as the End Game requires a strong military. Should be good for some volatility though. 

  • Skynard

    Do not need a military any longer. What for? You really think another war is in order? Don’t think so, and the US will loose their AAA rating very soon as it is only a matter of time now.

  • Joe_Jones

    WWII is what took us out of the Great Depression. I am sure some neocons/commies in D.C. are tempted to play the same script all over again.

  • Skynard

    After Clinton the troops were lucky to have a toothbrush:)

  • http://dartht.blogspot.com/ Darth_Gerb

    Darth Soros the Billionaire really knows how to push his currencies, and push Hard.


  • mothwhoflysbackwards

    hey guys… Larry and Bergamot… thanks for the reply. I should have made it more clear, but by “win small loose big” I mean .2-.3% of account for win small and 2-2.5% for loose big. So the big loss is in relation to the size of the wins, not my total account.

    Not to say I never went too large (once lost 15% of total account in one day! learned a lesson from that fiasco!) and laid it down. I took the loss and can honestly say that was one of the best moves I ever made. I am sure we all know people who went too large, didn’t want to take the loss (money wise – not ego wise) and things got much worse. But with me (while in the syndrome) it was all ego. Mainly I sold too soon to get another win.

    The take partial profits idea is valid -I have done that before and after the syndrome- but looking at my notes from the trades I made at the time it didn’t really (for whatever reason) occur to me. I also saw a “7 wins in a row!!!!” in my notes and thought aha this is how it starts.

    I remember this guy Berk (I think) Mole said this guy worried when up and was calm when down. That was exactly my outlook when in the syndrome. It comes from wanting to win (so you take profits too soon to keep the win) and then you hang on to the bad ones because you don’t want to loose for EGO reasons.

  • http://dartht.blogspot.com/ Darth_Gerb

    Happy Birthday George.

    what would you rather hold?  a golden apple or a golden shaft?
    at this point, it doesn’t really matter. 

    I’m off to move heavy furniture.

  • Pervergence

    Nice short entry on GC at the 25 hour sma

  • Skynard

    Volume /DX, flipped and now short:)

  • Joe_Jones

    At hourly support now.

  • convictscott
  • convictscott

    Nice chart :)

  • convictscott

    so far 36 trades 12 winners 24 losers, never more than 2 losers in a row

  • Skynard

    Long cable


  • Skynard

    /SB huge gap open:)

  • http://evilspeculator.com molecool

    ¨°º¤ø„¸F R E S H „ø¤º°¨ 
    ¸„ø¤º°¨ M E A T“°º¤ø„¸

  • http://evilspeculator.com molecool

    AWE-SOME :-)

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