Quote Originally Posted by Pierre Brodeur View Post
I am having a problem understanding why the GDX robot is willing to take so much risk and is basically disregarding the confluence support area in protecting the capital of the owner of this security. At closing of $56.25, the robot is willing to sell stop the shares at 6.58% below the close in the context that ATR% is 2.56% which is almost a 3 standard deviation event. This makes no sense to me and does not appear prudent at all. Again, the implicit Expected return appears to be around 18.4% but I, as a prudent trader would not be willing to wait for the stop to be hit on this trade. And it has nothing to do with emotions...!

Pierre
I understand very well Pierre.

What you are saying that you would not want to enter such a trade today. I understand. The signal is neutral and I would not be willing to do that either. Would you have been ready to enter a long trade with the same stop conditions on June 17, when the MF signal turned to a buy and when the robot started to look for a long entry (As I wrote it here, I entered at the open when this signal change occurred.)

I suppose that you would have not entered the trade then or you would have used much tighter stops.

So, is it ok to say that your question is basically why the use of wide stops on GDX?
The second question seems to be why disregard the close strong support levels and place a stop so far away and not just below these?

The answer to the first question is that the robot has been programmed to trade both extreme moves and trend reversals in GDX. You cannot trade extreme move on tight stops. It does not work that way, because intraday volatility is pretty high when the situation gets jumpy.

The second question is that pivots do not work well for GDX. Therefore, when the current trade closes, I will change the GDX settings and the GDX Robot will enter at the open of a signal change, disregarding the pivots completely. That has been announced some days ago.

If I may compare IWM to GDX, I would say that IWM is like watching the changing of the guard in front of Buckingham palace while GDX is watching a 15 years old kid riding a wild horse in the forest. It is just not the same.

I also prefer the prudent IWM Robot to the wild GDX Robot. Their combination gives excellent results though.


Pascal