Gdx

[Billy]

If there's somenthing I like of today's price action is that it looks like a bear trap.

I was afraid and wondering if large players would have set one before deciding to shoot higher, let's hope they have had enough with today's move.

Regardless of the final outcome of this trade, I must say I am impressed by the location of our stop loss compared to the low of today.

I agree with the bear trap scenario. We are witnessing the usual “false then fast move in the opposite direction”.

The initial ATR–based stop (47.94) was computed 4 days ago when ATR% was higher than today. Because of the declining volatility during the 3-day slide, it became harder for GDX to hit the stop at its extreme move down compared to history. If a prolonged sell-off was developing, ATR would likely have risen and GDX would have hit the stop today. Remember that only 5% of trades need to be exited on a stop trigger before a model signal change. This mostly happens in panic selling or buying with exploding volatility.

The lessons are:
1) ATR% is key to risk management of a position and central to the robots and multi-pivot risk methodology.
2) Pascal is one of the best back-testers on earth and today’s action relative to the stop can only further improve our confidence in the system’s rules that he has optimized.
Billy

[Pascal]

1) Thanks. I keep forgetting that the RT message is based on EOD position.
2) I see that I misread Pascal's comments. Lightening up is indeed different than exiting, and from his reply I understand his thinking to be to use the RT's short position as a reason to reduce his EOD long positions.

I was more thinking about a divergence in the afternoon with prices moving higher and MF not following.
This was not the case and hence nothing has changed for me.
We can see today that MF and Price had identical moves.


Pascal

[DJones]

I was more thinking about a divergence in the afternoon with prices moving higher and MF not following.
This was not the case and hence nothing has changed for me.
We can see today that MF and Price had identical moves.

Pascal

Can't I simply take confidence in being long by noting the divergence between MF and price over the last 12 days?

[Pascal]

Can't I simply take confidence in being long by noting the divergence between MF and price over the last 12 days?

Yes, and by the fact that when we crossed over the average in the past, this resulted in good trades.
Some weeks ago I produced the same figure but for a much longer period.


Pascal