MOM AND POP GOLD TRADERS' LUNCH EATEN BY PROFESSIONALS, HOW NOT TO BECOME A VICTIM $GLD $SLV $GDX $GDXJ $DUST $NUGT

Investors who prudently invest in precious metals with modern timing tools for the very long-term make money.

Professionals know this but mom and pop often do not understand that very long-term investing has positive expectancy irrespective of how good you are at investing.  On the flip side, short-term trading is a zero sum game; someone wins at the expense of someone else.

Professionals often have a hay day eating mom and pop’s lunch.  Let us explore an example with an annotated chart.

The Annotated Chart

The annotated chart is of gold futures.  Similar examples abound in ETFs such as gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), junior gold miner ETF (GDXJ) and leveraged precious metal miner ETFs (DUST) and (NUGT).

Please click here for an annotated chart.

Mom and pop tend to put their stops right below heavily advertised support levels. The support level of importance in the chart is $1200.  As gold approached $1200, professionals knew that mom and pop stops were right under $1200.  So they activated their ‘hunt and destroy’ algorithms to take out the stops and make a small fortune in the process.

The chart shows the zone where professionals took out the stops by their own selling.  Then professionals started buying to book profits in the zone shown on the chart.  To put a cherry on the top of their profits, professionals bought a little bit more after covering their shorts and then drove the price above $1200.  As the price went above $1200, mom and pop who have been taught to buy on break of a resistance started buying running gold up a few more dollars.  Professionals took advantage of mom and pop to sell into the strength.  Please note that once gold fell under $1200, $1200 became the resistance in traditional technical terms.

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