Tuesday, December 31, 2013

2013 Ends and The Forex Markets are Back - With Silver In the Tank! Challenge Account at $26,382

It's been a long while since I've been regular here.  It's good to be back.  There are some great opportunities facing us this next year.

It has been 316 weeks since the Challenge account had its first trade.  Or 6 years, 24 days.  So the challenge of getting to $150K + in a shade less than 4 years is still on.  It would have helped tremendously if I had any idea what this socialist-leaning presidency had in mind for us traders, but ultimately, as long as the freedom to trade forex is not limited any further, the odds strongly favor hitting the mark and then some.  In fact, if silver hits $113 an ounce in the next four years, which wouldn't surprise me at all -- success will be automatic.

People forget that governments at best only approach being "useful", but Big Government is absolutely not necessary for human existence.  Traders tend to survive even awful governments.  They adapt as necessary.

And thanks for all the great emails sent to me by readers of prior posts here, most of which I didn't get to answer properly.  I was busy -- but I still would have preferred keeping up with those who are interested in the Challenge Account and the concepts we talk about here.  I have always maintained-- and have even more proof gathered in the last 3 years --  that profiting in the forex, futures, and even stock markets--  is primarily a function of premise.   More about this in the coming weeks.

Forex trading has been getting better throughout the last half of 2013 because money finally was forced to move.  Now we, as opportunistic traders, have much better potential than the previous years of stagnation because of Big Money's (governments and investment banks) willingness to commit.

Personally, I've been trading much smaller size since the contraction in trading volume that we've been dealing with since 2010.  And trading full size on only the best and highest value trades.

Does this mean that methods like FirstStrike and OneNightStand were relegated to the trash bin?  Far from it.  Half of my best trades in 2013 were FS or ONS trades levered up to full size positions.

One of the greatest developments in 2013 was the intense weakening of the Japanese Yen which still continues.  All you need(ed) to profit is to get long just about any currency originating above the equator vs. the Japanese Yen.  There was nothing better than the Chf/Jpy and Eur/Jpy OneNightStand trades taken by followers of that method.

When numerous forex markets start taking out weekly and monthly highs on a regular basis-- I KNOW that something is going on and it is time to get geared up to profit.  So I got seriously intrigued in late 2012, especially with increased profits coming in-- and started trading a bit bigger in February 2013.

I had a very decent year in my personal account by trading long positions in Euro/Jpy, Chf/Jpy, Gbp/Jpy, and Usd/Jpy.  Also by trading some great OneNightStand and FirstStrike entries with large size.  As I had a balance of $4,583 at the end of 2012 in the Challenge account, I did a few of these for it too, profiting $2,490.97 on just 18 trades.  I knew that we were in a massive rush into northern currencies vs. the yen and it was not likely to last forever at the pace it was setting.  Maybe it'll keep it up longer. Time will tell.

Anyway, on the second of December, 2013, on an intense one day dump in the silver market---I took $6,560.40 from the remaining balance of the Challenge account and bought 330 ounces of silver (3 - 100 oz. bars & 3 - 10 oz bars) at an average price of $19.88.  So the Challenge account now has a total of 1330 oz. which will be valued at spot for the duration.

This year the Challenge account will start back up with the remainder of $513.57 for fuel.  I also reserve the option to liquidate some silver for additional capital if the markets get particularly robust.

I intend to trade it with OneNightStand trades for the duration with higher leverage according to the concept of the Kelly Criterion.  Reference: Fortune's Formula by William Poundstone.   And you can follow along or just watch.   It should be a very interesting ride.
(WARNING!!!  If you've read the book, which I encourage you to do; or have done any research about trading via Kelly money management methods, you already know that extreme drawdowns are GUARANTEED - not just possible.  If you can't afford to literally light a match to your trading account, don't even consider following the risk percentages the Challenge account will be using.)

A method with a definable edge and the will to trade it can make a man with $500 a very dangerous entity.  More about this and the version of OneNightStand  that I'll be trading -- next week.

