Interesting take
tokyogai
9/7/2011 9:51:12 AM
I think the method you described is interesting. Unlike some technical anaysis, this actually has some roots in both the emotion and performance of the underlying investment.
Re: Re : Talk About Moving Experiences
yalanand
9/7/2011 5:21:42 AM
@Fred thanks a lot for detailed explaination, it was very useful.
I have no way to predict how high gold will go. However, I believe that the practices now in force in this country and in the world are damaging to the value of currencies and to the dollar in particular.
Consequently, it is logical to expect that we will have to use more dollars in the future to buy an ounce of gold than are needed now.
So, since we expect gold to go higher but we don't know when or how high, the only thing we can do is to buy it and put it away as an insurance policy against the dollar becoming worth less, or we can trade in and out using stop losses and indicators to tell us when to get back in. I prefer the second technique, although I do have a bunch of old silver coins that I collected when I was a child and keep in the safe deposit box in case of an emergency.
Re: Re : Talk About Moving Experiences
Fred Goodman
9/7/2011 4:02:44 AM
Every technical indicator is capable of misleading the investor. That is the reason for the stop loss.
Most successful technical traders expect to lose money in a fairly large percentage of their trades, but they expect to make more on the successful ones. So for example, let's say you have an indicator that gives you 100 trades in a year. You enter each one with 10% of your capital and set a stop loss 5% below. Then, let's say you have a bad year and lose 60 times, but the 40 winners make 10% each.
At the end of the year you will have lost 1/2% 60 times, but you will have made 1% 40 times for a net gain at the end of the year of 10% before expenses. This is how it works in real life. There are no perfect indicators and even if you use many of them together, you will still have a lot of losing trades.
This is why they say that most of the gains a trader makes are due to proper money management rather than picking winners.
There are many books that cover this topic well, an excellent choice is Trade Your Way to Financial Freedom, by Van Tharp
Re: very interesting
yalanand
9/7/2011 3:24:32 AM
I use it primarily as described in this post and I have at least a half dozen other indicators for gold and silver.
@Fred, do you think its safe to invest in gold around 1800$ mark ? Do you think one more stimulus package from fed will drive the gold prices even higher ?
Re : Talk About Moving Experiences
yalanand
9/7/2011 3:20:13 AM
Fred thanks a lot for this blog. How do you identify false "death cross" and "golden cross" ? Can it mislead investment decisions ?
Re: What about the math impaired?
Fred Goodman
9/7/2011 12:31:48 AM
Well, there is no easy way. You can start as I did and subscribe to a few market newsletters, but if you are anything like me you will want to learn the reasons behind their recommendations rather than follow them blindly. So, you will want to read some books on the subject.
There are many excellent books. I have compiled a list of some I read in the last few years. They are listed here:
http://www.marketmonograph.com/goodman119/RecommendedBooksF.asp
Then, while you are at it, take a look at the daily letter I write, you can always read the week-old post at no charge to get an idea of what is covered.
http://www.marketmonograph.com/goodman119/free.asp
I use it primarily as described in this post and I have at least a half dozen other indicators for gold and silver. I beleive in having many corroborating indicators and rarely rely on just one.
Hi Fred, How much weight do you give to this specific technical tool?
Re: any specific corporate examples?
Fred Goodman
9/6/2011 5:44:11 PM
I just did a quick scan of the Dow Industrials using a commercial chart program and came up with one that had a golden cross last Wednesday. American States Water (AWR) crossed at 34.44, rose to 35.5 the next day and then fell like a rock for the last three days and closed today at 33.70.
This is not unique. Some mark the beginning of major upmoves and others do not. Any technical strategy must employ a variety of indicators and all must include a stop loss. A sensible stop for AWR would have been the 200-day moving average which yesterday was at 34.39 and would have made you sell near the close, before today's big drop. As a matter of fact, today's big drop may have been in part related to other traders playing the same game.
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