How to be Disciplined Trading Gold with Cycles Analysis

Trading can be a lot of fun and profitable or a nightmare and very costly. It really just comes down to understanding the key areas, which will make or break your trading. I have received a few emails asking me to explain more about how I stay disciplined, making sure my emotions don’t get the better of me.

Some questions asked are:
How do I pick a trading strategy, which will work for me?
What reading material and habits do I recommend for keeping focused?
What are some of my experiences?

I will cover all this for you below because trading discipline and managing emotions is by far the most important and difficult aspect of trading.

How do I pick a trading strategy, which will work for me?

Your strategy should be inline with your abilities to read the market also focuses on a time frame, which suits the time you have available to trade each day, week or month. In other words, you should not be trading ETF options if you cannot profit from trading ETF’s without leverage. Also if you don’t understand how options work in depth, then you need to spend some time learning about this type of trading vehicle before you ever place a trade using options. Simply put, if you don’t understand everything about what you are trading, then you will eventually give all your money to the market, leaving you with an empty account, decreased trading confidence and a frustration.

The point I am trying to make here is that you should focus on trading the types of vehicles where you understand the daily price action, how to trade that investment, what makes it move, is there leverage, and what time frame you should focus on, so that it works with your schedule. If you can only look at the charts at night, after the markets close, then you should not be focusing on day trading. So pick something you like, understand or want to trade and learn everything about it. Then find a trading system or create one yourself, which is profitable using the time frame and risk tolerance that fit your personality.

Over the years my trading strategy changed, as will yours. The more time you spend trading, the better you will become the more you will find yourself trading more of one type of investment that consistently makes you money. When I started trading back in the late 90’s I focused on stocks, but as time went on, my strategy evolved and now my main focus is on trading indexes and gold with a hybrid intra-day and swing trading strategy that I created. My focus is on ETF’s, because you can select different levels of risk/reward with the 1,2 or 3x leveraged funds. While ETF’s are fantastic to trade, they do have some limitations. Because the indexes and gold trade 24/7, you are limited to only regular market hours, 9:30am – 4pm ET. That leads me to the topic of Futures and CFD trading.

Depending on the type of trade and time of day a setup occurs, I will jump from ETF’s to futures or CFD’s. Let me explain, if there is a setup early in the morning before the regular market opens, or after the close late in the evening, then I trade futures or CFD’s because it allows me to trade 24/7 catching moves which would not even be seen by most North American traders. There are not a lot of these trades per year but enough to make it worth trading.

What are some of my experiences?

In short, virtually every trader will eventually reach the tipping point. What I mean here is you will either lose enough money and/or become so frustrated that you will debate whether or not you should continue trading.

I reached this level many years ago and I still remember it crystal clear. I lost most of the money in my account, almost every trade was going against me and I had never been so frustrated and upset in my life. I’m sure many of you know what I am talking about… Unfortunately trading does break a lot of people down financial and emotionally, causing them to give up. But others reach this point and realize that if they can be wrong all the time, then someone who knows what they are doing should be making good money and that they just need to learn what they are doing.

This is the point at which you decide whether to give up a life long dream of trading full time to go back to your day job or you step back to re-evaluate your situation and seek profession help. All successful traders have or had a mentor at one point in their life and it does not matter which career you are in, learning from someone who knows how to do what you want is the fastest and most effective way to learn.

Those who decide to continue and take things serious shift their mind set from Trying To Trade to Learning To Trade. It is at this point, where trading becomes fun and profitable again. My point here is that trading is not something you can learn quickly on your own. You should get help from someone who is successfully doing exactly what you want to be doing, then shadow their every move and seek mentoring from them. This usually costs more than say just buying a book or mini e-course. There is no comparison between what you get out of them or obtaining practical experience.

What reading, and habits do I recommend for staying disciplined?

There is no easy answer, as everyone absorbs information differently. Some prefer reading and studying charts, listening to audio, watching videos and some prefer or need live mentoring and real-time examples.

