Ask yourself the following question. What are my top five trading/investment rules. Write them down in detail and review them. Seems like a simple question but if there is any struggle in response, it is of utmost essence to clarify. It is impossible to produce consistent results over a larger sample size without a clear measuring tool. It is those rules that need to be principle based, adhered to, stacked in the right order and the list goes on. The devil is in the details, which is especially true for trading. Imagine a boat. Even a small leak will eventually catch up with you if you don’t take care of it. It can actually sink the whole boat. Many rules are necessary but certainly the top five are essential. It is a simple exercise to make money. Do not postpone this exercise.
Silver, Daily Chart: Just As Planned
Silver in US Dollar, daily chart as of May 14th, 2020
In our Silver chart book from May 1st 2020 we anticipated a long entry in Silver. Shortly after the publication all entry criteria were met and we posted an entry in real time in our free telegram channel. Since then we have reached the first two exits of our quad exit strategy. The quad strategy being one of our first five rules that we adhere to religiously. This way of approaching exits does not only allow for minimizing risk and maximizing profits but most of all allows through its variability of choices in target exits for an ease of execution. A much needed psychological element of successful trading.
Silver, Daily Chart: A Simple Exercise To Make Money, Avoid Rule Conflicts
Silver in US Dollar, daily chart as of May 14th, 2020 b
If you look at the chart above you will identify the recent reversal to be a “V” shaped recovery. This being statistically a very strong bottoming pattern. While our rules typically state that short trades are only valid after a sideways period, in the case of a “V” shaped pattern we do not short at all since this is from a probability perspective a high risk trade.
Most traders find themselves in situations where they violate their own rules and blame themselves for a lack of discipline. The underlying truth though is that the refinement of their rules and sub rules isn’t detailed enough. It takes them already very long to extract a true edge and once found there is an itchy trigger finger. Unfortunately, this causes system development to be abandoned way too early while execution suffers by the lack of degree of sub rules. Many rules might be conflicting and lacking a clear hierarchy. The devil is in the details, but once these kinks have been worked out execution will be a lot easier. Another reason for rule violation might be psychological in nature like the acceptance of risk. In that case, trade smaller and again this just points towards the lack of rules in the area of money management and position sizing.
Silver, Weekly Chart: Time Relativity Errors
Silver in US Dollar, weekly chart as of May 14th, 2020
One area of rules where trading losses often occur as well, is a misuse of time frames. Time frame relativity errors can be very costly. A simple exercise to make money, is not to loose any.
At this point in time we are extremely bullish on silver. We pointed out various reasons for this in our last silver chart book publication. It is still extremely important when and on what time frame to engage in the silver market. While the monthly and daily chart provides ample opportunities, the weekly chart (see above) is at a high risk zone right now.
We had a great bullish bounce, but are from a weekly perspective entering the middle of a sideways range which in addition is a strong resistance zone. This is from a trade entry risk perspective not a place where you want to initiate a trade.
A simple exercise to make money
It is only fair for us to share our number one rule with you. We have, what we call, the 80/20 rule. This means 80% of our decision making process is rule based trading versus 20% being discretionary.
The market is a living entity, far too complex to be tried to be compressed into an exclusively left brain rule based system. Nevertheless it requires a minimum of 80% rules based trading to be strongly guided. This allows for the creative discretionary decision making side to make trading decisions as well. These approximate proportions can lead to truly outstanding performance.
One way to assure such performance, is to allow the hierarchy of the top five rules to change throughout ones trading career – even new rules replacing old ones. The general guideline here is, that mastery is only achieved if the process feels easy. In case there is some friction it is time to analyze and find the culprit. Problems need to be solved before continuing to execute trades.
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