I have mentioned before I carry a gun when I hike with my dogs or ride my horse. The reason is that we live in an area that has real danger, such as mountain lions, wild boar, and rattlesnakes. This makes the environment unpredictable, which means I should know as much as I can about the terrain I travel and the gun that I carry. It means before I venture out, I need to mentally prep to make sure I have my wits about me and I am ready for whatever might be waiting out there to cause me or my dogs harm. I am not talking about fear; I am talking about a basic survival mentality. I am talking about not walking into danger blind, which brings me to a question I received recently, which speaks to exactly this notion—do not go into anything dangerous blind.
“I think gold is a worthwhile play at this time. Never played it before.How should I go about it and what should I do? Which market? Couldn’t even find the ticker.”
Believe me when I say I am not ridiculing the person who sent me this email. In fact, I applaud him for at least reaching out before he plunges. I congratulate him for asking how to go about it. The problem he has, and so many others as well have, is the underlying premise found in the statement, “Couldn’t even find the ticker.”
This statement points to a mistake so many people make when trading—they know nothing about the markets they want to trade. Maybe it is the bull crap floating around out there that tells folks trading is easy money, or maybe the generation of video game players who have learned that you can just jump into a challenging game and work your magic are now turning to trading for their thrills. Who cares if you fail? Simply start over again at the first level. I really don’t know where this attitude comes from, but I see it more and more. I would love to hear from some of you grizzled trading vets who know better than to buy into the get-rich-quick trading schemes, or who get it that video games are, well, games and trading is not.
Anyway, gold is a crowded trade, and I never trade in a crowd. And no matter if the “experts” are telling you gold is going to $2,000 or $5000, don’t listen. It may or may not. The issue is how to play it in the short term, if you play it at all. You can trade gold ETFs or ETNs (there are 14 of these). You can trade gold stocks or gold-mining stocks (too numerous to mention). You can also trade futures (11 symbols) or options for gold. One thing you cannot do, however, is trade an ounce of gold, as a ticker for this does not exist. “Spot” prices for gold are fixed twice a day in London, and the symbol for the spot price changes from exchange to exchange.
The gold trade is complex with numerous possibilities, all framed in the possibility that gold is a bubble, and it will pop. Then again, maybe it is destined for higher ground. Keep in mind, though, danger lurks in the countryside, so if you venture forth, please understand where you are, where you are going, and be prepared to protect yourself. Carry the gun of knowledge, and for goodness sake, learn how to use it. The last thing you want to do when trading real dollars is shoot yourself in the foot.
Trade in the day; invest in your life …
