-- Posted Friday, 8 February 2008 | Digg This Article
| Source: GoldSeek.com
Now, that gold traders’ accounts are fattening up with hard earned profits, the next step is to preserve that hard earned capital. It is interesting to see a lot of traders get somewhat careless in their trading especially after a nice bull run as we have just witnessed. The feeling of conquering the long awaited gold trade from our own researched fundamentals to our own perseverance of technical analysis is a powerful feeling but there has to be an exit plan to take profits for day and swing traders.
If you are fortunate enough to have enough capital to hold a core position then you do not need to concern yourself with entry and exist strategies (in the short term) since your philosophy is to just buy and hold even though put strategies should be used for those type of investors. Why sit through a 100 point decline when you could easily purchase put insurance at a discounted price? But for traders there has to be some sort of plan to exit positions especially when gold looks extremely frothy. This seems to be the problem with a lot of traders; they have the ability to find great entry points especially on dips but no one is there to help them with an exit plan, or simply put, when to get out! It almost seems unnatural to take a profit when gold is in a parabolic move or even when gold makes new highs for a couple of weeks, but gold will correct and correct hard before it climbs to new highs again. When profits are taken and gold keeps climbing is one of the hardest things to watch especially when you have been waiting for gold’s advance for months, but that is why you have multiple contracts and a core position for the long term.
One has to ask the question then: is it better to take chunks of profit at a time and miss part of the move or to ride out the entire move and risk not getting out when technical indicators are telling you that the short term is exhausted?
When an exit strategy needs to be implemented the first thing that you can look at is the daily chart and the 60-minute chart. Simple trend lines help you identify what the long and medium term trends are, and that can help you on where to identify exit points. Trend lines work extremely well in the gold market especially when gold breaks the down trend line. This alone can keep you out of a severe correction. The MACD indicator works well with the trend line acting as a sort of confirmation, especially when the trend line and the MACD cross over at the same time.
60-minute Chart, February 6, 2008 Charts courtesy of QST
Daily Chart, February 6, 2008 Charts courtesy of QST
More to come…
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George Cocalis
Senior Market Strategist gcocalis@BrewerInvestmentGroup.com
312.896.3978 or 800.971.2730
Brewer Futures Group, LLC
200 S. Michigan Avenue, 21st Floor
Chicago, Illinois 60604
DISCLAIMER: Futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
-- Posted Friday, 8 February 2008 | Digg This Article | Source: GoldSeek.com
