gold investment, silver investment

Metals Market

Aug. 22 ($ / troy oz.)
  • SPDR Gold Shares (GLD ETF)

    0.25 increase 117.56
  • IShares Silver Trust (SLV ETF)

    0.02 increase 16.51
cfa-przemyslaw-radomski

Gold & Silver Trading Alerts - Trading Performance

October 23, 2015, 7:39 AM Przemysław Radomski , CFA

We have recently promised our subscribers that we would provide a detailed and exhaustive list of our precious metals trades (a.k.a. our gold trading signals) in the past 12 months. Today we deliver.

To make calculations easier and more comparable, we will use a given day’s closing prices without paying attention to the exact hour on which an alert was issued. If we had used actual prices, our results would have been even better, but we think that when estimating performance, it’s better to be more conservative, so that’s what we’ll do. Disclaimer: the materials that we provide are for educational purposes only; we do not provide gold trading advice.

We will use gold, silver and the HUI Index as proxies and we’ll assume that the trade was diversified between these 3 markets in each case (except for the cases where we wrote about a position in only a part of the precious metals market - for instance silver). We will provide closing prices after each date when the position was opened/closed/adjusted in brackets in the following order: gold, silver, HUI Index. In the case of doubling or exiting half of a position, we will calculate the rate of return separately, treating it as if they were separate positions as this will make it easier to calculate the final yearly performance (despite the fact that we have been calling a few smaller trades one trade, if we simply chose to exit it temporarily to re-enter at more favorable prices). We will calculate the profits on the short positions by dividing the entry price by exit price (effectively reversing the profits that would have been generated on a long position in case of an identical move to the upside) as this is likely closer to the real gains that one made due to employing instruments that move higher when the underlying asset’s price declines (like inverse ETNs and put options).

We were out of the market with the trading capital on Oct. 22, 2014 and the same was the case on Oct. 23, 2014.

On Oct. 27, 2014 (1,225.30, 17.10, 182.04) we entered short positions in gold, silver and mining stocks, which we doubled on Oct. 30, 2014 (1,199, 16.45, 164.53). We exited these positions Nov. 10, 2014 (1,151.40, 15.59, 154.51). The outcome of the first part of the trade (before doubling the position size) was 2.19%, 3.95%, 10.64% (average: 5.59%). The outcome of the second part of the trade (from doubling the position to exiting it) was 4.13%, 5.52%, 6.49% (average: 5.38%).

On Dec. 1, 2014 (1,211.30, 16.46, 175.68) we opened a full short position, but it was automatically closed in the case of gold and silver as stop-loss orders were reached. The stop-loss orders were 1,193 for gold and 16.33 for silver. We closed the position in the case of mining stocks on the next day – Dec. 2, 2014 (HUI: 170.04). The outcome of the position was -1.51%, -0.79%, 3.32% (average: 0.34%).

On Jan. 6, 2015 (1,219, 16.55, 183.78) we entered full long positions and we closed them on Jan. 14, 2015 (1,229, 16.84, 181.32). This position was much more profitable in reality as the closing prices on Jan. 5 were: 1,205, 16.19 and 172.20, so a part of the profitable move was caught during the Jan. 6, 2015 session. Still, we’ll conservatively use the closing prices. The outcome of the position was 0.82%, 1.75%, -1.34 (average: 0.41%).

On Jan. 23, 2015 (1,294, 18.325, 196.37) we entered a small short position (half of the regular one) and we doubled this position on Jan. 30 (1,283, 17.255, 201.82). We exited this position on Mar. 23, 2015 (1,188, 16.975, 173.29). The outcome of the first part of the trade was 0.86%, 6.20%, -2.70% (average: 1.45%). The outcome of the second part of the trade was 8%, 1.65%, 16.46% (average: 8.70%).

On Mar. 30, 2015 (1,185.80, 16.70, 162.32) we entered a small short position (half of the regular one) and we exited this position on Apr. 2, 2015 (1,202.50, 16.75, 167.03). The outcome of this position was -1.39%, -0.3%, -2.82% (average: -1.50%).

On Apr. 7, 2015 (1,208.20, 16.825, 169.60) we entered a small short position (half of the regular one) and we doubled it on Apr. 22, 2015 (1,186, 15.76, 172.51). We exited this position on Jun. 18, 2015 (1,201, 16.13, 159.83). The outcome of the first part of the trade was 1.87%, 6.76%, -1.69% (average: 2.31%). The outcome of the second part of the trade was -1.25%, -2.29%, 7.93% (average: 1.46%).

On Jun. 24, 2015 (1,174.20, 15.85, 153.76) we entered a small short position (half of the regular one) and we doubled it on Jul. 8, 2015 (1,157.40, 15.09, 144.06). We exited this position on Jul. 24, 2015 (1,098.40, 14.71, 114.89). The notable detail about this trade is that in reality we exited positions right at the bottom, and by right at the bottom we mean exactly that. It was written that this position should be closed based on a profit-take order - if anything reached it, the entire position was to be closed. Silver’s profit-take order was set at $14.33 and that was the intra-day low. At that time, gold and mining stocks had also reached their respective minimums. Still, we’ll conservatively use the closing prices. The outcome of the first part of the trade was 1.45%, 5.04%, 6.73% (average: 4.41%). The outcome of the second part of the trade was 5.37%, 2.58%, 25.39% - no, that’s not a typo (average: 11.11%).

