Golden Rules Suffered a lot of pain in Phase #1 Gold Reaction? Want to do it better in Phase #2? By James Sinclair August 2, 2002
You MUST have a FIRM view of what you believe is the fundamental condition of the gold market. Is it a Bull or Bear Market? This has to be a firm conclusion that is valid when prices move adverse to the direction of that conviction. Once you have this view, it should not be easily changed. Nobody makes real money without a firm opinion on what the character of the market is. To review my firm view please go to www.financialsense.com or www.lemetropole.com
You must not overextend financially in terms of the percentage of your liquid net worth committed to gold-related investments. In gold, a moderate amount position will go a long way. If you are overextended now, cut done in the upcoming rally in gold investments. Start immediately! Overextension is the madness that always precedes disaster.
You must be willing to systematically sell 1/3 of your position into strength and commit not to buy it back unless it comes cheaper. In the inception period of a bull market, you can expect the price of gold and gold-related investments to have to climb a wall of total disbelief. Climbing a wall of disbelief means in terms of prices that gold entities tend to move ahead ten steps and fall back eight.
Your portfolio of shares should be made up of 2/3 non-hedged producers and 1/3 junior exploration and AVOID significantly hedged gold producers as one would avoid a person with EBOLA. They failed to perform well recently on the up or resisting the down.
You must study basic technical analysis so that you have a working knowledge of trend lines, support and resistance. This does not require the talent of a brain surgeon. It will not take up a great deal of your time. If you refuse to do it, you are an accident looking to happen. And, I assure you, that accident will happen!
Regardless of your fundamental conclusion, you must have predetermined "Stop Loss" points at which no matter what you believe, you limit your loss by automatic liquidation, in case you are wrong.
If you are "Stopped Out,", you do not reenter this investment field because it simply is not for you. Remain in cash. Buy some physical gold. Increase your liquidity at every opportunity and relax.
The following are valuable recourses of information, use them regularly: www.lemetropole.com www.hsletter.com www.financialsense.com www.pring.com www.bigcharts.com www.stockcharts.com www.tanrange.com (The Chairman's Corner)
