Martin Kronicle

(click for larger image)

Gold sold off about 1% yesterday and if you’re not short, you haven’t missed anything. The worst thing you can do is obsess over a missed trade or an opportunity you see after the fact. Two, this market was in a tricky range before yesterday’s sell off.

Here’s what you should look for IMHO:

1) Wait for the contract to rally up to the trendline and hopefully settle there. That’s at about $1170.

2) Sell the contract short on the reversal off the trendline. That is your lowest risk entry.

3) After you’re short, you’ll be looking to make sure that GC sells off and sticks. Make sure it takes out the lows of yesterday ($1729) and of 9/26 ($1738) and that it stays there.

The 20-day ATR is about $20. A good indicator of when to cover is on a day when you see the contract off $40.

Risk Management

If the daily vol is $2,000, you don’t need me to tell you that you should have between $100 and $200,000 in your account. Of course, some of you don’t, so you’re likely trading with leverage not by choice but by necessity. This is why you cannot chase something and that missing it is better for your mental health than some of the popular notions about how devastating it is to some to miss an opportunity. Get over it and don’t believe everything that you read on the internet.

You’ll miss plenty of opportunities regardless of your methodology over the course of your career. You’ll always have more than one chance to enter a trade. The moves worth being in don’t happen overnight and then “that’s it.” They last for weeks and months and there will always be a second chance to enter a trade for the first time.

(click for larger image)

Further, you should always be uptiming and downtiming your trades. Look at the charts over multiple time periods for perspective. When you see GD in the weekly charts, you see it’s in a trading range. So what’s the big deal?

Is fire dangerous?

Fire can burn your house to the ground, save your life, protect you from predators, and help you sanitize water.

So is fire dangerous? It depends how, where, and when you use it.

Options are like fire, even though they have a reputation of a product used by reckless speculators. They also can either burn or save your portfolio…it all depends how you use them.

Constantly apply long spreads and other long gamma strategies to your portfolio, and options just might save your year when the unexpected happens. See Google chart above as an example of the potential benefit of some leverage and absolute risk control. Own the stock in the 750 range or own 720 calls or maybe a bull call spread.

Which is potentially more risky?

Since I won’t be watching any baseball this weekend, I’ll be catching up on some reading.

We talk about following trends and about the importance of consistency well here’s one for you.

The Rolling Stones confirm their 50th Anniversary concerts.

That’s right these 70 year old guys are still rocking and you know with certainty they will fill the stadiums they book.

They set a trend that everyone followed and you cannot argue about their consistency to deliver on sold out stadiums.

If only we can have these kind of consistent results from our trading.

Oil is both a volatile contract to trade and also a volatile conversation piece.

If you listen to the likes of legendary investor Jim Rogers there is no doubt that we are running out of oil in the areas controlled by OPEC. As a result we are having to go further afield to harder to extract locations.

Few areas get people quite so excitable as the Arctic circle and it’s ice levels.

Environmentalists and those with a concern for the planet’s welfare are concerned with melting ice caps and the loss of habitat for polar bears. Especially so after the recent hot US summer, which has led to scientists reporting sea ice in the Arctic Ocean being at its lowest levels ever.

Not everyone is bothered by this. Actually some are jumping for joy. The Vice President of Shell Alaska for one. “I will be one of those persons most cheering for an endless summer in Alaska.”

Up in Alaska on the Chukchi Sea, 09/10/12 at 0430 Alaska standard time, Shell’s oil rig the Noble Discover began drilling the first pilot hole – the first time a drill has touched the sea floor in the Chukchi Sea in more than two decades.

Read more from the National Geographic on US Oil Drilling in Alaska