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How to be Disciplined Trading Gold
with Cycles Analysis
by Chris Vermeulen
Trading can be a
lot of fun and profitable or a nightmare and very costly. It really just comes
down to understanding the key areas, which will make or break your trading.
I have received a
few emails asking me to explain more about how I stay disciplined, making sure
my emotions don’t get the better of me. Some questions asked are:
How do I pick a
trading strategy, which will work for me?
material and habits do I recommend for keeping focused?
What are some of
I will cover all
this for you below because trading discipline and managing emotions is by far
the most important and difficult aspect of trading.
How do I pick a
trading strategy, which will work for me?
Your strategy should be inline with your
abilities to read the market also focuses on a time frame, which suits the time
you have available to trade each day, week or month. In other words, you should
not be trading ETF options if you cannot profit from trading ETF’s without
leverage. Also if you don’t understand how options work in depth, then you need
to spend some time learning about this type of trading vehicle before you ever
place a trade using options. Simply put, if you don’t understand everything
about what you are trading, then you will eventually give all your money to the
market, leaving you with an empty account, decreased trading confidence and a
The point I am
trying to make here is that you should focus on trading the types of vehicles
where you understand the daily price action, how to trade that investment, what
makes it move, is there leverage, and what time frame you should focus on, so
that it works with your schedule. If you can only look at the charts at night,
after the markets close, then you should not be focusing on day trading. So pick
something you like, understand or want to trade and learn everything about it.
Then find a trading system or create one yourself, which is profitable using the
time frame and risk tolerance that fit your personality.
Over the years my
trading strategy changed, as will yours. The more time you spend trading, the
better you will become the more you will find yourself trading more of one type
of investment that consistently makes you money. When I started trading back in
the late 90’s I focused on stocks, but as time went on, my strategy evolved and
now my main focus is on trading indexes and gold with a hybrid intra-day and
swing trading strategy that I created. My focus is on ETF’s, because you can
select different levels of risk/reward with the 1,2 or 3x leveraged funds. While
ETF’s are fantastic to trade, they do have some limitations. Because the indexes
and gold trade 24/7, you are limited to only regular market hours, 9:30am – 4pm
ET. That leads me to the topic of Futures and CFD trading.
Depending on the
type of trade and time of day a setup occurs, I will jump from ETF’s to futures
or CFD’s. Let me explain, if there is a setup early in the morning before the
regular market opens, or after the close late in the evening, then I trade
futures or CFD’s because it allows me to trade 24/7 catching moves which would
not even be seen by most North American traders. There are not a lot of these
trades per year but enough to make it worth trading.
What are some
of my experiences?
In short, virtually every trader will
eventually reach the tipping point. What I mean here is you will either lose
enough money and/or become so frustrated that you will debate whether or not you
should continue trading.
I reached this
level many years ago and I still remember it crystal clear. I lost most of the
money in my account, almost every trade was going against me and I had never
been so frustrated and upset in my life. I’m sure many of you know what I am
talking about… Unfortunately trading does break a lot of people down financial
and emotionally, causing them to give up. But others reach this point and
realize that if they can be wrong all the time, then someone who knows what they
are doing should be making good money and that they just need to learn what they
This is the point
at which you decide whether to give up a life long dream of trading full time to
go back to your day job or you step back to re-evaluate your situation and seek
profession help. All successful traders have or had a mentor at one point in
their life and it does not matter which career you are in, learning from someone
who knows how to do what you want is the fastest and most effective way to
Those who decide
to continue and take things serious shift their mind set from Trying To
Trade to Learning To Trade. It is at this point, where
trading becomes fun and profitable again. My point here is that trading is not
something you can learn quickly on your own. You should get help from someone
who is successfully doing exactly what you want to be doing, then shadow their
every move and seek mentoring from them. This usually costs more than say just
buying a book or mini e-course. There is no comparison between what you get out
of them or obtaining practical experience. This is what I provide at
and habits do I recommend for staying disciplined?
