The problem with trading

Here is the problem with trading. Most of the time any market will be in consolidation mode. Gold is a good example.

For the last 5 months gold has done nothing but trade back and forth with no defined trend. It's very tough to make money in those conditions.

Now don't get me wrong somewhere someone will have traded this perfectly. They will have stumbled upon the perfect system to catch each little wiggle. Often they will proclaim their superiority loudly for all the world to hear.

Unfortunately there really is no holy grail of investing and the system that happened to work this time will almost always fail during the next period. It's just how the markets work, conditions change. So unless one is lucky enough to guess what will work before each new period in the market what invariably happens is one ends up giving back all of the gains they made when their system breaks down.

The answer of course is to just stay aligned with the secular trend and accept that there are going to be periods when one will just have to sit and watch other people make money. The last five months have been a perfect example as the stock market has gone up while precious metals and miners have gone nowhere.

Know full well that eventually this too will end as gold is in a secular bull market with a long way to go and the general stock market is in a secular bear market with limited upside potential.

So at some point gold and miners will make another big move up and all the waiting will have been worth it. And at some point the stock market will come grinding back down and all those who held on expecting conditions never to change will lose all of their profits.

So one can trade if they must, but do so knowing that the market is going to take away any and every profitable system at some point whether it be a technical system, patterns, cycles, indicators, sentiment, COT or just intuition.

I've watched it happen to countless "traders" over the years. The really good traders survive these periods because they practice excellent risk management. Unfortunately most retail traders when they get on a hot streak believe they have found the secret to the market and risk management goes out the window. That's just about the time the market starts throwing curve balls.