To give you an idea of how we operate here at TRI, we took a position with 1% risk in GDX as a mean-reversion opportunity the day after the highest volume day in its history (April 3rd). When an asset capitulates as much as that, it presents an opportunity for an entry in the other direction. However, no trade is infallible and this morning price moved below our exit point. I sent out a note to subscribers to take your medicine and come back another day when the price action provides us with an entry.
This is the bottom of a very nasty 4-year decline in commodities, and managing risk is the most important thing. There is huge upside, but also severe downside if you don’t have a plan. Taking a 1% loss, as disappointing as it is, far outweighs riding something down 4-5-6% or more below multiyear support. The way the math works, if you avoid a 10% loss, when price returns to the same level as before the percentage gain is greater than 10%, it just takes patience and discipline in your trading to earn that reward.
I feel for everyone heavily invested in precious metals today, but this is not the end, it is just another lesson in understanding the markets and managing risk. Here at TRI, I preach risk management because looking down is so much more important than looking up. It is admittedly boring, but absolutely necessary to survive in this game for the long run.
I wish you all the best and I will continue to be here daily to provide the best commentary that I can.
Good trading all.
Steve Chapman, TRI
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