If you want to sell an advisory service the way to do it is claim a very high percentage of winning trades. This is how you market a newsletter to the average retail trader. For obvious reasons the average trader equates a high win percentage to making money. But nothing could be further from the truth. A high percentage of winning trades doesn’t automatically mean a positive expectancy. I’ll give you an example:
The Bollinger band crash trade has a win rate of about 92-96%. How can one not make money with a system like that you ask? If you advertise that you have a system that wins 96% of the time you are going to sell lots of subscriptions. But…
If you apply the Bollinger band crash strategy to an index like the SPY or QQQ you probably will make a little money over the long haul. Heavy emphasis on the words “a little”. On the other hand if you apply the strategy to individual stocks you will lose money over time. The system still has the same 92-96% win rate, but the few big losers overwhelm the many small winners. So that over time you consistently lose money.
But if I wanted to sell you a newsletter I could point to my success rate and claim that I have an almost fool proof system for making money, and many people would believe me and buy my service. They would even be happy as trade after trade would produce wins. But then a year or two later they would realize they aren’t actually making any money.
Day trading is pretty much the same. Many people have a system that makes money on a lot of trades, but over the long haul those many small wins aren’t enough to offset the few big losses.
On the other hand I’ve seen traders that only win 20-30% of the time, yet make huge long term gains. How? The are cutting their losers quick, and when they do catch a winning trade they let it run into a large profit. So they only need a few big winners to more than offset the many small losses. How many people would buy your newsletter if you told them you only win 20% of the time? Not many I suspect.
I see people freakout (or gloat) every time we have a losing trade. But the strategy I prefer, is to try to pick bottoms. Understandably we can get stopped out a few times as we try to catch the bottom. But if we can enter close to our stop the losses are minimal. Once we do catch the bottom we are in at the beginning of an intermediate rally and we then have the opportunity to ride a sizable run for many weeks. We don’t produce an exceptionally high win rate with this system but we do consistently make money over time. And in the end it’s the bottom line that matters. Are you increasing or decreasing your portfolio over time?
We missed several times trying to catch the bottom in gold in December. Once we finally did we ended up making good money on the run. So our winning percentage wasn’t high, but our profits were.
This is why I prefer to use cycles and sentiment as my two main tools. They offer the best strategy to get us into a trade that has the potential to produce a big win. But they don’t usually deliver an extremely high win rate. It can take several attempts before we get it right. But once we do we have to chance to produce a big gain.
After watching several markets unfold over the last few weeks I think I have a pretty good idea what is in progress. As I said in my last video, gold is probably stuck in a difficult triangle this year. Stocks, oil and the currencies are a different story.
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I followed Gary’s lead last week, when he said oil was going to break down to $42 and bought SCO . Now I am down almost 7% since oil is shooting up, now past $50! I followed Don’s lead and bought SOXS and I am already down 3%. I don’t know if I should sell these losing positions or wait some more. Pedestrian keeps saying the miners are going down so I got nervous and sold my mining ETF only to see it shoot back up yesterday. I am beginning to wonder if anyone has any real idea where anything is going.
Gold peaked on March 27th with the euro. On the hourly chart its forming a rolling top that implies a decline back to the 1200 dollar region (52 dollars below where we are now). That would represent a painful short term fall and doubtless have an impact on miners so you are probably better safe than sorry as rolling tops tend to fulfill on the downside. But do keep in mind I mainly comment on gold trends. Miners don’t always follow along with the dance routine as I am sure you have witnessed the last while. In any event, miners (GDX proxy) are down more than three percent in three days so I don’t know what your complaint is about.
Bigdaddy: You are obviously not that familiar with the markets and should not be playing leveraged funds. They can put a trade under water 10% or more, in a single day! I apologize for having mentioned SOXS to you. Please do NOT follow my trades on leveraged funds as you clearly do not have the stomach for them. My advise is to sell what leveraged you have and get back into the game with unleveraged funds only.
