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Trading Volatility, Ballasted by Gold

Started by romans holiday , Jan 27 2010 11:52 AM

405 replies to this topic

#1 romans holiday

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Posted 27 January 2010 - 11:52 AM

Being very overweight in bullion, I'm now looking to raise a sizeable dollar position this year. I do not really see the dollar as a hedge against bullion, or necessarily inversely correlated, but more as a currency that can be owned  in its own right alongside gold and silver. My strategy, in a macro-deflation, will be to stay liquid in the strongest currencies; gold, silver and dollars.

The current environment has been volatile and looks to remain so for some time to come. I will look to take advantage of this volatility by low frequency currency trading. I have chosen dollar/ silver to trade as they are a "contrary" pair and move against each other well. One is the reserve currency and represents safety, the other a proxy for commodities and represents risk. As the market swings between safety and risk this should be reflected well in these currencies. I have also chosen this pair as I will feel comfortable agressively trading them [though infrequently trading on the big macro moves] as I see both currencies performing well in the long term aggregate; they are both currencies you would do well to own in an asset/credit/debt deflation.

I'll use BV [no gearing] to trade. They charge 0.8% on transactions which I consider reasonable. The storage costs of silver is also very reasonable... but then I imagine I'll spend half the time in US dollars as I will be very much a dollar bull on BV [while a gold bull on GM]. There is a possibility that the dollar and silver might both track sideways together... though in a very volatile channel.  It is this channel I will be looking to trade. Silver I see as more speculative than gold and may look to take profits by purchasing further gold.

A couple of trading points have stuck with me from the Jesse Livermore book; to stake a position and sit on it for a good while.... and to make sure you stake a large position when you do so.







Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#2 romans holiday

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Posted 30 January 2010 - 03:41 AM

Previous dip suggests a bottom of 15.50.





Depending on the long term trend holding here, will start to buy. I am mindful of the "big one", a la Hoye, but think it could be delayed for a while yet. If the markets recover, and we get another push up, my target will be around 20/22 dollars.


Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#3 Wanderer

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Posted 30 January 2010 - 07:56 AM

Hey RH,

Good on you for doing this.  Seeing separate trading diary helps to separate people's objectives and styles, which is useful.  I'm looking forward to reading more as you make trades.

Wanderer

#4 romans holiday

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Posted 30 January 2010 - 02:00 PM

QUOTE (Wanderer @ Jan 30 2010, 04:56 PM) <{POST_SNAPBACK}>
Hey RH,

Good on you for doing this.  Seeing separate trading diary helps to separate people's objectives and styles, which is useful.  I'm looking forward to reading more as you make trades.

Wanderer

Thanks. I'm looking to pile in to silver [with my trading account] on this down leg. A factor I will keep my eye on is the dollar. When the dollar corrects/ consolidates from this move up, I think we could see another decent move up in silver. I'm going to denominate profits in dollars, and keep track of trades, profits, and losses in percentages.




What I find interesting about the above chart is the short lag between the turn in the dollar and then the turn in silver.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#5 riggerbeautz

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Posted 31 January 2010 - 01:18 PM

QUOTE (romans holiday @ Jan 30 2010, 02:00 PM) <{POST_SNAPBACK}>
Thanks. I'm looking to pile in to silver [with my trading account] on this down leg. A factor I will keep my eye on is the dollar. When the dollar corrects/ consolidates from this move up, I think we could see another decent move up in silver. I'm going to denominate profits in dollars, and keep track of trades, profits, and losses in percentages.




What I find interesting about the above chart is the short lag between the turn in the dollar and then the turn in silver.


Out of interest are you waiting for your chart to turn in both directions OR have you a set entry price that you will buy at?
Never stop questioning - Einstein

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#6 romans holiday

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Posted 01 February 2010 - 02:43 AM

QUOTE (riggerbeautz @ Jan 31 2010, 10:18 PM) <{POST_SNAPBACK}>
Out of interest are you waiting for your chart to turn in both directions OR have you a set entry price that you will buy at?

The main factor before I buy will be a convincing turn in the dollar. I think this will provide the discipline to wait as I am at heart very bullish on bullion, more so gold, and have the tendency to buy too early.

With a good core holding put aside [both gold and silver], I am now looking to strictly trade the volatility between silver and the dollar. I suspect I will have to wear my dollar bull hat more tightly to do so more effectively. If both the dollar and silver are in a bull market, and they move inversely - given the transitory mood of the market - this could be an excellent op for trading.

If the long term trend in silver holds [at around $16... 15.50], and we see the dollar turn, I will most probably be starting to buy in 2 or 3 weeks.

The dollar looks likely to break through 80 shortly. If the previous push up is anything to go by, it could go to near 81 before consolidating.




The aussie is well correlated with silver and is another cross I will keep my eyes on.


Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#7 romans holiday

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Posted 02 February 2010 - 12:44 AM



If silver carries on up here, will sit on dollars and wait for the big one should it come.

Not convinced this move down has run out of legs yet [the dollar still looks to be in an upleg]. Would consider buying if it dips down below 16.






Three reasons I am not buying here:

1] I already have a massive [percentage wise] position in bullion [buy and hold].

2] I think the dollar will continue to strengthen against other currencies.

3] Gold still looks to be in a consolidating trend.


Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#8 romans holiday

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Posted 02 February 2010 - 01:39 AM

Possible target 0f 15.62



Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#9 romans holiday

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Posted 02 February 2010 - 02:47 AM


Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#10 romans holiday

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Posted 03 February 2010 - 03:28 AM



Long term view on gold. 2010 looks to be mostly a year of consolidation. If the past pattern is anything to go by, 2011 could see gold to near 1400 [980 + 35%].

