If you consider the massive easing / devaluation of the Japanese Yen some months ago, and put yourself in the shoes of an average Japanese investor waking up, morning after morning – only to see the price of Gold (priced in Yen of course ) going through the roof, you’d almost think you’d entered the Twilight Zone.
This doesn’t make any sense! I thought the price of Gold was going down, down down. What gives?
When traded “against” a currency that is rapidly losing it’s value ( via rapid printing / easing such as the methods currently being used by the U.S Fed) , it only makes sense that a hard asset ( such as Gold) which cannot be duplicated/printed/ reproduced “should” rise in value substantially – as in the simplest sense – you’ll need a whole lot more of that “local currency” in order to purchase it right?
The example seen in Japan is exactly what one would expect to see – when a currency is rapidly debased in value, and then compared / traded against something that “cannot” be artificially created. Currency value down = Gold price up.
So what the hell has been going on in the U.S then? Why do I see the value of Gold taken to the cleaners AS WELL my USD / purchasing power getting smashed? How can this be?
How can this be you ask? How can this be?
………………………to be continued.
inquiring minds want to know
Kong,
What is your take on USD/JPY coming into next week? USD declined for a 6th consecutive day and the last time it did this was more than 2 yrs ago, so shouldn’t a significant bounce be expected soon? I would get margin called at 95.70ish(-250pips) & am kicking myself for not cutting my losses at -100 pips when I read your article about betting against the dollar. Can you write an article in detail about your money management strategy?
Thanks
TTH
It looks like a bit of the selling pressure has tapered off “for now” but……I’m still looking at the 94.00 area to consider what’s next.
We could easily see a couple days bounce here sure – but I’d still expect a “lower high” on a daily chart so….100 doesn’t look to be in the cards.
As it stands I’ve got “Kongfirmation” short on every single time frame from the daily straight on down to the 5 minute buddy.
Can you look to just sell ” a small portion ” of your trade in order to ride it out?
It’s tough being under water I know. Breathe man……breathe.
I don’t expect it to hit the 100 area anytime soon & would be more than happy to take a relatively small loss once it comes close to 98. Very hard to breathe when you’re literally only ~50 pips from a MC!
I know I will get a lot of heat for saying this, but using full capital/margin on a single trade at low leverage(10:1) & no set SLs is the only strategy I’ve been consistently successful with since I started trading 1 year ago. A few weeks ago I began managing a business partner’s 10K account. We had originally agreed to stick to my strategy, but everything quickly deviated from that. Although I had made 15% in the first week with less than a 3% drawdown, he quickly became greedy by requesting the leverage be increased to shoot for unrealistic gains & lowering my profit cut from 30% to 25%(this is why you should always have things in writing!). As if this pressure wasn’t enough, he then starts to interfere with trades by cutting two 50+ pippers prematurely so as not to be “greedy.” Sure enough, the account quickly gets margin called at high leverage(50:1) & the account is left with about 5K.
Sorry for the wall of text, but I just wanted to give you a bit of background regarding my current situation. Unfortunately I cannot close off small portions of the trade. Doubling the account back up to 10K using the original method would probably take a minimum of 3 months, so 20:1 is temporarily being used in an attempt to restore the account. I love to keep an open mind, so if you have any suggestions I would be glad to hear them.
I rarely if ever use stops (short of those tethered to ballons or hanging from anvils….ie very high or very low) if it’s anything to you.
Coming back from a 50% account cut would be daunting to say the least….as emotions now run hotter – and funds run lower. This is an extremely dangerous position to be in “pychologically”.
If anything leverage and position size should be “decreased” as thoughts of “do or die” swirl. In a sense you are now considering making “twice the gains” with “half as much money”. Very dangerous. Essentially a single mistake could easily cut things in half again.
My suggestion would be to plan on working much, much longer hours ( literally baby sitting every single trade ) using very small positions and targeting entries / exits on smaller time frames ( once you’ve established trend on larger ) and literally taking any and everything you can get to build a % or two at a time.