Bigdaddy – I’ve been in the industry for 10 years and counting now working at a top 5 bank during which time I’ve had the opportunity to work with, observe, and attempt to learn from some of the top money managers in the country. Managing $300-400mm is average, and some top people managing a few $B’s.
Even after all this time, there are only a few things I can tell you with certainty.
Two of them are below:
1) Nobody knows where anything is going. Nobody.
This is a tough one to learn. Trading isn’t easy and involves a lot of things completely outside of your control The market is a voting mechanism where millions upon millions of people have a vote…and not everyone’s vote counts equally. Almost every risk you’re exposed to is outside your control. It’s an extreme example, but Yellen could rip rates tomorrow, 2 hours later Trump could dish up a tweetstorm against all our trade partners, an EMP could go off at Google’s HQ wiping out their servers, and then N. Korea could start launching nukes into the atmosphere. Unlikely? Sure. But within the realm of possibility. Who would have seen it coming? Nobody.
2) At the end of the day, only you know when you should sell something
Every single investor has different goals and a different appetite/tolerance for risk. Some of this comes with experience, some comes from past experiences both unrelated and related to investing. So what’s your ideal position size? The largest one you can buy and lose 20-30% on and still be able to sleep at night. When should you cut a position? When it’s no longer allowing you to sleep at night.
At the end of the day, Gary is sharing with us his strategies on how he makes money over time. The only thing I can guarantee with absolute certainty is that not all of his trades will be winners.
Jesus it’s too late to be shorting oil now. It has to bounce out of its daily cycle low. Wait for the bounce to run out of steam and start to roll over before you sell short.
Classic example of what I keep stressing. Most people sell at bottoms and buy at tops.
Gary, I know we always put lots of emphasis on Gold, but can you comment on the strength of Silver these past few days/weeks. Its very promising and usually Silver leads Gold in established Pm’s bull markets?
As previously mentioned.. I’ve been following you on and off for a number of years now Gary, as a subscriber and as a guest on your blog.. I like your strategy, I like your perspective [even if I don’t always agree with every word that drops out of your mouth] and I especially like that side of you that’s very calm cool and collected when faced with the over-emotional trader, which at one point was rampant!
If I was to constructively criticize, I would say this.. I don’t always get the impression that you learn from your mistakes [and you’ve made some big ones over the years]. There are times when you do sound like a broken record Lol! And you spend way too much time picking on day traders my man.. some of us [myself included] have done quite well over the years, and I’ve done even better now that I’ve implemented Cycle Analysis and Sentiment into my strategy — thank you for that!
$400 for a 12 month subscription is a sweet Ass deal 🙂
Gary, it looks like you are right on the stock market (so far) but the dollar and oil are kicking you in the teeth. Are you prepared to reverse your positions on those two or are you sticking with the bearish calls on oil and the dollar? (note how I give you credit for the SM correct call )
Oil is doing exactly what it should be doing. It’s bouncing out of its DCL. Once that bounce is finished then we’ll get the final move down that should dip below $42.
The dollar is also bouncing out of a DCL. It also will have to complete the bounce before the next leg down can begin.
Dont think too much people JDST is going to 20 bucks
Ped, given that you are pretty much a short term day trader, isn’t you nice profit on JDST tempting you to sell?
Let your winners ride Don 🙂 Miners are looking weak and have been for quite a while now. Once Gold confirms the top and drops into a cycle low; Miners are gonna get slapped in the face..! Gary is right. We will get a better opportunity to buy in May, give or take.
Chart has not fulfilled itself yet. We will see what happens when my first price target of 15.75 is reached. The prior peaks are left translated though (made a higher high) so its bullish to the upside and should exceed the top I sold at on the 28th.
Do you recall asking me if I sold because I had no conviction and I answered that I was going to reenter at a lower price and take a second run at it? Well we are almost there now. Hopefully you can better appreciate that it was pointless to hold through the entire downdraft because that would have just wasted two days for nothing gained.
This way I will profit twice on the same trade but merely using Fibonacci’s and support lines. That’s possible (and not particularly difficult to execute) once you have established a trend in motion. If I was really being aggressive I would have flipped to JNUG during the decline in JDST but I didn’t take that step this time because I was just tired out.
