Posted on 11 August 2014 with no comments from readers
Bo Polny is famous among precious metal analysts for correctly calling the tops of 2011 and the bottom for both metals in 2013 (click here for his website). He sees gold hitting $2,000 an ounce before the end of this year and silver around $49, way out of line with many other forecasters.
You either get out of the trade or short the market here only to see that the index has consolidated a bit and started back with its up move.
Assume that the market indeed has topped. This means it is time to short the market or buy puts. You may analyse the market using this method or use complicated models like applying time series data or using the concept of modelling.
Whatever you do or whatever technique you apply there is no sure shot way to profit in the market. There is no proven technique that will confirm a positive outcome. This means that trading is random and just a game of probabilities. Based on your analysis you probability of wining is decided but again this is not with a100% surety.
However what most amateurs tend to do is to place a bet on the market and see them getting stopped out. They again repeat the same trade to see that they get stopped out again. This makes them revengeful and they again place a trade and the cycle starts to repeat.
You are confident that your analysis on websites is correct and you are convinced that the market will turn but you are getting continuously stopped out. You are a risk taker and you still have money in your trading account. In such a case will you stop trading or would you go ahead and risk your money on the same trade again.
When you are dealing with such randomness then your odds of making a loss is as high in the first time as on your 10th turn. Just because you have made a series of loss making traders this does not mean that you will be profitable in your next trade.
Traders generally fall prey to gamblers fallacy and they end up increasing the size of their bets without knowing how the odds will get stacked up. In fact this in turn ruins the size of your positions and this then tends to wipe out your trade capital.
So far the market this summer is panning out as he predicted in this May interview with Kitco…