Gold, Inter-Market Analysis, and Obscure Trading Methods
10/24/2013 10:42 am EST
Your host Rob Booker catches up with market strategist Neal Gilbert, author of Braving the Rapids. Rob asks Neal if he has strong opinions about gold (as well as other markets). Rob and Neal also talk about deep inter-market analysis and whether it’s necessary for understanding one’s market of choice. Rob asks Neal how many screens he has open at any given time and asks what he watches for and why. They talk about patterns and somewhat obscure methods for predicting where the market is going, such as Murrey Math and moon-phase trading! And finally Rob asks Neal what to do if a trader pulls up one time-frame chart and then starts scanning other time-frame charts only to second-guess the initial plan.
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Rob Booker: Neal, how’s Grand Rapids treating you?
Neal Gilbert: Rob, Grand Rapids is beautiful. You know we just had the Grand Rapids Art prize. I don’t know if you have ever heard of this?
Rob Booker: No.
Neal Gilbert: It’s a huge art festival that we have here in Grand Rapids. It’s $200,000 for first prize and we get world renowned artists come in here and just put their art all over our city, so it’s a great time.
Rob Booker: That is fantastic. Did you put any pictures of your charts up?
Neal Gilbert: Well, for some odd reason, people don’t like those as much in the art community; I’m not quite sure why, I think they’re beautiful.
Rob Booker: I refuse to believe that answer; I reject that answer. I think your charts are beautiful. Our guest is Neal Gilbert. What’s your official title at GFT besides supreme ruler of the charts?
Neal Gilbert: Well it’s no longer GFT anymore either, it’s actually Gain Capital and I am a market strategist, or at least at this point I am.
Rob Booker: So you officially work for Gain now?
Neal Gilbert: I officially work for Gain. The buyout or the merger, whatever you want to call it, actually went through and I think the final papers were signed or something about a week and a half ago, maybe two weeks ago, so I’m officially a Gain Capital employee now.
Rob Booker: That’s fantastic; congratulations.
Neal Gilbert: Well thank you, I appreciate that.
Rob Booker: Although I’m not sure that congratulations are in order, but I’m just happy that everything worked out for you. You’re one of our favorite guests and chartists and I’ve got some questions for you today that have been on my mind since we’ve done an interview and you’ve written a book called Braving the Rapids; it’s awesome. Neal, do you ever look at least substantially anyway at other markets besides FX with this trading system that you have developed?
Neal Gilbert: With the Rapids Trading Strategy I have mainly just looked at the FX market. I have dabbled in gold and silver and the Dow indices mainly with CFDs since I also have access to those here. Now granted most people in the US won’t be able to trade CFDs, but in that atmosphere I have and it’s pretty good looking, I guess you could say for looking at those other indices outside of the FX market, especially gold; gold seems to be one that trends very well and when you get a move going in either up or down, it tends to last and it is kind of strong.
Rob Booker: Do you have strong opinions about gold?
Neal Gilbert: My opinions about gold vary. I tended to think when gold was rising as much as it was that the fever of we have to buy gold because we have to protect everything that we have and I need gold bars sitting somewhere at my house somewhere; I always felt that that was a little delusional, but on an overall basis, I don’t really see the allure of gold, I guess you could say.
Rob Booker: Jason, you’re familiar with Zombie Apocalypse, Jason?
Jason Pyles: Yes, very.
Rob Booker: In The Walking Dead or I am Legend or whatever, why is it that we never see people spending gold coins that they had saved in their basement?
NEXT PAGE: Does Inter-Market Analysis Work?|pagebreak|
Neal Gilbert: Well, I think they were worried about the exchange rate; they just weren’t getting what they thought they should.