There is no easy answer, as everyone
absorbs information differently. Some prefer reading and studying charts,
listening to audio, watching videos and some prefer or need live mentoring and
I learned charting
from the well known annalist, John Murphy, through his book “Technical
Analysis of the Financial Markets”. This is a massive book with over 500
pages explaining technical analysis. This book is a lot to digest, but there is
a lot of great free information online, which will allow you to read about the
basics of trading including: chart patterns, volume, candle sticks, support &
resistance levels and trend lines. Once you understand these key concepts and
are able to read the charts, then you are literally ready to start paper trading
and applying or creating a trading strategy, which manages entry, exits, scale
out prices, and manages your money.
As most of you
know, I am a very patient trader waiting for risk setups in the investments,
which I understand best and have consistently traded for many years. Because of
my strict trading setups and rules, which I have set for myself, it does cut
down on the amount of trades the market provides. My focus is on low risk, high
probability setups, which I completely understand, and that’s all I trade. This
trading strategy works on any time frame allowing me to use it for day trading
and swing trading.
everyone wants to know is how to stay so disciplined and keep emotions from
This takes me back to the Tipping Point
mentioned earlier. I always ask myself if the trade meets my setup criterion,
which is a simple yes or no answer because my setup criteria is clear in my
head. Either it has the characteristics I am looking for or it does not.
Sometimes the setups are very close and I will admit it is very tempting to take
the trade, but I always step back (walk away from the computer) to clear the
emotions flying around in my head and ask myself, do I want to break a rule,
which almost broke me financially and emotionally once before? The answer is
always No. So I pass on the trade and wait for another one to unfold.
When I was first
learning to day trade, I quickly learned that I did not have to take every setup
that looked like it had potential. I realized that no matter what condition the
market was in, there would always be another trade just around the corner, so
its not a big deal. I admit, I hate to see an investment make a large move
without me like this 7 day rally in gold happening right now, because my setup
criteria was not met. But I know there will be many more trades through the year
in gold and other investments, which will provide me with great returns. People
who think they need and must catch ever big move in the market in order to make
big money on yearly basis, are looking that things completely backwards. It only
takes 5-10 good trades per year to out perform the market so I don’t understand
people when they panic about every zig and zag the market makes.
Ok, lets take a
look at the gold chart, which I have overlaid with two cycles, which I use to
help time gold.
9 Day Gold
The daily chart of gold below has my
9-day cycle overlaid. You can see how this cycle relates to the price movements
of gold. After the recent low cycle, we saw gold continue to move higher and
this is because the trend of gold turned up in March and the long term cycle is
also moving up at the same time. These two bullish forces can over power the
short term 9-day cycle at times.
That being said,
the 9-day cycle will be topping in 2 days (Tuesday) and that should put some
selling pressure on gold. I expect to see a pullback or consolidation (sideways
movement) in the coming week.
29 Day Gold
This cycle allows us to see the big
picture and underlying trend for gold. This larger more powerful cycle of gold
will top in one day (Monday) and that should put a damper on this rally. You can
see how I think gold will play out from the lines on the chart.
This chart clearly shows how both cycles
will top this week which should put some selling pressure on gold and silver and
one of the reasons I have not chased the price of gold higher buying in a panic.
In short, trading discipline is something
you can become educated about from books, but the only way to actually take
control of your trading, is to be honest with your self. Think of it this way,
every time you break a trading rule, you are setting yourself up for failure. Do
you really want to sabotage the most important person in your life, which you
will have to live with every day (You)? If you cannot trust yourself from
sabotaging and lying to your self, what type of person would you be? Do you want
to lose money by taking positions, which are proven not to work and cost you
money in the long run? Of course you don’t!
So the next time
you see a trade, which is close to your setup but no exactly what you are
looking for, just walk away and wait for the next one.
As for the current
price of gold, I think we are about to see lower prices, or at least a pause,
which will last for 5-15 days.
If you would like to receive my
Real-Time Low Risk ETF Trading Signals please checkout my website:
Vermeulen is Founder of the popular trading site
There he shares his highly successful, low-risk trading method. For 6 years
Chris has been a leader in teaching others to skillfully trade in gold, oil, and
silver in both bull and bear markets. Subscribers to his service depend on
Chris' uniquely consistent investment opportunities that carry exceptionally low
risk and high return. Reach Chris at: Chris [at] theGoldAndOilGuy [dot] com
This article is
intended solely for information purposes. The opinions are those of the author
only. Please conduct further research and consult your financial advisor before
making any investment/trading decision. No responsibility can be accepted for
losses that may result as a consequence of trading on the basis of this