This week I’m going to tell you about a defining moment in my career. It involves a trade that would have a lasting influence… a trade that gave me confidence that I’d make it as a trader.
Let me set the scene…
It was 1999, and gold had been in a crushing bear market. The price had sunk to US$275 per ounce — its lowest level since the 1970s. Needless to say, the outlook was awful… just about everyone was bearish.
Now, extreme negativity is an interesting thing. There comes a point when the bears have nothing left to sell. And this can lead to some of the best buying opportunities.
The key to profiting from these situations is patience… it’s about waiting for prices to start turning higher. Pre-empting a reversal often proves costly. So I waited…and waited some more.
Gold finally began to grind higher during April. Then in early May, there was a surge, and I bought.
Now, the exact size of my position is blurred by time. Although, I remember thinking that I’d bought more gold than some producers mine in a year. Quite simply, I was long a lot of gold!
But my timing wasn’t good. Within hours a shock announcement came out of London. The Bank of England was planning to sell a huge chunk of its gold reserves. And prices plummeted.
Now, one of the first rules of trading is to always have an exit point — a stop-loss. The problem was the price instantly gapped lower — there were no buyers to fill my sell order. Gold was in freefall.
Eventually, some buying emerged, but it was at a much lower level. The fill price for my stop-loss was ugly. I lost more than three times what I was expecting. It was a total disaster.
But it’s what happened next that was my defining moment as a trader.
You see, gold had now broken below key support. My trading rules were clear: Go short if prices break to the downside. There was no time to re-consider the rules. I reversed my position without hesitation.
So for weeks I’d been waiting to buy — my view was that gold would trade higher. But within a few minutes, I had sold two large parcels of gold… the first sale was to exit my long position… the second was a new trade that would profit if gold fell further. This was the exact opposite of what I was expecting.
Over the next two months gold fell hard, and I held on for the ride. Staying with the trend is a key part of my trading strategy. It’s the single most important rule for maximising profits… and this time was no different.
I finally closed my position after about seven weeks. My second trade made back the initial loss many times over.
So why was this trade a defining moment? Well, I was able to hold my nerve and make good decisions. This gave me confidence that I’d go the distance as a trader. I knew this was the career for me.
But it’s what made this possible that really matters… You see, having a set of proven trading rules was the key. This is how I was able to quickly make good choices under pressure. It was my plan for buying and selling that won the day.
This experience gave me an unwavering confidence in systemised trading. I knew that consistently following a well thought out set of rules was the key to long-term success.
I now fully understood why so many traders fail. It all comes down to preparation. The rules-based trader has a plan for everything, while many traders have a plan for nothing.
Good trading is essentially a formula. It’s about developing a set of rules to consistently make decisions. If you can follow the rules, then I believe success is within your reach.
So that’s all for this week. If you’re watching this anywhere other than my website motiontrader.com.au then come over and check it out. That’s where I have all the free stuff. I think you’ll like what you find. And if you liked this video, or even if you didn’t, scroll down and let me know what you thought. Maybe give me a thumbs up, or thumbs down, whatever you think.
Until next time, I’m Jason McIntosh, and let’s find some trends this week.