As of now, there's no position, this may change tomorrow. Remember, the power of compounding is a big part of the system so trades should be made that include all of the gains of losses from the last signal. If you alter the amount you invest in each signal in an arbitrary way, you will not see the results of compounding. As always though, any trade should fall within the risk parameters of your risk management plan. I prefer the 2% rule.
I've had some questions about my perspective on gold the last few days and if that might effect DUST positively. There is some correlation between gold and GDX although GDX s specifically gold miners.
One of the reasons I'm bullish long term on gold miners is because of the relative performance, which has been very poor for the miners as many people seek to take physical possession of gold. In years past, gold miners have actually outperformed the metal itself, not so currently. However, as the price of gold rises, people will always gravitate to a sale or discount, that's the mechanics behind the Cats and Dogs trade near the end of an extended bull market when they are firing off the most. People who didn't trust the rally and are late comers, seek to find stocks at a discount and that's why the C&D trades work.
As for miners, when we consider their reserves and their multiples (value), they are currently running at an adjusted rate of approximately $350 per oz. of gold, a significant discount.
The Miners System doesn't have a single line of code that references the price of gold or what gold is doing. What I found and why the system works is based on the following:
Gold miners, especially those outside of the U.S. have costs that are not fixed (wages would be an example of fixed costs). One of the biggest variables in Gold miners cost of operations is energy, specifically oil. Another variable for miners outside of the US is the exchange rate. For example, a mine in Australia pays its workers in local currency, the Australian dollar, however they are pad for their product (gold) in U.S. dollars, so when their local currency is trading rich compared to the US dollar, their wage costs are higher (relatively speaking) then the money they bring in for the gold they produce as the dollar is weaker. This is also a variable. We all know that it is generally accepted that a falling $USD makes oil more expensive as oil is also traded around the world in $USD. The G.W. Bush era weak dollar policy had a lot to do with oil soaring from the low $20's when he came into office. However, the correlation is not fixed and sometimes a falling dollar will not have as dramatic of an effect on the price of oil as other times.
The trading system looks to take advantage of lower energy costs and a higher $USD, but it's not as simple as that alone. The way I've coded the system, it looks for trends in the relative performance of oil and the $USD and when those trends are favorable to the miners, the system produces a long NUGT signal, when they are not favorable to miners, then a long is triggered in DUST. It's a bit complicated with regard to how I define these relationships, but the system is basically as simple as that so in answering some questions recently, the price of gold does not figure in to the signals generated by the trading system.
As you know, I've built in a 3% stop loss rule and that is what has triggered the exit of the DUST trade.
I hope that gives you some more insight as to how the trading system works.
I've backtested literally hundreds of trading systems including most of the ones you have read about in popular technical analysis books and I can tell you that there are very few if any that can consistently beat the market. By narrowing the Miners system down to 2 trading vehicles, it has greatly enhanced the results of the system, I mention that for those of you who are back testing trading systems.
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