Originally published by Chamber of Merchants
I’m excited about sharing my thoughts in the Weekend Report. I would like to spend some time on the most important tool that a Merchant can use in making transactions on the ASX and trading in general. I’ll also touch on some of last night’s gold price action, the news that it was responding to as well as some thoughts on where I believe we’re heading.
I’ll also share some exciting developments at the | Chamber of Merchants |.
Gold | October 2016
I’ve been spending a lot of time on Gold lately. No surprise there. I am up to my neck in gold and silver miners. I tweeted my account balance losses on Friday for anyone that is interested. It ended around 27k below the total I was on around the 3rd October 2016, which is when I posted that I am expecting a loss and how I was going to mentally and emotionally process the event. We are probably not at the end, however, I’ve said many times and I will continue to do so: a Merchant’s entry point will determine the quality of the entire transaction, from start to exit.
What do I mean by that? I’ll explain in a second. But here is a vision I want to share with you as we enter into the next week of ASX and international market action.
Vision for Better Thinking.
[We’ll get back to Gold in a few minutes depending on how quickly you can read [or scroll].
Vision: the point of all of this, the purpose of the entire site, is to assist you in the way that I wish I had been assisted when I started. For this financial year so far, I have gained 100k AUD from successful transactions on my total balance. That means I have an extra 100k AUD now that I did not have a year ago. But, over the years, on my journey, I can tell you that I have squandered an accumulative $300k – $400k of profits [give or take] since day 1, because I had no system , no foundation of thought and no idea where I fitted into the bigger scheme of things. There were days when I would stare at 30k profit balance from a single trade and all I would do is congratulate myself and feel accomplished, only to find that within days or even hours, I would see that profit disappear and even turn into a negative balance. Not once, not twice: multiple times.
And what or who was to blame for my inability to convert to cash? I can name them off by heart: market manipulators, distractions, a colleague’s advice, a fellow trader’s opinion, institutions, global events, USA, interest rates, short sellers (blaming short sellers is near the top of the list) and etc etc etc. Does that sound like a mind of a Merchant? No. It’s sounds like the mind of a human being who takes a whole lot of risk without direction and without purpose.
Let me share why I could not realise my gains or in other words, Why I was unable to take a profit.
It was not due to any of the external factors I mentioned before. There was one person and one person only who clicked the mouse button to enter a trade. There was only one person responsible for exiting the trade. That person was and always will be me.
[in your case it’s you…I’m sure I didn’t need to point that out but just covering my bases here]
So why did I enter at a too high price and why did I sell at a loss? Why did I celebrate massive profits, only to see them fade into losses shortly after? Here are a few real reasons: greed, hubris, fear, imagination, satisfaction, ego, ignorance, naïveté [Yes I do french-looking english words now], excitement, adrenaline, addiction etc. The list really can go on and on.
Do any of those sound familiar? Take a moment to reflect on your own trades. Now let me give an example of why no one except you are to blame for your trades. For each transaction on the stock market, there is a buyer and a seller. When you buy at an overbought price, there is a seller on the other side that released those shares to you. When you sell at the bottom, there is a buyer on the other side who bought those shares from you. Let’s briefly look at the chart for Breaker Resources NL (AX:BRB) which I called the dump on at 73c.
Breaker Resources BRB:AX
Someone always buys what someone else is selling. So what is the point of this demonstration?
The point is: 2 people bought into BRB at 2 different times. One makes a profit, the other holds on for dear life.
I don’t give stock tips. But even if I gave you a stock that would triple in 1 year from now, you would probably lose money if you don’t enter and exit at the right times.
So to conclude by digression: the vision here is to help you think better, gain composure and be less emotional in trading. There is no better education than to learn how someone else, more experienced, thinks and processes information. Then the crux is to apply that to your own trading. My aim is to facilitate every visitor of this site to become more successful, by gaining better self-control through education and knowledge.
This brings me to an exciting development at the | Chamber of Merchants |
The Patron
A non-trading associate of mine, Stewart, with no experience in the stock market, has opened a trading account on Friday. I felt it would be a great opportunity to have him post, now and again, under the nickname of the Patron. He will keep us updated on his experience as a new entrant into the stock market. I cannot advise him what to do [I’m not a financial advisor] and I cannot tell him what trades to take, however, I will be coaching him under a framework I refer to as the Merchant Method to think better and make more informed and less emotional decisions. The ultimate goal will be to turn his one and only deposit of $10,000 (10k) AUD into 20k AUD within the next 6-12 months. Whether or not this will be achieved will depend on many factors, however, he has peace that if he can receive a return superior to his bank saving’s rate of roughly 3% then he will be satisfied to continue after 12 months. L O L. He happens to be a personal friend and I know that having him share his experience and thoughts will be a great educational journey for anyone that intends on reading his posts. I will weigh in now and again with some views if he lets me.
