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