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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (6944)	6/1/2014 7:59:01 PM
From: Goose94	Read Replies (1) \| Respond to of 203026

Gold Breaks Down: Define Your Risk The gold market posted a downside breakout from its recent sideways range over the past week. The near term trend outlook has turned down. While technical traders take the time to study their charts, define the trend and pinpoint targets, objectives and stop-loss levels —all traders and investors need to manage their risk. Risk management is a crucial part of trading and investing, as it allows one to manage and preserve their capital. Obviously, traders and investors have the goal of growing and increasing their capital, but losing positions are a part of a trader's career. The key is to limit your losses and stay alive to trade another day. First things first. Define your time horizon. Are you a long-term gold investor buying bars and coins? Well then, the little short-term blips back and forth don't really mean a lot to you. Most physical gold buyers purchase the yellow metal for the long-term to diversify one's portfolio, for hedging reasons, capital preservation and growth. Few physical gold buyers look to cash in on their long-term investment on minor price pullbacks. But, it's always worth keeping an eye on the chart to see how dips might offer buying opportunities. Looking at the current environment, there is major chart support well below the market at the $1,183-$1,182 zone. See Figure 1 below. Sell-offs toward that price floor generated active buying interest in the past. See points A and B, which reflect the June 2013 low and the January 2014 low. If prices were to retreat this far in the weeks or months ahead, it could be a zone where physical buyers are once again attracted back into the market. Now, for traders. For those gold traders who are more active on day or swing basis with gold futures, gold stocks or gold ETFs, risk management is key. A commonly accepted principle is for traders to risk no more than 1-2% of their portfolio on any one trade. Know your position size. The next key guideline is: know where you are getting out before you enter a trade. It may sound simple, but in the testosterone driven world of trading it is all too easy to jump in on a trade without a plan. Before you enter a trade, identify your price target—where do you look for the market to go? And, define your stop-loss point. Where will you cut your losses and exit the trade? Input a stop-loss at the same time you enter the trade in order to avoid the hemming and hawing and hoping that occur once you are in the trade. For profitable trades, be careful about "cutting your winners short." Let your winners run. The use of a trailing stop can be helpful in this area. If you've got a gold futures trade with some cash in the position, let it run. Some traders will take partial profits at the first price objective, and then let the remainder of the position run with a trailing stop. Let the market take you out of a profitable trade. The bottom line? There are many methods of trading and investing. But, no matter what approach you utilize —risk management matters. Long-term investors can identify buy spots and where they want to add to their physical gold portfolio ahead of time. Write it down —that way once gold hits your price —all you have to do is implement your plan. Short-term traders need to be disciplined in their approach, set your stop-loss points as you enter a trade and limit your position size to a manageable 1-2% of your account. Stay alive to trade another day.