Thursday, June 20, 2013

A great example of patience with winners

I am not in this particular trade, however one guy in the mentoring programme has been holding his short position in silver for a while now.

The chart below clearly shows how silver has had periods of sharp declines, with with some pullbacks and consolidation mixed in, but nothing to get him stopped out of the trade. He was also able to resist taking profits off the table (particularly after the sharp drop in mid-April), and is now reaping the rewards. His profits are several multiples greater than what he risked on the trade. Nice going!

This is trend following in a nutshell. The occasional large profit will cover a lot of small losses incurred looking for potential trends just like this one, and whatever is left over is pure profit.

I'm sure there have been plenty of traders trying to pick a bottom in this market, as well as gold. Just remember that, when a strong trend like this develops, what seems like a bargain price today, could be even lower next week or next month.

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