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Do you really have to give us various gold and silver signals?

October 12, 2012, 12:00 PM Przemysław Radomski , CFA

I can appreciate your thoughts about creating trades based on various signals. However I, for one, have no interest in trying to integrate signals from a single source, i.e. Sunshine Profits. When I read a summary update or a market alert, which of course contains your analysis and conclusions, I don't then want to have to review other Sunshine indicators to see what they say. I expect you will do that as part of your analysis, because, after all, who is better qualified? Just like with the various charts and graphs, we don't just want to read you say 'buy' or 'sell' without reviewing the data, but, in the end, we do want the 'buy or sell' opinion. There is no shortage of free data (and opinion, for that matter) all over the Internet. It is the skillful integration and analysis of this data that is valuable.

Thank you for asking this question. Before we reply, it is very important going forward that each of our subscribers is convinced that we have answered this question exhaustively and that everyone agrees with our reply. We ask you in advance to let us know what is unclear or what part of our views you disagree with. We will strive to discuss this issue until our take on this is perfectly clear for everyone.

The first point that we would like to make is that Sunshine Profits should no longer be viewed as a single source of signals.

We didn't put emphasis on it previously because until recently we used signals from our charts as supplementary information and always summarized all the signals in each update/alert. We mentioned that one can use our indicators on their own as they wish, but we didn't specifically suggest opening particular positions. We preferred to verify our indicators multiple times over the years before becoming really convinced that they are able to do a great job for you on their own.

There are literally loads of examples that confirm that they get the job done. It could have gone under your radar if you didn't monitor these charts, but it's all there. Just take a look at the long-term charts - the first two from the top. The second one is particularly interesting. You don't see signals close to major tops - but you have just seen one on July 20th, 2012. On the following day (when you could react to the signal) the HUI Index traded between 387.24 and 392.23 – practically at the previous major bottom.

SP Indicators were released in March 2009 along with the start of our Premium Service that included access to them. Signals that you see before March 2009 are simulated - so from the methodological point of view they are less important. However, the really big thing here is that since that time, the efficiency of the indicators has been just as good as during backtesting. This is very good information because it means that the results we got during backtesting are stable and the indicators really represent psychological phenomena that are present in the precious metals market. We were not simply "lucky" to have picked good parameters that nicely fitted past data. What we got is a real and tradable representation of psychological phenomena present in the precious metals market.

The values of the indicators since March 2009 are based on real prices, updated daily and you - our Subscribers - were able to monitor these charts each day. Therefore, whatever you see since 2009 is verified. As you can see, the performance is quite good to say the least, and we feel confident to introduce these indicators as a stand-alone source of signals.

Why can't we just include it in our weekly analysis from time to time like we have so far? We can and we will!

However, the "skillful integration and analysis of data" is only one of two sides of this approach. The point is that while a calculator, computer program, or an indicator by itself can be perfectly logical and emotionless, I, PR, cannot. I can make thousands of dollars without a single smile and I can lose them without a single frown (because I realize that it's all part of a bigger process), but as hard as I might try, I will never be completely free of emotional biases, nor will any other (human) analyst.

So while I (or other analysts) strive to use all my knowledge and data (including indicators) in order to create value for you, I can sometimes simply "mess up" in my analysis of the emotionless indicators. For instance, if I get 10 trades in a row correct and get 50 "Thank you! Keep up the good work!" emails, I might get overconfident in my abilities and take on too much risk in subsequent trades, which will lead to losses when I finally do make an incorrect call. If I get 5 trades in a row wrong (even after these 10 successful trades) I will get 50 emails saying how bad I am and that could make me hesitate before taking the next position in the market. I am aware of this (by the way, the ability to spot these phenomena was one of the things that were tested in the final CFA exam) and I strive not to be affected by them. But I will never be as unemotional as a computer program or indicator.

Simply put, sometimes less is more (simple signals from indicators and nothing else) and sometimes more is more (complex analysis taking into account multiple factors).

What is best to do? Diversify! And that's what our approach is all about. The factors determining the correctness/ incorrectness of your Editor are different from those determining the correctness/ incorrectness of the indicators. So a large part of successful and unsuccessful trades should average out. In other words, thanks to diversification between subjective signals (Premium Updates and Market Alerts) and objective ones (signals from indicators) you will make smaller trades that will lead to more stable capital growth and decreased risk. In the future, when more sources of signals are introduced, we might suggest increasing the leverage on each position. The lower risk gained from diversification should allow us to do so.

The bottom line is that thanks to the SP Indicators and the signals provided in Premium Updates/ Market Alerts independently, you lower your risk and make capital growth more stable. That's why we advocate it. Sunshine Profits is no longer just a source of signals but a brand that provides multiple sources of signals. For now, there are two in particular: PR's analysis and the SP Indicators.

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Dear Sunshine Profits,

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