We Sell Gold

16 September, 2009 by Stephen Leahy

Boston Sept 16 10:25 EST

We noted on Monday that there were two price levels that would be attracting attention in Gold. On the topside it was the $1020 -$1030 level…..and on the downside it was the $979 level. See our post from Sept 14 at www.backbayfx.com/blog.php. Well two days or rapidly accelerating price action took us up a briefly through the $1020 level. We will take our chances us here and put on a short position. We are a bit late with this posting as we sold Gold this morning at $1018 (current bid at $1015.70), but we would now use a Sell Limit at the same level ($1018) as we expect a lot of intraday volatility through this morning. Our Stop Loss level is up at $1027, and our Take Profit level is $993. We think this trade will take a few days to shake out. As a confirm, we are looking to see the price level in Gold this afternoon at the CME gold-mini closing time of 17:15 EST. Below $1020 will give us a better confirm that the stops have been run on the top and that Gold may drift lower in coming days. We do not think it will be a sharp sell-off.

Note that we are still bullish Gold in the long term This short term position is created by a combination of our technical analysis and our experience on a dealing desk. Dealing desks are those market makers that truly rule the global capital markets in the short run and that is why we sometimes put out our “Think Like A Dealer” postings. Understanding the psychology of market takers (aka: clients) is imperative to successfully trading on the sell side.

Next up…..our EUR/USD position. We first noted that we wanted to go long EUR/USD on July 20 and placed our trade on July 30 at 1.4059. See our previous postings at www.backbayfx.com/blog.php. Since then we darted in and out around one of the NFP numbers successfully, but other than that we were long the pair and have hit our target of the 1.47xx handle. This morning we hit our target. We reduced our position by half and are re-assessing. Our instincts are that EUR/USD will move SIGNIFICANTLY HIGHER in the coming months towards the end of the year. But for now we tend to our half position and think about our next action.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

sell gold said:

just a word of caution before anyone decides to sell their gold online…I think this information is very helpful but I can not stress the importance on making sure that you work with a reputable company when you decide to sell your Gold. I have come across one site, called Empire Gold Buyers, that honest and has a loyal following.

September 16th, 2009 at 5:37 pm

Magister said:

Can you explain more about your experience on a dealing desk and how this is affecting your trade decision here? Does it have to do with dealing desks hedging their risk as the market makes its moves? Please explain…thanks

September 18th, 2009 at 11:40 am

Stephen Leahy said:

Response to first comment: We are discussing margin trading of Gold. Not physical.

Response to second comment: My background is listed on our website (www.backbayfx.com). The short version is that I started in FX in 1996 at State Street Global Advisors, then onto Wellington Management Company. I earned my MBA at Babson college and joined a start-up firm as the “retail” FX marketspace was just beginning. I was a Senior Dealer and Risk Manager for 5.5 years in the spot FX markets for a firm that is now part of city Index in London.

And yes, my comments about time spent on a dealing desk is directly correlated to how a desk takes risk, makes money and handles client order flow. All the fundamental and technical analysis in the world can not compete with knowing where client orders are at. The big option levels, the Stop Levels, etc. And I do not mean to imply that there are firms that are “Stop Hunting” on an individual basis. Quite frankly, no dealer cares about you stop Order for $300,000 EUR/USD. What is interesting to know, and what I have learned, is where the general levels for Stops and Limits are….what is the psychology of the market at any given time. Are people worried about losses, or giddy about profits? That knowledge and those throught processes are invaluable.

September 24th, 2009 at 11:16 am