Rob Booker: Right, so if you’re hoarding gold for the apocalypse that will be brought up on us because of Obamacare; that’s a joke, then you might be disappointed to find out that after the apocalypse what really goes for top dollar are things like people’s legs to eat if you have seen or read the book, The Road, by Cormac McCarthy. People want to eat each other at the apocalypse; they don’t necessarily go to flea markets and spend money in gold. Like, do you take credit cards? No, but I’d take your gold coins or I’ll eat your face off because I’m a zombie. I was wondering about the strong opinions about the other markets, Neal, because I was in a conversation with an educator the other day, a trader and an educator, and they talked about how important it was to do inter-market analysis, deep analysis into other financial markets in order to interpret their specific and most favorite markets. The one trader I spoke with was very interested in the direction of the S&P 500, the US broad index, in order to judge the direction of the Japanese yen actually. Then another trader was interested in the Canadian dollar as it related to oil and they really couldn’t do an analysis on one without doing an analysis on the other, and I was interested in your opinion having viewed the market for as many years as you have, does any of that make any difference to you? Do you do any inter-market analysis?
Neal Gilbert: Personally, I don’t find as much importance with it and the main reason behind that is because, you made a great example in the dollar yen and the S&P, when the S&P is dropping, usually dollar yen is doing something similar and they’re moving hand in hand with one another, so when you’re doing analysis on one, in my opinion, the analysis is just going to be the same on the other one anyway, so you’re just repeating your own work and maybe perhaps on more long-term basis it might be a little bit more helpful to look at those different types of relationships between the two, but typically they’re moving hand in hand. Now, granted you could see a move in one before a move in the other and therefore it might be a great opportunity, but that would be something that is relatively quick in my mind in order to be able to take advantage of it. By the time that you try to analyze that, you might have missed the move already instead of being able to jump on board with it.
Rob Booker: Yeah, that’s a good point. I often think also in my experience that inter-market analysis leads to enough confusion that I’m never ready to take any trade at all.
Neal Gilbert: That is a great point, too, is that it goes back to the whole KISS methodology of trading and keeping it simple and stupid. When you add in too much stuff, it really tends to make you more confused than it would to begin with.
Rob Booker: Now it’s convenient for us because we have no guest on the program right now that does inter-market analysis that would tell us that we are complete idiots, but one of mine, I would call him a good friend.
Neal Gilbert: I’ve been called worse.
Rob Booker: Even though he never calls me back or anything and hasn’t come on the program yet is Ashraf Laidi, who wrote a book called bladi, bladi, blah, blah analysis, which I think on pages 1 through 10,000 pretty much preaches the gospel of inter-market analysis, and the point behind this kind of analysis for those of you who are new to this kind of thinking in the world of trading is that every financial instrument has a sister companion financial instrument and they are threaded together over the eons through cosmic forces unbeknownst to mere simple-minded traders like Neal and I that are busy making money, and these relationships span space and time, sort of like starring roles in a Nicholas Sparks movie where gold puts a letter in the mailbox 50 years ago and the Canadian dollar living on the other side of the world opens up their mailbox in the morning and finds this note from gold on what they should do that day and they have this long 40-year love affair spanning centuries and ages, pretty much like the movie Cloud Atlas mixed with The Notebook together.
NEXT PAGE: What’s Neal Working on Now?|pagebreak|
Neal Gilbert: The Lake House; that was The Lake House plot.
Rob Booker: The Lake House starring Sandra Bullock and Channing Tatum, starring Channing Tatum as gold and Sandra Bullock as the Australian dollar, and there’s this inner relationship between them that is so neatly tied together, Neal, that not only could you figure out how one relates to the other, but also you could figure out which one moves first and that’s the other part I can’t figure out about inter-market analysis; it’s like a thermos right, a thermos keeps liquid hot or cold, but how does it know, who told the thermos and that’s what I want to know about inter-market analysis. How does the Canadian dollar find out what oil is doing? Is there some poking around the charts? Do you open up a chart on the Canadian dollar one day and it’s not there for a second because it has been over checking on oil. I wonder Neal about all that and I wonder if it’s just another way to play the game of trading and now I’ve deeply offended some of our listeners, Jason, which was my original intent. Jason, if someone strongly disagrees with this comment, how can they write the show and express their displeasure?
Jason Pyles: They can email us at email@example.com.