Anyway, I am fine with this. I reached above a dollar a share a short while back and that’s nothing to sniff at on a single bet as it amounts to 7% in two trading days with the potential to yield 10% or better before this day is done. I know Gary is not impressed with this style of trading but it works for me. He is correct though that the vast majority lose doing this.
But I am not one of them.
(anymore 🙂 )
One of the no brainer good deals around now is oil.
I am on board with 2K shares of USO.
I will make a couple of grand here at least.
Plus: Gary gives you a leg up on the machine trading that front runs technical moves.
Loving the TQQQ call !
Minus: Gary completely missed the move in Bitcoin 😉
In his defense he’s probably waiting till it breaches $2K.
I’m not familiar with bitcoin so I would never trade it.
10min chart of hui from twitter… bearish to say the least…
https://twitter.com/imtiaz_gold/status/847454537203961856
It pays to look into all SM sectors without bias. Exclusive focus on spx may not be the best approach. Oil related etfs could be attractive on pull backs.
But I guess every guy has a right earn his living. His subs left en masse last fall due to blunders in PM trades. Of course you will get $100 in discount but his advice will cause you heavy losses.
who are you referring to? Gary?
Yes
What he doesn’t bother to tell you is that they left right before we made back all of our losses and a lot more profits on top of that.
Classic example of selling low and cancelling subscriptions right before we make a bunch of money.
Most traders are just emotional and they will never make any money. All I can do is try to help people but most will never learn.
All that matters is the scoreboard and ours just keeps grinding higher. The winners consistently outweigh the losers. So over time we consistently make money.
Even if one subscribes to an SM letter like Gary’s, it is important to supplement the advice proffered in the letter with one’s own due diligence. I do not know of any perfect analyst. There will always be some missed/bad calls along with great calls. That is part of the game.
Agreed…
Getting back to the stock markets…
There is a pattern I have been watching for many weeks now and a target that I think will lead to an *actual* stock market correction in both the US and Europe. I have mentioned this many times before on this site but I don’t think anyone has ever responded to it yet.
So here goes again.
If you look at the EuroStoxx 50 chart (linked) you will notice that we have a narrowing wedge in play and that the destination can be reasonably guessed at 3500 points. That number coincides with a prior peak on that index set back in middle 2015.
So the number 3500 is a prior peak and is therefore a resistance level that I suspect markets will respond to by selling off or even correcting (more than 5%). A similar resistance point is not visible on any US indices since all of them are at all-time highs. The only way we can discover such a resistance level therefore is to look at other major stock indices.
The other major indices chart I am using is the Nikkei (as you should probably recall). And it too is coming in at major resistance near 20,000 so now is probably a good time to remind everyone that the threat of a market correction has not abated but has only been deferred.
The reason that these European and Japanese indexes are important to us is that all developed economy stock markets are currently trading more or less in sync with one another. When one rises they all rise and when one falls they decline together.
So it is not far-fetched to conclude that a significant resistance point on the Nikkei or EuroStoxx is going to also be meaningful for the DOW, the S&P and NYSE. This is, I believe, the very best indicator we currently have to determine where the real correction will begin. I have not found anything more convincing thus far and although this is an untested idea I think its going to yield a favourable result for the short sellers.
Exactly when we hit 3500 EuroStoxx or 20,000 Nikkei is not precisely certain but it looks like its not far off now as the ES-50 is a mere 90 points shy of that target today. My suspicion is we exceed it first before correcting to signify a left translated double top however this is obviously conjecture and we cannot know what will happen until we arrive there.
So heads up people! There could yet be a really bad day coming and it may be sooner than we think.
Note the bearish rising wedge. You can test it by drawing the channels. It targets 3500 very nicely.
http://finviz.com/futures_charts.ashx?p=d1&t=EX
Looks to me like the EuroStoxx wedge terminates late in the third week of April. Probably right around options expiry on the 21st so keep it on your calendar. If I am correct about this I hope somebody gives me a medal.
