This is how I pyramided gold

90% of the decision making process in my trading is based on technical analysis (Elliott wave), but in this gold trade, I think the fundamental reasons are clear. If I list from what I think to be the biggest factors, they are:

  1. FED’s loose monetary policy
  2. US fiscal deficits
  3. Sovereign crises in Europe
  4. Japanese earthquake
  5. Unrest in Middle East
  6. Central banks’ purchase of gold
  7. Real demands from China and India

It’s funny no body except for Indian wedding is buying gold for real use (yes, it’s an exaggeration). But sinking dollar and uncertainties in all over the world driving people buying this useless metal just because it does not stain. Yet when it goes up, anything goes up like smoke.

After I saw the initial wave (.1), I immediately thought some crazy acceleration of the price might be following. In terms of Elliott wave, it meant an extended 3rd wave. So, I bought gold at $1446 on March 24, risking about 2.5% of my capital.

The price went side-ways for a while, but finally it overcame 1 on April 5, so I bought more, and my average entry became $1450. Again, the total risk was 2+% with the narrowed stop loss level. After a few days pause (and patience), gold never looked back and kept breaking the record. There was no meaningful pullback that one can enter the market…until $1518 (iii).

After we saw the quick pullback to $1492 (iv), we confirmed that the FED assured cheap money for the extended period. I bought once again at $1520 when it went higher than the previous high of $1518. I moved my stop loss to the current level ($1491), and this guarantees the profit since the average entry point is now $1473.

Now, this is my way of pyramiding the position. I think a pyramiding requires extended rally like this time.

Beginning the new week, we are seeing biggest correction down to $1542 after the gold briefly hit $1576. $34 drop is big, and we may see a volatile yet choppy market from here for a while as people start to take profits. But I sit tight here because it perfectly make sense in terms of Elliott wave; this should be the 4th wave correction (4 in the chart), not the market reversal.

Real time trading tweets

The plan in the article may get rejected any time, so please check out my tweets on Twitter.

Current risk exposure:

"","","","","$29,058.30","","","","","","","","","","","","","","","","","","","","41.95%","","","2.00%","","","","","","","","","","","","","","","","","","","","","","","","","","","",""
Rational Move always use stop loss orders, and this is the worse case potential loss over the capital for the currently open positions. This is unrealized loss is less or equal to the risk exposure.

Capital growth

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Drawdowns

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Total returns

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(Aug 10, 2009)
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This is a normalized value: the return on each trade is normalized against the capital just before the trade execution. This way, it is eliminating the effect by the capital change from deposits and withdrawals. The calculation thus reflects the trading performance of each trade. The value does not contain unrealized profits and losses. RM's trading strategy never risks more than 5% of the present capital. Not including subtraction by tax.

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