I learned charting from the well known annalist, John Murphy, through his book “Technical Analysis of the Financial Markets”. This is a massive book with over 500 pages explaining technical analysis. This book is a lot to digest, but there is a lot of great free information online, which will allow you to read about the basics of trading including: chart patterns, volume, candle sticks, support & resistance levels and trend lines. Once you understand these key concepts and are able to read the charts, then you are literally ready to start paper trading and applying or creating a trading strategy, which manages entry, exits, scale out prices, and manages your money.

As most of you know, I am a very patient trader waiting for risk setups in the investments, which I understand best and have consistently traded for many years. Because of my strict trading setups and rules, which I have set for myself, it does cut down on the amount of trades the market provides. My focus is on low risk, high probability setups, which I completely understand, and that’s all I trade. This trading strategy works on any time frame allowing me to use it for day trading and swing trading.

The question everyone wants to know is how to stay so disciplined and keep emotions from taking over?

This takes me back to the Tipping Point mentioned earlier. I always ask myself if the trade meets my setup criterion, which is a simple yes or no answer because my setup criteria is clear in my head. Either it has the characteristics I am looking for or it does not. Sometimes the setups are very close and I will admit it is very tempting to take the trade, but I always step back (walk away from the computer) to clear the emotions flying around in my head and ask myself, do I want to break a rule, which almost broke me financially and emotionally once before? The answer is always No. So I pass on the trade and wait for another one to unfold.

When I was first learning to day trade, I quickly learned that I did not have to take every setup that looked like it had potential. I realized that no matter what condition the market was in, there would always be another trade just around the corner, so its not a big deal. I admit, I hate to see an investment make a large move without me like this 7 day rally in gold happening right now, because my setup criteria was not met. But I know there will be many more trades through the year in gold and other investments, which will provide me with great returns. People who think they need and must catch ever big move in the market in order to make big money on yearly basis, are looking that things completely backwards. It only takes 5-10 good trades per year to out perform the market so I don’t understand people when they panic about every zig and zag the market makes.

Ok, lets take a look at the gold chart, which I have overlaid with two cycles, which I use to help time gold.

9 Day Gold Cycle

The daily chart of gold below has my 9-day cycle overlaid. You can see how this cycle relates to the price movements of gold. After the recent low cycle, we saw gold continue to move higher and this is because the trend of gold turned up in March and the long term cycle is also moving up at the same time. These two bullish forces can over power the short term 9-day cycle at times.

That being said, the 9 day cycle will be topping in 2 days (Tuesday) and that should put some selling pressure on gold. I expect to see a pullback or consolidation (sideways movement) in the coming week.



29 Day Gold Cycle

This cycle allows us to see the big picture and underlying trend for gold. This larger more powerful cycle of gold will top in one day (Monday) and that should put a damper on this rally. You can see how I think gold will play out from the lines on the chart.



Combined Cycles on Gold

This chart clearly shows how both cycles will top this week which should put some selling pressure on gold and silver and one of the reasons I have not chased the price of gold higher buying in a panic.



Gold Trading Discipline Conclusion:

In short, trading discipline is something you can become educated about from books, but the only way to actually take control of your trading, is to be honest with your self. Think of it this way, every time you break a trading rule, you are setting yourself up for failure. Do you really want to sabotage the most important person in your life, which you will have to live with every day (You)? If you cannot trust yourself from sabotaging and lying to your self, what type of person would you be? Do you want to lose money by taking positions, which are proven not to work and cost you money in the long run? Of course you don’t!

So the next time you see a trade, which is close to your setup but no exactly what you are looking for, just walk away and wait for the next one.

As for the current price of gold, I think we are about to see lower prices, or at least a pause, which will last for 5-15 days.

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Oil, Not China, Is The Real Destroyer Of America's Trade Balance

UBS's head of Asia-Pacific economics argues that the real global trade imbalance isn't U.S.-China, it is U.S.-oil. As shown below, current account surpluses from fuel exporting-nations have been a far larger driver of total global trade imbalances coming from emerging markets. China's current account surplus (in blue) has been large in recent years, as a percentage of the global economy, but it has been dwarfed by fuel exporters (in green):



Looking at the movements from the late 1990s through 2006, when the overall U.S. deficit worsened from 2 percent of GDP to nearly 7 percent of GDP at the trough, a full three percentage points of that adjustment came from other advanced economies and from fuel imports; only two percentage points came from China and other non-fuel emerging markets. And the recent drop in the U.S. deficit had almost nothing to do with China; again, it was oil prices and developed trade that explains the entire swing over the past 18 months.



