Re: the silver price falloff and India. Failing to understand ordinary trading patterns, the public creates reasons to explain the observed.
Examination of silver price charts shows a pattern of a 40% - 60% pullback following sharp gains. Many pros short-term trade commodities and will commence taking profits, if not shorting, once the momentum of a given runup begins to wane. That drives the commodity down and the resulting volatility is usual. Failing to understand this creates frustration and losses and sends us creating explanations that reside, in simple fact, in how pros trade.
One must invest recognizing the effects pros have on the market. Our problem is that it is human nature to avoid risk. We tend to follow the "herd" and buy AFTER a commodity has exhibited impressive strength. That means most speculators tend to buy into a market about to top out, i.e. we buy into selling by the pros. We refuse to recognize our losses and hold well into corrections. Later, we sell at a loss and experience deep self doubts about our ability to profit. This sets up a pattern of being even slower to buy the next rally and we fall ever deeper behind the curve until we quite the game.
To win at commodities, either trading or long term investing, one must be willing to risk being early in order to catch the upmoves and sufficient profits to absorb inevitable (small) losses. If buying stocks, sell options on the position when the commodity's momentum tops - buying the option back after the correction. This inherently means doing, or having access to, unusually good analysis. Ordinary analysis will only reflect the herd's belated recognition after a move is well advanced, i.e. its too late to profit.
Unfortunately, really astute analysts having a proven record of success are scarce and expensive. So, the public provides profits to the pros. |
