Is it Popular To Hate Gold?

Here is a post by someone with the username woodsie on the yahoo finance forum from an article about why gold isn’t done dropping.


It is popular to bash gold.

The NY media dislikes gold, because Wall Street dislikes gold, always has. So they bash gold. Certain groups of people also dislike gold due to their political orientation, as rising gold prices tend to confirm the unsoundness of the monetary and fiscal policies of those in power. Last I look, the conservative side of the political ledger only controls the H.R. See it all the time obvious Administration supporters running their mouths about how gold is bad, and how those who watch Fox News or listen to Glenn Beck buy gold….blah, blah, blah…..see it all the time. So there is a theme w. gold bashing by certain elements of the media, and certain segments of US society… [for the record, Glenn Beck started touting gold in 2004….]

Much of the heady gains in stock sectors this past year occurred in overprice social media and tech-related shares,much of which was run up fueled by outright hype or share buybacks [since those businesses saw no good uses for their cash….]. Who wants to chase that?

Owned gold since 1998, and since China likes it, so do I.

Since the people who are on the media are telling people that gold is bad, it makes sense if people believe that.  But they might have their reasons for saying that.  A rise in the price of gold may indicate that other things are happening in the economy that they don’t want to mention.

Silver Reversed Exactly At A Fibonacci Level!

Look at this one!  Price reversed exactly at the 0.764 Fibonacci level!  Now, I didn’t even know that was a Fibonacci level, but it seems to have called the exact bottom.

silver fibonacci reversal
Unfortunately I don’t think anyone knew ahead of time that this particular Fibonacci level would be the one where price reversed (why here and not 0.618, or 0.5, or 0.382?), and I’m sure none of the fib “gurus” that people actually pay money to to learn how to trade made this prediction.

It’s funny how Fibonacci lines only seem to work sometimes and no one knows ahead of time which one will work.

It’s almost as if Fibonacci levels in trading are complete nonsense.

All Trading Is Predicting

A lot of people online, and I don’t mean just the “gurus,” get their jimmies rustled when you imply that trading is predicting.

They will say stuff like “I don’t predict, I react.”

Or, “I don’t predict, I trade based on statistical analysis of the markets.”

Or “I am playing the odds.”

Let’s cut the nonsense, it’s all the same thing.

What is a prediction?  A prediction is when you think that one thing is more likely to happen than another thing.

Why do you take a long position?  You do so because you think price is going to go up.  After all, if you thought price was going to go down, why would you take a long position?  You wouldn’t.

It doesn’t matter if you take a long position because you are “reacting” to something that makes you think price is more likely to rise, or because your “statistical analysis of the markets” suggests that in a certain scenario price is more likely to rise, you are still predicting that price is going to rise, and as a result you take a long position.

People don’t like to use the word “predict” because it ties into their ego.  If they get a trade wrong, their ego takes a blow.  Their prediction didn’t come true.  That hurts.

But when they’re “just playing the odds” or whatever, it’s ok to have some losing trades.

All trading is predicting.  Regardless of your reason for entering with a long position, whether it’s because you see a particular pattern, or you did statistical analysis, or your indicator gave a signal, or because you are “reacting” to a certain situation which has lead you to believe that price is more likely to go up than to go down, what do all of those situations have in common?

They all involve you thinking price is more likely to go up than to go down.

They all involve you predicting that price is more likely to go up than to go down.

Here is a flow chart that explains the process for every single non-random long entry (random entries are not predictions; see the paragraph about random entries below):

long flow chart

(click to enlarge)
This is how every non-random long entry is made by every directional trader.

As you know, I frequently state that I cannot predict price direction, and that is why I trade the way I do.  But even when I trade I am still predicting!  I am predicting that the S&P will eventually go back up.  I don’t know when, and I don’t know how far up it will go, but I am predicting that it will eventually go back up, and that’s why I average into my positions.

If I did not believe that the S&P was eventually going to go back up, I would not take a long position.

All trading is predicting.  The reasons don’t matter.  When you take a long position you are predicting that price is going to go up (after all, if you didn’t think price was going to go up, why would you go long?).  When you take a short position you are predicting that price is going to go down (after all, if you didn’t think price was going to go down, why would you go short?).

Even if you use statistics you are still predicting.  If you are going to flip a fair coin 100 times I will predict that you will get heads 50 times.  If you are going to roll a six-sided die 60 times, I predict that you will roll a five 10 times.

If my statistical analysis tells me price is more likely to go up than to go down, I predict it will go up.  If my statistical analysis tells me price is more likely to go down than to go up, I predict it will go down.

As for “reacting,” that’s the same thing, too.  Trading “gurus” love to say they “react” rather than “predict,” as if you can’t be wrong with a “reaction.”  But even that is all the same.

We’ve already established what a prediction is: a prediction is when you feel that one thing is more likely to happen than another thing.

