John Carter’s Discussion on the Current State of Gold and Reversion to the Mean in the Recent Absolute Wealth Newsletter
Austin, TX (PRWEB) February 05, 2012
John Carter of Absolute Wealth explains in the recent Absolute Wealth Newsletter, that the concept of “Reversion to the Mean” is not original by any stretch of the imagination. Absolute Wealth’s John Carter goes on to add that there are two things that throw traders for a loop on this setup, and must watch these when trading gold with its current volatility.
Absolute Wealth’s John Carter explains that the first thing that throws traders for a loop, is the temptation to take profits too soon, which can easily happen with the way gold is currently moving. John Carter explains that people get excited about a small profit, then take it thinking they can buy back in at a later date. Typically the market continues higher, and the traders panic about missing the move, John Carter of Absolute Wealth reveals, then they watch it run away without them. Instead of standing aside and chalking it up as a bad trade, John Carter explains, they mistakenly dive right back in.
This “emotional trade” is typically a bad one, Absolute Wealth’s John Carter explains, because it gets them in right at an intermediate top of a move, so a bigger picture of the way gold is reacting in today’s environment must be considered. They then have to spend time watching this market move against them, warns John Carter, causing them to watch the negative numbers get bigger and bigger. John Carter of Absolute Wealth explains, this throws them off stride, dominates their thoughts, ruins their confidence, and hurts their bank account. What turns out to be a normal pullback, a reversion to the mean, turns into a loss for the trader who picked up the position at the wrong time, reveals John Carter of Absolute Wealth.
This emotional type of trading is very dangerous, and is a common cycle that traders can fall into, explains John Carter of Absolute Wealth. For most investors, John Carter says, reverting to the mean is a simple calculation. Place a 65 day moving average of gold on a weekly chart, advises John Carter of Absolute Wealth, because this provides the longer term average price, and also represents the ideal price to get into a prevailing trend of gold. In fact, any market that is trading above this price is considered to be in a long term bull market, explains John Carter, and any market trading below this price is considered to be in a bear market.
Leverage, especially with gold has to be timed properly to work, explains John Carter of Absolute Wealth, because the longer term traders and investors who are aware of this, simply tapped into the greatest strength a trader can have, which is patience. Patience equals good timing, and good timing equals superior investment returns, reveals John Carter of Absolute Wealth.
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