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Random Thoughts

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Trailing stops and risk management are a vital component of sustained profitability.

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  • So, why did the frisky yellow metal spike as it did yesterday? We heard talk of central bank buying, Indian ETF buying, production cuts (not confirmed) from South Africa, North America and Australia, rising investment and jewelry demand, an 'uptick' as an asset class (institutional money flow), technical buying, dollar hedging and rumors of Mr. T returning to the big screen. All possible but none, in and of itself, likely responsible.

  • My 'gut' was that something geopolitical was afoot (Iran kept popping into my keppe) but as Captain Ramsey liked to say, discipline isn't open to interpretation, personal intuition, gut feelings, hairs on the back of your neck or little devils or angels sitting on your shoulder. That's why trailing stops and risk management are such a vital component of sustained profitability.

  • My better sell-side coverage guys are telling me that they're not seeing much hedging in the marketplace. Interesting, as one of the first things I learned when running a portfolio is that you always wanna lose money on your hedges.

  • The definition of momentum? Income funds are selling cheap and cheaper premium (naked puts and calls), collecting that money as vols crush, using those proceeds to sell more options, crushing premium even more, collecting that money and selling more options...

  • Com·pres·sion - noun: (In internal-combustion engines) The reduction in volume and increase of pressure of the air or combustible mixture in the cylinder prior to ignition, produced by the motion of the piston toward the cylinder head after intake.

  • I still can't quite figure out how inflation pressures are "diminishing" when the equal-weighted CRB is tickling all-time highs?

  • For all you Golden Stars (thanks Minyan Garrett).

  • I've gotten alotta mail from my former friends at Realmoney, wonderin' where I've been (has it really been over five years?). Right here, fellas, building the 'Ville and staying true to my roots.

  • I'm keeping tabs on the drillers--flagged a few days ago as trading dry--as they eyeball our uber-important level.

  • Minyan Mailbag!

    Toddo,

    Here we sit, directly
    at the trend line from last August on the XAU. Can you walk through your game plan - both shorter and longer term?

    By the way, you were getting quite a few props on Rev Shark's Real Money blog yesterday. I would expect to see a few new Minyans enter the fold over the next few days. To them I say "where ya been?"

    Best,
    Minyan Dave

    MD,

    Props? On Real Money? I didn't know I was "allowed" to appear in that 'hood. ;-)

    Please thank the Shark on my behalf. He took over the trading diary when I left and from what I understand, he's done a fine job. Plus, he's a gentleman and, in my book, that matters more.

    I see the upcoming trendline and, beyond that, a more important level around XAU 150. Again, my exposure is in two buckets--trading and longer-term cores. I am approaching the former with trailing stops (please "see" the quick finski give-back in gold) and the latter with latitude.

    One of my major flaws is a tendency to over-trade bigger, broader secular trends. I did it in crude from '03 to '05, silver (from sub-$6 to the teens) and, at times, with gold. As discussed, there are alotta ways to win and one major risk: The Phantom.

    Out of respect for the potential for deflation, I haven't gone hog wild with any one posture (you should never put yourself in a position where you're liable to lose your shirt). But I plan to keep my cores at a healthy level, one that allows me to be there if it runs and buy more on downside disconnects.

    Hope this helps cookie.


R.P.

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