When a trader “reacts,” what is happening?  He sees a situation and feels that because of that situation, price is more likely to do one thing than to do something else.  In other words, he is predicting that price is going to do something, and taking the appropriate position.

A “reaction” is a prediction of what will happen now.  All predictions are reactions to the current situation.

The only way trading is not predicting is if your entries and your direction are random.  If you flip a coin and heads means go long and tails means go short, that is the only situation in which trading is not predicting because you are entering randomly rather than because you think one outcome is more likely than another.

All (non-random) trading is predicting.

Hopefully your jimmies are unrustled now.Rustled Jimmies

How To Determine The Trend In Real Time

Where did the up trend begin in this chart?

ES weekly chart

Where did the up trend begin on this chart? Click to enlarge.

We can all look at that and see that price is in an uptrend, but when exactly did you know it was in an up trend?  If you cannot pinpoint the specific bar at which you determined “now we are in an uptrend,” then your method of determining the trend is useless in real time.

I have seen three (well, four, technically) definitions for how to determine a trend:

1) a series of HH/HL.  Depending on who you talk to, the number of points required varies, but it’s generally at least one HH/HL to determine an uptrend.

2) the slope of an MA.  This one is pretty self-explanitory although obviously results may differ based on the length of MA used.

3) S becoming R (or vice versa).  This one works great when it works, but often price rallies upward for a long time without ever bouncing off of a previous R point, in which case this method would not identify the trend.

4) indicator stuff.  The slope of an indicator, or an indicator crossing a certain level, or a fast line crossing over a slow line, etc.  I don’t really count this as a separate category though because all indicators like these are just showing you what price is doing now compared to what it did a certain number of bars ago.  They aren’t providing new information.

Those are the three (four) methods I’ve seen.

To determine a trend in real time you have to be able to reach a point in real time when you say “now that this most recent bar (or tick) has printed, a new trend has been established.  Prior to this current bar (or tick) printing, the trend was either the opposite direction or unknown (chop).”

If you cannot make that statement, or if the person who is supposedly teaching you how to trade cannot make that statement, then your “trend analysis” is useless.  Anyone can look at a historical chart and determine the trend, but that’s not going to help you trade today.

Also, once you determine the trend, what makes price more likely to keep going in that direction?  People love to say things like “the trend is your friend until the end.”  Well looking at a chart in hindsight, of course you can see big trends and areas of congestion.  But let’s say you have now determined the direction of the trend because you have a method of quantifying the trend that allows you to say “as of right now I have established that we are in an uptrend whereas prior to right now the trend was either going in the other direction or price was chopping.”  After you determine the trend, what makes price more likely to keep going in the current direction?  How do you know you aren’t buying the top?

It is quite possible that there is no such thing as a “trend” in real time and they only exist in hindsight.

So once the trend is established, the next point becomes determining when to enter.  And that’s another topic for another day.

Weekly Silver Fibonacci

The people who think Fibonacci levels have magic powers might be interested in seeing this weekly silver chart that shows that price is just about to hit the 0.764 level.  That’s not even one of the main Fibonacci levels.  Also notice how price pretty much ignored all the other levels on the way down.

It’s funny how Fibonacci numbers only seem to work sometimes and no one can ever predict ahead of time when that will be.

silver fibonacci

USLV Reverse Split

Over the past month and a half, USLV has fallen over 50%.

If silver drops approximately another 33%, USLV will be at 0.

If silver drops 50% USLV will be negative.

Do you think a reverse split will happen?

If silver recovers this will represent a huge investment opportunity.  Or maybe the recent highs were crazy and silver is going to go back down to $5 and stay there.  How do you think the world’s economy will be affected if that happens?

USLV weekly


How Low Is Silver Going To Go?

As you know, I’ve been watching (and buying) silver since it began falling in April.  As of right now it is trading at $19.66.

Here is a chart of sliver with some previous support and resistance lines marked on it.  Perhaps one of these will play a role in the future since sometimes price likes to bounce off previously established levels, which you can see has already happened a few times here.

Or maybe it will reverse at a level that hasn’t been support or resistance yet.

Or maybe it will keep going down through all of these levels without reversing.

silver weekly chart

How to Identify People Who Are Trying to Scam You

Trading seems to be one of the few industries where the less information someone gives, the more people seem to think they know what they are talking about.

If you’ve spent any time on any of the major trading forums, you’ll see that often the people who are most respected as trading “gurus” or people who give the most knowledge actually say the least.  I don’t mean their posts are short, although sometimes that is the case, but I mean the amount of actual, quantifiable, useful information they give is very small.

Trading “gurus” seem to realize this and know that they can string people along by giving them a little info and often phrasing it as a riddle or some other nonsense.

It makes no sense.  If you asked your math teacher a specific question and their reply was “what do the numbers tell you to do?” do you think that math teacher would still have a job next year?  Of course not.  All their students would fail.