Finally, Back to Gold | Perspective.
I’ve posted many charts that have received positive feedback. I believe it’s because subscribers receive some perspective about where they are in the bigger scheme of things. So what does a Bull Market look like? What does a Bear Market look like?
Gold Bull Market vs Bear Market
The last two bear markets for Gold lasted around 4 years each. The bull that followed lasted 10 years. If we have indeed entered a new bull market then we should be making higher highs over the coming years. If we are in a new bull market, I intend to continue trading it.
Now onto current affairs.
The Jobs Report | Unemployment Report | #FedFairyTales
If you follow me on Twitter you’d know I go pretty excited when I saw the jobs numbers come through. They came in well below estimates and the unemployment for the United States rose to 5%. Gold made it all the way back to $1265, however, as quick as it bounced, it commenced a retrace as traders were shepherded by FOMC members and the media. What do I mean?
I mean this: The entire market is pivoted, leaning one way or the other depending on whether or not the US Federal Reserve will be raising interest rates. [This is a huge topic and if you research it you end up with information that keeps locked up with the herd which is slowly being led off a cliff.] Google (NASDAQ:GOOGL) SchiffRadio which I subscribe to if you’re interest in awesome economic commentary.
So the consensus was that the NFP Payrolls number should be 172k. During the week, many of the banks and analysts expected 180k and some even expected above 200k, especially since there is an expectation of a rate rise in December. Low and behold, the number came in at 156K. Not only that, but unemployment rose to 5%.
Now from an economics perspective, this is way below what was expected. This is especially the case if you intend on raising interest rates which is designed to slow down an expanding economy. So, with these numbers already looking like the US is heading for a recession [Australia would follow unfortunately], raising interest rates would be like pouring water on wood even before it’s taken flame. Can you imagine going camping, trying to light a campfire and someone suggests “Hey, let’s pour water on!”. That is a very bad idea. Yet, we are seeing core inflation starting to creep up higher while GDP remains lacklustre. [I think I need to start a podcast because speaking would be quicker than typing.]
So with this dire conundrum and poor jobs numbers, why did gold sink back down to $1257. The answer is spin.
spin
noun
: A distinctive point of view, emphasis, or interpretation; a distinctive character or style: “He put a spin on the facts”
Yes. Directly after the disappointing jobs report which 100% takes a rate hike off the table for November and even raises doubt about a December rate rise, FOMC Mester delivered a speech that it looks good. Suddenly, over and over on the media, the disappointing jobs report was dubbed “The Goldilocks Report”: Not too great, not too bad. Just right.
Are you kidding me?!
No. It’s true, they really said it. And why would they? Because you cannot enter an election with a disappointing jobs number. So a disappointing jobs number became a #FedFairyTale number literally, dubbed the “Goldilocks report.”
Now the question that a Merchant must ask: If interest rates were not raised for the entire year, when the employment figures were actually better, why would the Fed raise rates as the numbers start heading downhill? Answer: They won’t raise rates. If they do raise then the stock market will have a worse correction than in January 2016, which is great for gold. And if they don’t raise rates, guess what? It’s great for gold. Understand why I’m trading the gold and silver miners? I also believe that Big money and Smart money are smarter than any of us and soon we’ll see the sell off in the dollar which will commence the next leg up for Gold.
I wanted to discuss particular stocks such as BLK, MOY and RMS but I will look at them in later posts.[ This post has taken me way too long]
I will say that I expect only a few more days of the gold price below $1300. As I said in the last post, from the past we can see that these nightmare dips last only a few days [I’ll address this again later this week.]
The Best Tool for Trading
I mentioned earlier that I would discuss the best tool for trading that a Merchant uses.
The best tool you could possibly use for trading is your Mind.
Seriously. Look how easy it is to make money: Buy low, sell high. 2 clicks and profit. Wham! Easy right?
But between the space of those 2 clicks are you, your mind and time. The combination of these can create failure or success.
So if you’re going to spend your time on something, spend your time honing your thought process. It’s the most profitable tool you have.
If you want to be a profitable trader, if you want to think like a Merchant, then you need to learn to control yourself: Control your imagination, control your thoughts, control your conversations. Learn to wait and seize opportunities when they present themselves. There are many, many opportunities across different stocks, different commodities and throughout each year.
Being a merchant means making between 16 to 50 trades a year. For some people, that is not exciting enough. And I say “each to his own”. Later this year we will be moving to a subscription basis for selected articles and reports. Please express interest by shooting me an email at info@chamberofmerchants.com.au.
Thank you for reading the | Chamber of Merchants | Weekend Report.
| the Merchant