Don’t they give awards for this kind of thing?
Thanks for sharing Ped. I’ve marked this off in my calendar and it does coincide with seasonality too in that markets tend to correct around late Apr/May every year regardless of how much “hype” there is going into the period. I’ve been caught in that before – and was a bagholder for the banks in the past.
Why are miners holdng up here and gold has sold off?
Probably just to tease you Robert 🙂
Gold is flirting with its 10 DMA; it hasn’t sold off yet.
Ok. It looks today could be day 1 for golds daily cycle decline, so maybe another 5 -10 days of downside?
Gold is looking pretty strong for expiry week, may get a bounce off the 1238 median tonight. That’s a positive change in character. FCX has been moving back up off its gap.
PED: Do you not consider the German DAX to be important? It is almost at it’s all time high with no wedge pattern. I think you are right about a market correction coming but it will be the US leading, not following. It’s sort of like how you thought the Canadian dollar would lead crude when it’s the other way around. The Canadian dollar is finally taking note that crude is rising rather quickly.
I am not wrong about the Canadian dollar and crude oil relationship, Don. Either can lead so you don’t watch one in isolation as you are doing and then automatically say the correlation is broken or does not work because it did not work tick-by-tick.
Honestly, I don’t know how you manage to get any trading done with your eyes closed.
About the Dax. Well the answer is that I don’t follow it because it does not give the kind of clear signals I watch for. I have been using European indices to make judgement calls on US markets for years actually so its not quite true that this idea is new or untested.
The ES-50 picked off the top prior to the market melt down in 2008/09 in a way no other index did and since then I have been hooked on watching what it does. The signals are often valid and revealing. I hope you and others here will give the idea some consideration just in case my idea here does pan out.
I hate reading the horror stories about guys getting ruined in corrections.
Robert, what do you mean “holding up”? My chart shows that GDX has been selling down right from the opening bell and is now down 1.5%. Are you looking at a different chart?
Just sold JDST @ 15.40
I didn’t like the wedge it was forming and don’t want to hold overnight.
That was a nice score Ped.Congrats!
Thanks Don.
Did you buy it by any chance? I posted the entry yesterday for your benefit (in case you didn’t know).
I’m in HGD.TO (Canadian) for a little hedge. I’ll be a piggy and hold onto it for at least one more day. Holding GPR.TO & FR.TO on the other side of the bet.
Let the safe fully fall, break, and then collect the riches.
The dollar is killing the PMs today with silver down almost the exact percentage the dollar is up. Currency driven fluctuations have a habit of being unreliable in the long term. Remember that silver was going up the past few days while the dollar was also going up.
I meant to say : Currency driven CORRELATION has a habit of being unreliable in the long term.
I just bought 300 GDX @ 22.61
Sounds OK short term. I may be buying JNUG tomorrow for a bounce. Will know by later tonight I think. For what its worth JDST still has life in it so we’ll get back to that again by Monday or Tuesday maybe.
Swing high in gold, followed by a break of the 10 day SMA (after much flirting) today.
Dramatic close in GDX!
Don,
Why getting into GDX?
The miners are falling, right?
The pessimism concerning the miners is getting pretty intense. I believe the miners are in a bull market and not worried if GDX falls tomorrow or whatever. It’s not a huge buy so I can hold it.
I don’t know a lot about stock markets but strike rates and losing runs are something I’ve analyzed to death through betting on the horses. I myself have been through some horrendous losing runs and depressing lows, and how you cope with these runs is, what in my opinion separates the men from the boys, the winners from the losers. Gary talks a lot about the psychology of trading, buying bottoms, selling tops, the difficulty of holding old Turkey etc but this is the first time I’ve ever heard him mention winning percentage and strike rates.
Over in England, there is a successful tipster who posts his horse selections online for free – Google Hugh Taylor ATR. If (and it’s a big if) you can get the odds on the selections he advises with the bookmakers in Britain, you would of made money all the years he has been posting his tips BUT he has admitted to having 50+ losers in a row. Could you handle that amount of losers in a row? I’ve been through runs like that and it forced me to go back through all my betting records and re-evaluate the way I bet.