On Jul. 27, 2015 (1,093.50, 14.51, 109,67) we entered a full long position. On Aug. 3, 2015 (1,085.60, 14.46, 106.73) we adjusted the size of the position and from this day to Aug. 11, 2015 (1,108.10, 15.325, 117.28) the size was half of the regular one. On Aug. 11, 2015 we moved back to the full size of the long position. On Aug. 20, 2015 (1,152.60, 15.545, 130.26) we once again adjusted the size of the position by cutting it in half and on Aug. 24, 2015 (1,154.40, 14.76, 116.21) we closed the remaining half of the long position and we entered a small short position (half of the regular one).

The outcome of the first part of the trade (Jun. 27 – Aug. 3) was -0.72%, -0.34%, -2.68% (average: -1.25%). The outcome of the second part of the trade (Aug. 3 – Aug. 11) was 2.07%, 5.98%, 9.88% (average: 5.98%). The outcome of the third part of the trade (Aug. 11 – Aug. 20) was 4.02%, 1.44%, 11.07% (average: 5.51%). The outcome of the third part of the trade (Aug. 20 – Aug. 24) was 0.16%, -5.05%, -10.79% (average: -5.23%).

On Aug. 24, 2015 (1,154.40, 14.76, 116.21) we entered a small short position (half of the regular one). On Aug. 25, 2015 (1,140.30, 14.66, 111.17) we doubled the size of the position. On Nov. 30, 2015 (prices on Nov. 27, 2015 - we are updating this before the market’s open on Nov 30, 2015: 1,056.10, 14.07, 107.48) we once again adjusted the size of the position by cutting it in half. Half of the position remains open.

The outcome of the first part of the trade (Aug. 24 – Aug. 25) was 1.24%, 0.68%, 4.53% (average: 2.15%). The outcome of the second part of the trade (Aug. 25 – Nov. 30) was 7.97%, 4.19%, 3.43% (average: 5.20%). The outcome of the third part of the trade (Nov 30 - … ) remains to be seen. The details of this trade (targets and stop-loss levels) are available to our subscribers to our Gold & Silver Trading Alerts.

To sum up, taking all our completed trades in the past 12 months (actually 13) into account and viewing adjustments in a certain trade as ending one trade and opening another one, we can say the following:

  • We entered 17 trades.
  • The average conservative (not impacted by intra-day gains, which were significant in a few cases) outcome of these trades (not taking into account the position sizes) was +3.06% (with gold at about $1,200, this translates more or less into the average performance being similar to profiting on a $37 move in gold).
  • The final outcome (achieved using the entire trading capital and re-investing it into subsequent trades): +53.59%.
  • The final outcome (achieved using one third of trading capital and re-investing the same amount percentage-wise into subsequent trades): +15.76%.
  • There were 14 winning trades and 3 losing trades.
  • The first of the losing trades was really a losing one (small one, but still) and the second and third ones were a part of a bigger (and profitable) trade.
  • There were both long trades and short trades: 4 major long trades (3 of them were actually a part of one bigger long trade) and 9 major short trades. We think that the medium-term trend remains down, so we are focusing on short trades as we view them as less risky at this time.
  • Many trades were not profitable immediately, but the profits proved well worth waiting for.
  • All of the above is verifiable - you - our subscribers - can access all alerts that we’ve ever posted and check why and when we had this or that outlook.

The chart below shows how the size of the trading part of the portfolio would have performed if it had been based on trading signals from Gold & Silver Trading Alerts in the past 12 months. As you can see, the green line featuring the value of the trading part of the portfolio runs up with small corrections along the way. We have often written that by doing thorough research, staying focused and so on, one can achieve a 70% - 80% efficiency at best. The 14 profitable trades out of 17 are above 82.3%. This is the kind of performance that we aimed to achieve (not 100% efficiency as that’s impossible to achieve and setting such a goal for oneself makes one either take on too little or too much risk, which overall decreases the profitability).

gold trading signals

If you’re interested in some of the things that we take into account while analyzing the precious metals market, please take a look at our gold trading tips section.

The above is about our trading performance, but if you’re interested in our long-term performance regarding the investment capital, we invite you to read the Aug. 20 alert - it includes a detailed discussion of our performance. In short, as of today, since the inception of our premium service for the precious metals market we have outperformed (as of Dec 1, 2015) the buy-and-hold approach of a 1/3, 1/3, 1/3 portfolio of gold, silver and HUI Index (used as proxy for the mining stocks) by 42%. At the same time, the variability (standard deviation) of the returns is lower (which is often referred to as portfolio’s risk). The Sharpe ratio of the portfolio (with 1/3, 1/3 and 1/3 weights) that includes our adjustments is over 15.45 times higher than the buy-and hold version of the same portfolio.

Note: the actual value of one’s trading capital would have been more volatile as the above chart does not take into account the mark-to-market aspect (it is based on outcomes of trades and it doesn’t feature the value of the portfolio that changed when the trade was opened). Still, it would not change the overall implications of the above chart.

Note 2: The above calculations don’t take any leverage into account and the rate of returns would have been much higher if leverage had been used. Of course, this is not an encouragement to use leverage - it’s risky, and not for everyone.

Note 3: The above does not prove or show that we will be able to repeat this kind of performance and in particular it does not guarantee that we will achieve a similar rate of return in the future. It is a lengthy reply to the question that we received about our 12-month performance.

We encourage you to make the investment in our detailed alerts. While we can’t guarantee it, it’s likely to be an investment that pays for itself soon (if not very soon) - join us today.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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