GDX Trade on May 26, 2016 09:31 from tradephd: Tradervue User Stock Trades.

Play Idea

I will have to say up front that this wasn't my finest moment. The only thing I can say positively about these series of trades is that I kept my losses pretty small. However, the point of this journal is to share my good trades and my bad ones so that I can learn from my mistakes and maybe others can learn from them too.

These trades happened on the third day I was trading GDX during the week. The previous days trading GDX I actually squeaked out a little profit but that was erased on the last day that I traded that week. During the week I wanted to try a different strategy of only trading 1 stock. I wanted to see if I could specialize on just one stock that has a lot of volume and a lot of volatility. This came about because the previous week I felt like I was trying to follow and trade too many different stocks and I was also missing the moves that they made and mistiming my trades. I wanted to find one stock to play that was active enough to be "In Play". After running my high volume scanner in finviz.com and taking a look at some charts I found GDX. So with GDX, my strategy was to scalp trade by going long and short to catch moves about .10 to .15.

GDX is a great stock to play because of it's high volume and it can easily make moves around .50 to .75 during the day. This is an ETF that trades at around $20 and trades on average over 80 million shares a day. Because of this the liquidity that this stock provides is great. You don't have to worry about quickly getting in and out of a short or long position.

This ETF follows the gold miners which intern follows the price of gold. You can also use the GLD ETF while you are trading GDX to anticipate where the price action will go. Gold has been on a down trend the recent couple of weeks because the FED is going to raise interest rates soon and the dollar is on the rise again. This is bad news for gold stocks, however this will make GDX even more volatile which is good for traders. With that in mind, I would never recommend anyone to use GDX as a way to invest in gold. It is a stock that should only be traded.

What Went Wrong

• I traded too early in the morning and should have waited to after 10am in order to start to trade this.
• The day before, GDX had a nice up trend and I went in assuming that might have continued into the morning of the next day, which only happened for the first few minutes.
• I was trying to apply a scalping strategy and it caused me to overtrade, which isn't good for my brokerage fees.
• I was trying to anticipate where the price movement was going to go instead of waiting for it to happen and then going along with it. This lead me to mistime almost every trade I made.
• During the previous days ,GDX followed GLD a bit closer than it did on this day. GLD had a nice down trend the whole day but GDX had more bullish spikes throughout the day. Screenshot 2016-05-30 08.15.35

Conclusions

After taking a couple of small losses, I should have stepped away or just watched the stock for the rest of the day. I still believe that GDX is a great stock to play for all the reasons I listed above. The price of gold is going to continue to drop and will lead this stock to make some strong down moves, which will make for some great shorting opportunities. In the future, I'm going to see I can take advantage of the price movement in the stock but limit the amount of scalping because that will lead me to over trade it.