If your GPS gave you some overly complex gibberish instead of saying “turn right in 0.3 miles,” do you think people would continue to buy that model of GPS?  Of course not.  They would tell their friends “dude, this brand sucks, don’t buy it” and that company would go out of business.

If you bought a complex piece of technology and the instructions said “hook everything together so it works,” do you think people would be happy with that product?  Of course not.  They would take it back and buy another one that wasn’t such a pain.

But for some reason, people who are trying to learn how to trade are satisfied with non-specific instruction.

Perhaps they think it’s because they think real life is like a 70’s kung fu movie where the master speaks in riddles and the student, after lots of hard work, suddenly “gets it” and can defeat his enemy.  After all, “kung fu” translates into “skill developed through hard work.”  And technically you can have “kung fu” in anything if you’re good at it after having practiced it for a long time.

On that note, one of the other areas where students are content with vague answers is the traditional martial arts world.  Hang out in a school long enough and you might see that the instructor never spars with his students (he’s “too deadly,” after all), the students never spar with each other or compete in tournaments (they’re told what they learn is “too deadly for the ring”), and the instructor might never quite be specific with anything because, you know, his students might find out that he can’t actually apply what he teaches.  You’ll also see this at those schools where they claim to teach you to knock people out without even touching them (funny how it only works on their own gullible students but not on resisting opponents).

Not coincidentally, these students often lose street fights because they never actually trained against a resisting opponent but they have a huge amount of false confidence because they actually think they are super deadly.

The other area where this seems common is seminars where they teach you to invest in real estate.  Although I’ve never been to one, I’ve been told that the instructors don’t actually practice what they preach (imagine that), and instead make their money through high priced seminars and courses.  I’ve been told that the “instruction” given in these is not specific enough to actually help with anything and that they just try to upsell more expensive garbage.  I’ve also been told that some of the methods taught aren’t even legal.  Again, I don’t know anything about that, but it’s not surprising.

So back to these long threads by the trading “gurus.”  Why are they so long?  Because noobs think these people being all vague actually hold the answers.  But you will notice that none of these “gurus” will  ever:

– make real time calls

– post specifics about their method

– answer questions directly

– post verified or notarized account statements

Making real time calls would let everyone see if you could actually trade or not.  Can’t do that!

Posting specifics about their method would let people actually test the method which would reveal if it was profitable or not.  Can’t let that happen!

Answering questions directly might cause them to accidentally give away enough specifics so that people could test their method.  Can’t have that!

Posting verified account statements would actually be a bit of a pain, but if someone is claiming to teach a profitable method, the onus of proof is on the person making the claim.  This should be especially true if someone is charging for their instruction.  Why would you pay money to learn from someone who hasn’t shown proof that they are a profitable trader?  And to go back to an example from above, why would you pay for instruction from someone who claims to be able to teach you to knock someone out without touching them if they haven’t shown they can do it?  Do you just take them at their word?  The onus of proof is on the person making the claim.  If someone could even demonstrate this skill against a resisting opponent one time they would have thousands of students from all over the world willing to pay to learn their methods.  Similarly, if any of these trading “gurus” could prove that they were actually profitable traders, they would have more students than they knew what to do with.  Of course, if they were actually profitable traders, they wouldn’t need to sell courses to make money.

Instead you will see a lot of:

– vague descriptions

– overly complex descriptions to specific questions.  Instead of saying something like “enter when price does this,” they will take 3 paragraphs and talk about all sorts of things using buzzwords they made up but never defined and circular logic, thus making it impossible for anyone to actually get anything useful from their answer.  However, it’s all set up so that on the surface it looks like you got a good, detailed answer.

– blaming the student.  Did you lose money trying to trade my method?  You must’ve done something wrong.  Reread my posts and try again.  All the answers are there, grasshopper.

As I have said before, the number one rule when trying to learn something is this.

Ask a specific question?  Get a specific answer.

If you ask a specific question and do not get a specific answer, it means one of four things:

1) the person misunderstood your question.  In this case, ask one more time.  Perhaps rephrase the question.  Misunderstandings do happen.

2) the person is BS’ing you (and therefore has no method to teach you, and therefore cannot give you a specific answer, and therefore you cannot learn from them)

3) the person doesn’t want to teach you (and therefore you cannot learn from them)

4) the person is unable to teach you, even if they themselves have shown demonstrable proof that they are successful at what they are doing (since they are unable to teach you, you cannot learn from them).

A special note about number 4: it is often the natural inclination of someone who wants to improve at something to seek instruction from those who are the best.  Often the person who is the best at something had a natural ability at that thing, anyway, and may be unable to tell others how they do it.  If something has always been easy for someone, they may not even logically understand the difficulties that other people may have with it.  I have known a few people who were very skilled at certain things yet completely unable to explain how they did it.  They “just did them.”  The best teachers are often the ones who developed skill after a lot of struggle as they can relate to the difficulties others may have.

So of those 4 situations above, 3 of them mean you are unable to learn from the person, so move on.