Quote from Ghost of Cutten:
I don't really understand those stops, especially the first one, it's only 1% or so from your entry. There is no trend on earth with such low volatility that it cannot retrace at least 1% on pure noise. Let's say gold goes 1450 to 2200 (for example) that's a 50% rally. Do you really think you can ride a 50% up move without any 1% or even 5% corrections along the way?
Stops should be placed at levels which, if reached, show that you are most likely wrong. Gold ticking to 1850 proves nothing at all other than that any market can go up or down 1% at any time for any reasons (or no reason at all). Setting a stop within the bounds of typical market noise just doesn't make sense.
GoC, you are absolutely correct and thanks for pointing this out.
The reason I put the stop at 1850 was because I was over-leveraging myself, in hopes of a quick up move above 1920 or so, without any significant retrace at all. 1850 stop was not meant to ride the trend. Its objective was to take me out quickly, if price doesn't move in my direction immediately. Sorry, I was not articulate enough.
As it turned out, when EURO cleared 1.3837 level, which was low for the last 5 months; I thought that at that moment, being short Euro was a better trade than being long gold. I closed my gold position at 1882 to free up capital to short Euro. Within next 15 minutes, Gold dropped like a stone, and it was pure "luck" that I did not take any heat on the gold trade.
I have not re-entered Gold yet, I will be looking to re-enter sometime on Monday/Tuesday. After the stone-drop move today during London session, I am scared by the volatility in the Gold. Maybe its a signal of short-term top - I don't know. Maybe, market is saying that its expecting margin increases - I don't know.
Counting, during the last 14 days, Gold has fallen 7 days and risen 7 days. The falls as well as the rises have been pretty large moves. Its in a longer term uptrend, but volatility at least at this stage is quite large.