If I manage to make some profits trading silver and the dollar, I will look to skim of some and buy gold [on the dips, in dollars] which I consider my core currency.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#11 romans holiday

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Posted 03 February 2010 - 02:02 PM





Dollar turning up, commodities down.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#12 romans holiday

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Posted 04 February 2010 - 07:10 AM



Dollar back on track.  If it goes through 80 here, silver should go well below 16.00.  I will think about starting to buy on a turn down in the dollar. It will be very interesting to see if the long term trend in silver holds.



I suspect on a decent correction in the dollar, we'll see another leg up in silver.  Will look to trade this.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#13 chazza

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Posted 04 February 2010 - 10:15 AM

Yup all looks a bit bearish overall.

Hoping for a small last uptick in stick markets so I can add some SDS. Contemplating whether to turn my gold over for USD again, though think I might just sit on my stash and wait to add more bullion...and then silver when G:S hits 100... wink.gif
“What experience and history teaches us is that people and governments have never learned anything from history, or acted on principles deduced from it”  
Georg Wilhelm Friedrich Hegel  (1770-1831)

#14 romans holiday

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Posted 04 February 2010 - 12:32 PM

QUOTE (chazza @ Feb 4 2010, 07:15 PM) <{POST_SNAPBACK}>
Yup all looks a bit bearish overall.

Hoping for a small last uptick in stick markets so I can add some SDS. Contemplating whether to turn my gold over for USD again, though think I might just sit on my stash and wait to add more bullion...and then silver when G:S hits 100... wink.gif

Yes, I'm not bothering to lighten up on any gold... it could continue to consolidate a little but will remain quite solid in the greater scheme of things. Silver is the worry... if the dollar carries on strenthening it could get pummeled.  I lightened up a little on silver in my "investing" account [for dollars] but have also kept a good holding in silver... as I feel that would then allow me to agressively trade silver/ dollar in my trading account [in dollars at the mo]. I hope to only buy when there is a decisive correction in the dollar.

G:S 100? Was just yesterday when it was nipping at 59... I was all set to swap at 55. Now must be nearing 70 odd.   dry.gif
You might be right, and we see 100 before 50... but I still don't think I'd swap my gold for it.  sleep.gif
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#15 romans holiday

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Posted 04 February 2010 - 11:34 PM

Started to buy here at 15.28. I've decided to buy in in three tiers; so now have a third in silver [not a lot of money as am still in the process of funding BV... and more just to get a feel for the BV system]. Maybe a bit early, and maybe reflecting a past habit of being overly bullish on silver. Needless to say, will be looking for bottom dollar prices for further purchases.... and a turn in the dollar index.

Wouldn't be surprised to see the dollar start to consolidate at 80/81 if the past pattern is anything to go by.


Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#16 romans holiday

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Posted 05 February 2010 - 04:31 AM

On the other hand, and looking at the longer term, here is a very scary chart for silver. If gold consolidates to its long term trendline [to 1000] then silver could go a few dollars lower.  It depends on how quickly it consolidates.....

It also hinges on the dollar here, and whether the market can find a floor. If the dollar corrects, silver should turn up. If the dollar continues to strengthen and the market breaks again.... silver could take another beating. That said, silver looks to be the best thing in town to pick up on dollar weakness and market mood swings.

I believe this chart shows gold strengthening against the dollar, whereas silver might just remain volatile. In this scenario, gold is the one to accumulate, and silver is the one for trading against the dollar.









Neither does this bode well for the ratio. It looks to be swinging back to 80... perhaps the trading channel will stay within 60 and 80... or maybe even 90.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#17 chazza

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Posted 05 February 2010 - 09:40 AM

QUOTE (romans holiday @ Feb 4 2010, 11:34 PM) <{POST_SNAPBACK}>
Started to buy here at 15.28. I've decided to buy in in three tiers; so now have a third in silver [not a lot of money as am still in the process of funding BV... and more just to get a feel for the BV system]. Maybe a bit early, and maybe reflecting a past habit of being overly bullish on silver. Needless to say, will be looking for bottom dollar prices for further purchases.... and a turn in the dollar index.

Wouldn't be surprised to see the dollar start to consolidate at 80/81 if the past pattern is anything to go by.



Im thinking DXY tests 85. I going to hold on (with white knuckles) maybe until then before getting on the silver beast
“What experience and history teaches us is that people and governments have never learned anything from history, or acted on principles deduced from it”  
Georg Wilhelm Friedrich Hegel  (1770-1831)

#18 romans holiday

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Posted 06 February 2010 - 02:36 AM

QUOTE (chazza @ Feb 5 2010, 06:40 PM) <{POST_SNAPBACK}>
Im thinking DXY tests 85. I going to hold on (with white knuckles) maybe until then before getting on the silver beast

laugh.gif

As for 85, yeah, I think the trend is towards that for sure.  Could be a couple of forks in the road before it gets there but. I'm quite happy to wait a while also.... as it will take a couple of weeks to get some serious funds [dollars of course] to BV.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#19 romans holiday

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Posted 08 February 2010 - 04:25 AM



When the dollar consolidates, there should be a nice bounce in silver.  I won't be buying until I see the dollar retrace at least 0.5.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#20 chazza

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Posted 08 February 2010 - 09:53 AM

QUOTE (romans holiday @ Feb 8 2010, 04:25 AM) <{POST_SNAPBACK}>


When the dollar consolidates, there should be a nice bounce in silver.  I won't be buying until I see the dollar retrace at least 0.5.


Looks like the DXY could be approaching a "third of a third" move coninciding with stocks. This week should let us know if these patterns work.
“What experience and history teaches us is that people and governments have never learned anything from history, or acted on principles deduced from it”  
Georg Wilhelm Friedrich Hegel  (1770-1831)
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