Now, I have a strike rate of between 20-25%, with a return on investment (ROI) of between 10-15% ie if I back £4000 a week on average I expect to win between £400-£600 BUT I can still expect to have at least one losing run of between roughly 25 to 30 bets in a row over a period of a 1000 bets – something I am comfortable with. If I had a strike rate of 15% , 43 losers, 10%, 66 losers, that’s a lot of losers in a row to keep the faith, not chase or go go on tilt. More here: http://www.thepunterspal.com/archives/875
Similar to what Gary says, I could opt for a higher ROI, seek out bigger priced winners, but it would mean a lower strike rate, longer losing runs, (which I’m not comfortable with) and less turnover and probably at the end of the day less profit.
One final thing, I have a separate bankroll, which I use solely for betting, nothing else, so I have no financial pressure on me and my average stake on a horse is 1-2% so for my bank which say now is £15,000 I will bet between £150 to £300 on any given selection, which gives me plenty of leeway when i encounter the inevitable losing run(s).
I hope somewhere in the above there is analogy that bears similarities to trading on the stock exchanges. Gary, has a 20-30% strike rate, he’s going to back plenty of losers, have you as a subscriber got the mental fortitude and correct bankroll management to see the year through or do you just want instant gratification? Good luck.
James? That you?
Your all making a mistake buying GDX and JNUG today. If they really tomorrow you should sell and get back short. No way gold self is done.
Agree. We could see an intraday bounce but it’s not worth the risk — momentum is still to the downside. I will be adding to my JDST position tomorrow or Monday if given the right opportunity.
As a general rule: If you’re day-trading [or swing-trading] then MOMENTUM is your friend. If you’re holding for weeks and months at a time then the TREND is your friend 🙂
Very true. Jnug is jus good for quick scalp, day trade. The whole setup in miners feels exactly the same as February. So i feel they can surprise us any day now with JNUG dropping 15% or more in 1 day
I didn’t buy JNUG today Robert. It’s on the menu for tomorrow if the set up is right. Otherwise I will be looking for another entry to JDST. I suspect a decent price will present itself. Maybe 14 dollars. The chart tells me it needs to correct and recharge a little first. But there is something about the look of the pattern I don’t like right now and I cannot put my finger on it. I must be missing some information.
“When in doubt, bail out”.
Ok. 14? That seems too low, I would say 14.8. look on the moving averages of jdst they are starting to ride and cross up. The 1 hr chart looks strong. Checkout gold, today is the first real red day in awhile. 1230 is next
I see the dollar retesting 98.50 or lower so that suggests gold bounces back towards 1260 and possibly double tops. Just watching JDST and it has been unable to break above the days highs and instead turned back down at 15.40 so unless something changes there quick its going down.
There was a fair amount of selling JDST at the close today (I wasn’t the only one) and also a spike in buying on JNUG that indicates others also smelled a reversal coming. Also Yen fell a little too fast and should return to .9060 tomorrow sending gold back up for at least a day or two.
In short, I am happy I sold at days end. Caught almost the exact bottom yesterday and the near perfect top today so that was kind of cool. Does not always go so smoothly and my wife was naturally thrilled.
She thinks I am a genius. LOL!!!!
I was away all day so still holding my JDST. I think we`ll be visiting March lows soon and maybe December. I took a quick peek at the JDST dailt and what I see is a flat top, ascending wedge which could break to the upside. I see 18 as a target.
My take anyway.
JNUG lows I meant
Let me save you some time, you’re not going to learn anything from Covel. You’re already seeing what he sees and he doesn’t make money from trading either. To give credit where it is due, at least you’re searching to find the answers which is more than most. You actually have some instincts but you just need a better understanding of markets to learn what they are really telling you. More importantly though, it’s how you trade that is your Achilles. That and your desire to make predictions. Ego is a traders worst enemy.