Thus the U.S. could use a little less finger-pointing at China... and a lot less driving... if it really wants to correct its global trade imbalance.
This is a huge argument against U.S. trade protectionism since protectionism would miss the largest cause of America's trade deficit while only hurting U.S. export prospects by pissing off trade partners.


Reporter Vincent Fernando writes for The Business Insider


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Crude Oil Weekly Technical Outlook

Crude oil edged higher to 87.09 last week but failed to sustain above 61.8% projection of 69.50 to 83.16 from 78.56 at 86.92 and formed a short term top there. Consolidation from there is still in progress and deeper retreat cannot be ruled out. But downside should be contained by 61.8% retracement of 78.56 to 87.09 at 81.82 and bring rally resumption. Above 87.09 will target 90 psychological level next.

In the bigger picture, medium term rise from 33.2 is still in progress and could extend further higher. Nevertheless, there is no change in the view that it's the second wave of the whole correction that started in 2008 at 147.27. Hence, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, below 78.56 support will be the first signal of topping and will turn focus back to 69.50 support for confirmation.

In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While the rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and we're still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that, strong resistance should be seen between 76.77/90.24 fibo resistance zone and bring reversal for another low below 33.2 before completing the whole correction from 147.27.....Nymex Crude Oil Continuous Contract 4 Hours Chart.


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Where is Crude Oil Headed Next Week?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks at where oil is likely headed next week.




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Crude Oil and Gasoline Futures Decline on Speculation U.S. Fuel Supplies Will Climb

Crude oil fell and gasoline declined for a fourth day on speculation that U.S. stockpiles of the fuel will surge as refineries bolster processing rates. U.S. plants operated at 84.5 percent of capacity last week, the highest level since October, according to an Energy Department report on April 7. Futures climbed earlier today on signals that Greece, Europe’s most indebted nation, will get an international bailout to avert a default.

“We’re still in corrective mode,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “Gasoline has been under pressure ever since the inventory report showed the increase in refinery runs.” Crude oil for May delivery declined 64 cents, or 0.8 percent, to $84.75 a barrel at 12:07 p.m. on the New York Mercantile Exchange. Prices climbed as much as 98 cents, or 1.1 percent, earlier today. Oil has dropped 0.1 percent this week and increased 6.8 percent this year.

Gasoline for May delivery slipped 1.78 cents, or 0.8 percent, to $2.2805 a gallon in New York. Oil surged to an 18 month intraday high of $87.09 on April 6 following reports that showed growth in U.S. jobs and service industries. “Prices moved higher on expectations that economic growth will continue and demand is going to increase,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Inventory levels are still robust. If demand doesn’t pick up, oil is going to drop.”

U.S. Stockpiles

The U.S. Energy Department reported on April 7 that supplies of crude oil rose 1.98 million barrels to 356.2 million last week, leaving stockpiles 7.1 percent higher than the five year average for the period. It was the 10th consecutive gain, the longest stretch of weekly increases since late 2004.

“There’s no shortage of supply, and demand isn’t that strong,” said Paul M. Mecray III, a managing director at Tower Bridge Advisors, an investment adviser in West Conshohocken, Pennsylvania. “There are geopolitical concerns that are supporting prices. If Iran were to be attacked, oil would rise well over $100 in minutes.”

President Barack Obama vowed to maintain “consistent and steady” international pressure against Iran developing nuclear weapons capabilities. “I don’t think you’ve seen the degree of international unity that you’ve seen in this effort,” Obama said on ABC’s “Good Morning America” program, taped yesterday in Prague.

The U.S. is pushing for tougher measures in a fourth set of sanctions against Iran at the United Nations to stop what it says is an Iranian development program for a nuclear arms capability that would destabilize the Middle East. Brent crude oil for May settlement fell 38 cents, or 0.5 percent, to $84.43 a barrel on the London based ICE Futures Europe exchange.


