In our last weekly chartbook we showed edges on how to trade a small range and volatility. This style of trading comes with an extra bonus. You will be ahead of the crowd when it truly matters. Small ranges, triangles and volatility nourished by crowd uncertainty about direction, eventually resolve. Meaning ranges and triangles break at some point. Once this occurs it is noticeable to the whole world. Orders get triggered, as well as trend line alarms and so forth. Eventually news tell a story. This is the time when amateurs place orders either chasing trades, or preset orders get filled on wide spreads and in an environment of high risk. Another way to participate in these lucrative breakouts is to be ahead of the crowd.
Within the three week volatile sideways range in silver we had three long entries. These entries from the 8th, 15th and 16th were all posted live in our telegram channel.
Silver in US Dollar, daily chart as of October 16th 2019, buying at the low of the range:
Silver in US Dollar, daily chart as of October 16th 2019
The first two long entries provided range profits and were as such income producing trades but without follow through. The range held and the runners got stopped out (see our quad strategy).
Daily chart, silver in US Dollar, October 24th 2019, ahead of the crowd:
Silver in US Dollar, daily chart as of October 24th 2019
Our third entry on the 16th got financed as well and reached its first target but prices again were sent back within the range.
Three days later prices attempt again to expand the range. If not positioned like we are, one finds oneself in the dilemma of where to enter:
Buying at the end of a already strongly advancing day of more than 1.5% price move?
Trading the range breakout that has been rejected multiple times with overshoots?
Buying above recent highs as a confirmed price breakout?
That would be the challenging questions if trading along side the crowd. And no matter what one would pick, it wouldn’t be low risk.
October 24th 2019, gold in US Dollar, daily chart, “point of uncertainty”:
Gold in US Dollar, daily chart as of October 24th 2019
When looking at the gold market at exactly the same time, the dilemma is even more clear. With gold near its upper resistance line of a dominant triangle formation on the daily time frame, breakout traders become alert. In addition price levels are trading exactly at US$1500. A mark the media doesn’t miss. The same agonizing questions arise for gold traders and investors, of how to participate in a possible opportunity to make some money.
Entering trades ahead of the crowd allows for much less risk to participate in a possible price advancement. It effects possibly avoiding volatility, wide spreads, low risk/reward ratios and most of all participation in challenging times psychologically. In today’s chart book two ways of such anticipatory market participation versus reactionary one is pointed out (for bullish long entries):
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