Feeling as if the market is “ripping you off” is like a mouse thinking that a cat is out to get it. Well, the cat is out to get the mouse, and both the cat and the mouse know it, but each accepts their relationship as the way of their world. In the trading world, the market doesn’t think and “market mood shifts” are just how it is.
A day before Thanksgiving I purchased five July 11 27 calls on SLV. Last week news came out that China is going to tighten money supply to its banking system to encourage the banks to save their cash. This in turn caused a selling in commodity prices. My question is what should be my action on my SLV position? I get the feeling I’m getting ripped off again, as this is usually what happens when I make a trade – the market mood shifts.
Now, if you are thinking you can trade successfully without factoring in the potential mood of the market, think again. The market is not some autonomic entity predictably reacting to stimulus. No, it is quite the opposite indeed. The market is an emotional entity responding to an array of stimuli in the most unpredictable way. Never forget, “the market R us.” The market simply represents the collective consciousness of all its human participants (leaving computers out of this for the moment).
Unlike the cat and mouse relationship, which is autonomic (one chases the other runs without thinking), your relationship with the market is defined by thinking, and just as it is in any human relationship, thinking makes the difference between success and failure. To be successful in a relationship, one has to understand the “other” party and be proactive about what one understands. Thus, quit feeling the market is cognizant as to your existence (it knows you not) and start acting as if you want to catch it. Watch it, stalk it, learn its behaviors, and then pounce when you think you know which way it will go when you jump in.
As to SLV … This coming year will be the year of the commodities. As the global economic picture brightens, pressure will come to bear on those commodities that have an industrial use. Silver is one of those, as is copper, as is platinum, as is palladium (As an aside, gold does not have an industrial use, so I expect it to move in the opposite direction of those commodities that are useful.).
My advice is that you treat SLV as if it were the “other” party in a relationship. What stirs her? What does she like? What makes her move? Keep in mind she is extremely responsive to global economic news, which means you had better be one step ahead on that score. Understand the context, if you want to know which way she will go when you make your move.
Trade in the day; invest in your life
