Gold Trading Boot Camp: How to Master the Basics and Become a Successful Commodities Investor

365 Pages·2007·8.99 MB·English

by  Gregory T. Weldon

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GOLD TRADING
BOOT CAMP
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GOLD TRADING
BOOT CAMP
HOW TO MASTER THE BASICS AND BECOME
A SUCCESSFUL COMMODITIES INVESTOR
GREGORY T. WELDON
John Wiley & Sons, Inc.
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Copyright © 2007 by Gregory T. Weldon. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
Wiley Bicentennial Logo: Richard J. Pacifico.
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Library of Congress Cataloging-in-Publication Data:
Weldon, Gregory T., 1960–
Gold trading boot camp : how to master the basics and become a successful
commodities investor / Gregory T. Weldon.
p. cm.
Includes bibliographical references and index.
ISBN-13 978-0-471-72800-9 (cloth)
1. Gold. 2. Gold—Purchasing. 3. Commodity exchanges. 4. Gold—United
States. 5. Gold—Purchasing—United States. 6. Commodity exchanges—United
States. I. Title.
HG293.W45 2007
332.64′42410973—dc22
2006034740
Printed in the United States of America.
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CONTENTS
Foreword ix
Acknowledgments xi
Part One Evolution of a Trader
Chapter 1 Trial by Fire 3
Chapter 2 Neophytes and Neanderthals 13
Chapter 3 The Show 17
Chapter 4 The Firm 21
Chapter 5 Character 25
Part Two Evolution of a Macromonetary Era
Chapter 6 “Top-Down”—It Starts at the Top 33
Chapter 7 The Golden Bull 35
Chapter 8 Bretton Woods and the “System” 37
Chapter 9 Seniorage 41
Chapter 10 The Goldbug Is Born 47
Chapter 11 The Emperor with No Clothes 53
Part Three Capital Markets:
Looking Inside the Market
Chapter 12 Welcome to My Boot Camp 59
Chapter 13 Intermarket Analysis—The Tape Tells a Story 61
Chapter 14 Who’s on First? Know the Players 101
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vi CONTENTS
Part Four Looking Inside the Market Technically
Chapter 15 Reading the Tea Leaves—Technical Analysis 107
Chapter 16 Charts 111
Chapter 17 Moving Averages 121
Chapter 18 Oscillators 129
Chapter 19 Rate-of-Change Indicators 133
Chapter 20 Fibonacci Retracements 139
Chapter 21 Historic Volatility and Volatility Bands 147
Chapter 22 Volume, On-Balance Volume, and Money Flow 151
Chapter 23 The Commitments of Traders Report 153
Part Five Looking Inside the Market:
Top-Down Macro
Chapter 24 Again, Everything Matters! 157
Chapter 25 U.S. Monetary Fundamentals and the
Federal Reserve System 161
Chapter 26 Energy Market Fundamentals 179
Chapter 27 Global Trade 191
Chapter 28 U.S. Fiscal Fundamentals 203
Chapter 29 Inflation and Labor Market Fundamentals 207
Chapter 30 U.S. Housing and the Consumer 221
Part Six Trend Identification and
Momentum Trading
Chapter 31 Why...Trend Identification? 237
Chapter 32 Trend Identification Techniques—Momentum, Timing,
and Trading the Trend 243
Chapter 33 Countertrend Trading—Divergence, Saturation,
and Exhaustion 251
Chapter 34 The “TIMID” Matrix 255
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Contents vii
Part Seven Defining and Managing Risk
Chapter 35 Defining Overall Risk 269
Chapter 36 Diversity 271
Chapter 37 Position Leverage 275
Chapter 38 Trade Risk 279
Chapter 39 Correlated Risk 285
Chapter 40 Sector and Portfolio Risk 287
Chapter 41 Psychological Risk 293
Part Eight Putting It All Together
Chapter 42 Using What You Know When Making Decisions 303
Chapter 43 Global Supply-and-Demand Fundamentals:
The Mining Industry, Gold Consumption,
Gold Holdings, and Central Banks 305
Chapter 44 Chart Library 313
Appendix Precious Metals: A Secular-Macro Overview 325
Index 341
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FOREWORD
C
ommodity trading is never easy. It’s not meant to be, but it can be
fun and it certainly can be profitable when done well. But even the
most experienced investors cannot keep up with the changing markets
as often and as well as they’d like because the very nature of the com-
modities market is to be confusing far more often than not. But amidst
that seeming confusion, order can be found.
It does not matter if you are trading gold, soybeans, or bonds, a suc-
cessful speculator has to keep an eye on what is happening in many
markets around the world. At the same time, the speculator must be
alert and mindful of his or her individual position in the marketplace.
I have been an observer/participant in the commodities world for
more than 30 years. During that time, either as a hedger, floor trader,
foreign exchange dealer, bond trader, or individual speculator, I’ve had
far more than my share of dramatic ups and downs in the commodities
markets.
It is in this light that I encourage traders everywhere to read Greg
Weldon’s book. This book offers an intimate and insightful account of a
professional trader from his first days as a novice walking onto the
floor of the Commodities Exchange Center through the present, where
he sits at home in New Jersey surrounded by sophisticated technology
that provides him with ready access to data about markets in all cor-
ners of the world.
Not everyone will have the intellectual or psychological wherewithal
to be a trader, but there’s still a good deal to be learned from Gold Trading
Boot Camp. Whether you’re trading your own account, using a profes-
sional advisor, or simply wondering whether you have the courage to
trade on your own, this book offers an accessible, reasonable, and usable
approach to the commodities market. Gold Trading Boot Campprovides an
overview to the world of commodities and how this world changes, and
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