Monday 9 April 2012
In yesterday's article, we said the sell stop for the long May silver at 31.46 was 31.33, which it was. However, the original stop when the position was originated was 30.82, and we opted to change it to
a money stop, and that was a mistake. The improper use of stops can contribute to more losses just as easily as a bad trade. When we saw how the position was stopped out at 31.33, on high volume,
we opted to get right back in and correct the wrong use of a money stop.
Monday's intra day is shown in the 20 minute chart, below. Another swing low occurred at the high volume low, relative high volume. [See Silver - Trading Range Bound, http://bit.ly/Iwk9S8, 4th chart for a comparison]. When we saw HOW the then low developed, a sharp increase in volume, but less selling volume than the previous trading day, we had the immediate sense that the use of a money stop was wrong. The best move was to get right back in, which we did.
The reasoning was already given in the previous commentary, linked above, so it was an easy decision to make. It does not mean that the trade will be profitable, for it can still turn into a loss. As we all know, or should realize, the outcome of any given trade is unknown. One can never know how it will develop, and for that reason, it is best to have prepared for the trade PRIOR to entry, and then let the market develop as it will.
This is to acknowledge a re-entry after being stopped out.
[We continue to highly recommend the purchase of physical silver and gold.]