Reporter Mark Shenk can be contacted at mshenk1@bloomberg.net


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Stephanie Link: Opportunities In Oil

Stephanie Link, director of research for Action Alerts Plus Portfolio, says they're buying oil stocks that have big upside potential and ignoring high crude prices.




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Crude Oil Daily Technical Outlook For Friday

Crude oil recovers strongly after drawing support from 4 hours 55 EMA. Nevertheless, with 87.09 resistance intact, consolidation from there might be in progress and another fall cannot be ruled out. But after all, break of 78.56 support is needed to indicate that crude oil has topped. Otherwise, outlook will remain bullish. Sustained trading above 86.92 will target 90 psychological level next.

In the bigger picture, the strong break of 83.95 high confirmed that medium term rally from 33.2 has resumed. Nevertheless, there is no change in the view that it's the second wave of the whole correction that started in 2008 at 147.27. Hence, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, below 78.56 support will be the first signal of topping and will turn focus back to 69.50 support for confirmation.....Nymex Crude Oil Continuous Contract 4 Hours Chart.


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Crude Oil Is Set for a Second Weekly Gain on Economic Recovery Optimism

Crude oil is poised for a second weekly gain as concern over a Greek default subsided and stronger than estimated retail sales in the U.S., the world’s biggest energy user, bolstered optimism of an economic recovery. Oil rose for the first time in three days as March sales at 31 chain stores gained 9 percent, the largest one month increase since March 1999, the New York based International Council of Shopping Centers said yesterday. U.S. oil refineries raised operating rates to 84.5 percent of capacity last week, a six month high, the Energy Department reported on April 7.

“We saw some fairly encouraging retail sales data in the U.S. and that seemed to buoy market sentiment,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “It’s the latest in a string of encouraging macro data.” Crude oil for May delivery rose as much as 44 cents, or 0.5 percent, to $85.83 a barrel in electronic trading on the New York Mercantile Exchange. It was at $85.74 at 1:15 p.m. Singapore time. The contract is poised for a 1 percent gain this week, after climbing 6.1 percent last week. Futures have increased 8 percent this year.

Prices declined yesterday amid speculation Greece may default. The euro came within a cent of its weakest against the dollar in 11 months before erasing losses after Greece’s finance ministry said the country’s first-quarter budget deficit narrowed. European Central Bank President Jean-Claude Trichet said a default is “not an issue.”
Oil surged for six days to April 6, the longest rally in three months, following reports that showed growth in U.S. jobs and service industries.....Read the entire article.

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Where is Crude Oil Headed on Friday?

CNBC's Matt Nesto discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.




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Crude Oil Market Commentary For Thursday Evening

Crude oil closed lower on Thursday as it extended Wednesday's decline. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If May extends the rally off February's low, the 50% retracement level of the 2008-2009 decline crossing at 97.31 is the next upside target. Closes below the 20 day moving average crossing at 82.77 are needed to confirm that a short term top has been posted. First resistance is Tuesday's high crossing at 87.09. Second resistance is the 50% retracement level of the 2008-2009 decline crossing at 97.31. First support is the 10 day moving average crossing at 83.87. Second support is the 20 day moving average crossing at 82.77.

Natural gas closed lower on Thursday as it extends this week's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are turning neutral signaling that sideways to lower prices are possible near term. If May renews this winter's decline, weekly support crossing at 3.502 is the next downside target. Multiple closes above Tuesday's high crossing at 4.334 are needed to confirm that a low has been posted. First resistance is Tuesday's high crossing at 4.334. Second resistance is the 25% retracement level of the October-April decline crossing at 4.405. First support is today's low crossing at 3.857. Second support is last Thursday's low crossing at 3.810.

The U.S. Dollar closed higher on Thursday as it extends the rebound off last week's low. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are neutral signaling that sideways to lower prices are possible near term. Closes below last week's low crossing at 80.52 are needed to confirm that a short term top has been posted. If June renews this winter's rally, the May 2009 high on the weekly continuation chart crossing at 83.34 is the next upside target. First resistance is March's high crossing at 82.52. Second resistance is the May 2009 high on the weekly continuation chart crossing at 83.34. First support is the 20 day moving average crossing at 81.18. Second support is last Thursday's low crossing at 80.52.


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