I am in close contact with a couple of dozen traders who keep putting in ONS and FS trades.  Among them 5 who made between $50K and $250K on the silver move which culminated in early 2011 - using a special trading system.  I informed a number of them about my choice to expand the account's silver position.  I got asked: Why did I consolidate almost all the available capital in the Challenge account in silver?

Great question.

Here's some of the background.  Most of you already know about my interest in silver and the fact that it and gold represent 2 unique currencies with the same trading (actually better) characteristics of typical fiat currencies. And the fact that the metals are truly finite, while government greed is definitely infinite, typical fiat currencies are heading for a chaotic showdown on a number of fronts.  Also, I had some long term cycle lows due in the metals which gave me an added nudge.

Besides, I believe it is quite possible that my plan of using OneNightStand  trades with enhanced position sizing could by itself hit the $150K 10 year goal, with a "free" position in silver along for the ride.  I also think it will make the challenge a bit more intellectually accessible to newer traders than seeing some already "big" account just get bigger.   (There will be more discussion about this in the next week or two)

But before I go, a short discussion about something that, tangentially, also has precious metal implications.  I want to make a serious mention about a currency all traders have at least heard about, which trades 24/7 -365 days a year.


A Real Six Million Dollar Man.  

A single dollar invested in Bitcoin just a few years back at one point in 2013 was worth $124,000.

I know a guy in Minneapolis who bought 5,000 bitcoins  in early 2010 for $100 from a local "miner" (which back then meant anyone who had an extra PC with the time and the simple program it took to crank out the bitcoins)  back when they were just a couple of pennies each.  He stored them on his backup HP Pavillion laptop and didn't even think about it when the hard drive crashed a year later.  He just threw it away.  And the digital records for his 5,000 bitcoins.

Currently, he is beside himself.  Inconsolable.

I really do sympathize with him.

If he could only remember the 32 digit random password he used on his bitcoin wallet....  He even has gone to 3 different hypnotists to try to remember his original password.  I'm sure he is not alone.  Probably millions of bitcoins are lost or irretrievable never to surface.  Doesn't make him feel any better though.

Anyway, I just think it would be good for you to inform yourself a bit about these new currencies like Bitcoin.  They have absolutely no more intrinsic value than a dollar or a euro, but because they have the advantage of being transferred instantly with no nanny-state interference..., they have actual value because enough people have agreed it is so.  A very interesting development.

Precious metals share similar advantages of course, but large transactions with metals are almost always done face-to-face.  But then again, so are large transactions in Bitcoin.  Imagine if Bitcoin or a similar crypto-currency was intertwined somehow with precious metals.  Governments and their monetary controls would be shut out very quickly.  With astounding reprisals no doubt.  Just some thoughts.

As an aside -- I somehow don't think the guy in Minneapolis would have tossed out a few million dollars worth of silver..., or gold.  Or even $100 of precious metals.

The overall Bitcoin saga is interesting enough to give you food for thought about what will likely be a future with cryptocurrencies existing beside or even eliminating the current fiat offering from governments.

To see what a modern Bitcoin mine looks like, check out the short video below:

I currently have a (very) small percentage in a mining operation, have a little Bitcoin return every month.  Not a lot, but my growing contacts in the cryptocurrency community are giving me a good idea of what others in the business are doing.  It is turning into a serious business by serious people.  All I can say is do a little investigating.  It can only be advantageous to precious metals down the road.

Trading account equity: $ 513.57
Silver position value: $ 25,868.50
(Current XAG price: $19.45– 1330 unit position average: $14.40)
TOTAL  Equity: $ 26,382.07

Well, that's it for the end of the year summary.

I'll be back next week.

Joel Rensink 


Davidson said...

Hi Joel!

Its good to see you post again.

I just want to say thanks for the good job what you have done here.

Your articles and post help me a lot to became a better trader.

Kind regards
David Németh

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