Shorted Gold (XAU/USD) Yet Again

For the Gold bugs in us (and I have encountered quite a number in recent months asking me whether it is a good time to buy Gold), I present to you this chart below:

I just shorted Gold (XAU/USD) 2 days back. It is in a clear downtrend channel. It touched the bottom of the channel 4 times. (Remember I shorted Gold back in 1st October 2012). My initial stop loss was 1643. I have moved that to 1614 to protect my profits from turning in losses should there be a rally from the current level 1580. My target price is 1532.

Reasons for this trade? This is a downtrend. I follow the trend unless the MACD Histogram has a divergence. I entered my short position on a dead cat's bounce (wiki it!), shown by that small red arrow. I expect it to fluctuate down to my target level that was defined by previous resistance (look to the left of the chart). After the 4th time of knocking on the bottom of the channel, probability is good for further weakness to the south.

Why did I not take the trade from the top of the channel, you may ask? Well, it is because I could not see that it was in a clear downtrend channel before. I only happened to see it 2 days before and traded on the dead cat's bounce. Some things are always clearer on hindsight. That is the known as hindsight bias (google it, it is useful to be aware of if you are a beginner).

"I can calculate the movement of the stars, but not the madness of men."

If you are wondering who said the above quote, let me give you a hand. It is none other then the man who gave the world the three laws of motion, Sir Isacc Newton. He was without a doubt very intelligent. He was also rich. But he lack financial intelligence and lost a lot of money in the South Sea Bubble. Traumatised by his loss, he uttered the quote above.

So please do not think that your IQ can be translated directly as financial intelligence in the trading markets. Most definitely not.

"I can calculate the movement of the stars, but not the madness of men." ~ Sir Isaac Newton

Chartgame

Well, for all the investors/traders in us, there is a link on the internet for you to try out your skills without any risk to your money.

It tests your chart reading and therefore technical analysis prowess. Here it is:
http://chartgame.com/

And here is my track record on this game: http://chartgame.com/trackrecord.cgi?e7btbw-9,7

Enjoy!

Seventh Heaven in Dukascopy Forex Strategy Contest

After participating in the Dukascopy Forex Strategy Contest for over a year, I finally won a monetary prize of $500USD for my efforts in December. Winning in the contest requires writing a strategy that risks more than I normally would in real life, with real money. More than 20 times.

Here's the link:
http://www.dukascopy.com/strategycontest/?action=blog&trader=eagl&month=201212

You may have noticed that I win only 25% of the time in the contest for December. But I still manage to double my capital. How's that, you may ask? Well, my losses are small relative to my wins. Remember the golden rule of trading? Keep your losses small and ride your wins high. That's my strategy in action!

Disclaimer: Please do not use my strategy in real life. It risk too much. In real life, this translates into a heart-pounding roller coaster ride!