“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.”
– Bernard Baruch
In reading Bernard Baruch’s quote from many decades ago I got to thinking: When did “speculator” become a pejorative word? In the old days market participants often referred to themselves as speculators. But now it’s “traders.” And a speculator is somehow akin to a gambler.
In fact, InvestorWords.com defines speculation as “Taking large risks, especially with respect to trying to predict the future; gambling, in the hopes of making quick, large gains.”
“Trying to predict the future.” Taking large risks.” “Gambling.” I somehow don’t think the great “speculators” of the past looked at themselves that way. I think they thought they were prudent business men intelligently engaged in a perfectly legitimate enterprise. And I don’t think they would have become as successful as they were if they were merely gambling.
And if I felt like getting into it — which I don’t right now — what’s the difference between a trader and an investor? Everybody seems to think they know the difference. But if you Google it you’ll find there are different opinions about what defines investing and trading. I don’t see any point in making a distinction, but I seem to be in the minority.
Anyway, all of that is neither here nor there. I just think it’s interesting how the meaning of words change over time and how the same words mean different things to different people.
On to our strategies.
ATR Trading Strategy
After being 100% in cash for several weeks while markets corrected, the strategy is approximately 37% invested as intermediate trends in favorite markets seem to be turning back up.
Right now the the portfolio is in gold (GDP) and junior miners (GDXJ). That’s because gold is leading the other metals in regaining its bullish trend. But, unless the precious metals turn down again, I also expect to be buying silver and maybe the new platinum (PPLT) and palladium (PALL) ETFs soon.
COT Trading
COT is a little over 70% invested. In looking at the latest Blees numbers I don’t see anything new to buy right now. Nothing to do but be patient.
RSI Reversal Strategy
100% in cash and ready to get invested in a hurry when markets sell off sharply. I’m thinking about using a stop loss with this strategy for the purpose of position sizing. I back tested all the trades since last March and I haven’t found one that would have been stopped out using a three times ATR stop loss from entry and risking 2% of equity.
So since the stop has never been hit, why bother with one? It might make for better position sizing rather than using a standard 10% of equity. But we’ll see. Like I said, I’m just thinking about it at this point.
Magic Formula Strategy
The Magic Formula is a little over 20% invested at the moment. I plan to buy another stock or two in the next day or so. And I’ll get a little more aggressive if the stock market sells off. The S&P index closed on Friday with an overbought 2-day RSI of 97. So we should see a some sort of a pull back soon.
Long Term Trading
The portfolio is 71% invested. We’ll know at the end of the month whether we need to make any additions or subtractions.
Gold/XAU Ratio
The ratio closed on Friday at 6.81. Conditions remain bullish for the mining stocks and I will continue to respond accordingly.
Have a prosperous week,
Larry
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