There’s a problem with the retail trading space and we aren’t naive to it.
We jump into this complex trading world with little to no knowledge and expect the outcomes to be great. We look at a chart, see that it’s been going up for weeks and weeks and think to ourselves…
“This can’t go on forever…”
So we sell it, and we continue to do this until we get frustrated and end up risking everything once we’ve become battered and bruised, only to get steamrolled.
Right now is no different.
Retail positioning shows traders are heavily short on gold. They’re betting on the top. They are indeed getting churned up.
Why do we do this?
The retail playbook usually goes something like this:
Price rallies.
We are short because we think it’s too high.
Price keeps rallying.
We continue to be short.
It keeps going.
We panic and reverse our positions.
The market reverses.
This is a vicious cycle which is why 70-90% of retail traders fail.
How to avoid getting steamrolled
If we want to avoid the pain of being on the wrong side of the market more than not, we need to put some work in. Here are 4 steps to do.
Research before you trade. Don’t just look at charts over and over again. They are driven by multiple factors. Start with fundamentals, interest rate differentials and bonds.
Respect momentum. Just because a market has rallied doesn’t mean it’s due to fall. The market can remain unpredictable.
Pick your spots. Instead of blindly fighting the trend, wait and be patient. A reversal could form but you need to wait for a shift first.
Use tools. I don’t mean indicators, I mean sentiment tools and macro tools to help you understand what’s going on. Be sure to test these tools by looking at examples.
Will Gold Keep Going?
Yeah, probably.
Global uncertainty, central bank demand, investor flows, inflation worries. Are all pointing to upside in metals.
Not to mention the money supply is heading up, more money printing will put more money into the economy and that could see an increase in inflation.
Now I’m not saying it can’t turn, but the fundamentals may have to shift somewhat for a serious reversal.
Thinking out loud
This is why I became an analyst, it’s why I became the host of Market Wake Up with Jord. Our vision was to pass on our mistakes, our knowledge, others knowledge to help prepare traders for the beast that is the market.