Rob Booker: And we’d like to hear from you and we’d like to have you on the show because we want to hear more about how it’s important to you and what difference it makes in your own decision making, but we’re not done yet here with our good friend, Neal, broadcasting from Grand Rapids, Michigan, the site of the $200,000 art festival that just concluded. Speaking of chart art Neal, I have some additional questions for you. You look at the markets everyday, I would call you a professional trader and analyst, how many screens do you have open at any given time, and tell us more about your routine because you publish research for others, as well as for your own benefit.
Neal Gilbert: Yeah, now I’m still bothered by the fact that Jason knew the difference between The Lake House and The Notebook, but anyway, as far as how many screens I have, I work with a variety of different screens, but not all of them is charting. I have charting up on one screen and that’s it. The other charts that I have or the other screens that I have are for spreadsheets, the Internet or Web sites and things, so really as far as charting is concerned, I only look at one screen that has a chart on it and what I’ve been doing a lot of lately is trying to find different patterns that are developing in the market. Not only do I like using something like the Rapids Trading Strategy in order to be able to try to predict which way the markets are going, but we’re starting to look more into Gartley patterns and butterfly patterns and three-drive patterns, Fibonacci, Elliot Wave-type of methodologies in order to find where the markets might find some resistance or support, as well as past prices and things along those lines. We have been working a lot with that lately. I’m not exactly 100% sure how that’s going to go here in the future with the merger here between Gain and GFT, but that’s what I’ve been working with a lot lately and also continuing to follow and making sure that the information that I wrote in the Braving the Rapids book is still valid. I want to make sure that the information and the advice that I provided in that book isn’t just going by the wayside, and going into the future, it still seems to be working just as I had plotted it out previously and is continuing to work well.
Rob Booker: I still have it up on one of my screens as well and maybe as part of the show you could provide just a recent chart with a completed trade using the Rapid strategy and then we could put it up there on the web.
Neal Gilbert: Certainly.
NEXT PAGE: What’s a Three-Drive Pattern?|pagebreak|
Rob Booker: You mentioned the three drive, is that a pattern or is that a strategy, is that a Gartley thing, what in the world is a three drive?
Neal Gilbert: A three-drive pattern is where you have, either going up or down, where you have three waves basically in the same direction and it is a lot. From what I understand, at least in the readings that I have done with Elliott Wave, it is part of the Elliott Wave-type of analysis where you have three drives in one direction and five waves down in the other direction, so really it just has to do with that where the market goes up, pulls back to a Fibonacci retracement level, goes up to an extension level, pulls back to another retracement level and then goes up to another extension level.
Rob Booker: So it’s like a knockoff? It’s like a Gucci knockoff of the Elliott Wave pattern like Ants was a movie made to compete with A Bug’s Life? Full on, like oh one studio has got an idea; let’s do that idea also. It sounds to me like you’re really getting more interested in some of what I think traders would call the more mathematical patterns, Neal, would you call it that? It’s sort of straddling the world between mechanical and discretionary trading when you start measuring things with Fibonacci retracements and so forth.
Neal Gilbert: I would definitely agree with that; it is completely mathematical-based and it gives you perhaps another element of competency or confidence or whatever you want to call it in order to be able to make your calls on when and where the markets do go. It is just adding another element or using that element on its own and just seeing how that can be exclusive upon itself.
Rob Booker: Did you mention Gann as well? W.D. Gann?
Neal Gilbert: I have actually seen some Gann charts in the past. I haven’t really explored it as much as perhaps a lot of other people have, and that one actually confused me, I think, more than Fibonacci.
Rob Booker: Yeah, Gann, I’m not making this up was famous for, I think, predicting the great stock market crash of 19, whatever 1657, whatever, but the one in the 1900s when Leonard DiCaprio was starring in The Great Gatsby or whatever and that was his claim to fame, but then everybody found out that he was a total nut job like he mixed mathematics and astrology and the Internet; I’m just kidding, there was no Internet back then, but he mixed some crazy stuff and I say it’s crazy and I say it’s nutso, but I don’t know about you, Neal, but there is always this thing in the back of my mind that I’m secretly interested in, like it fascinates me, it almost scares me like it’s a Ouija board or witchcraft of some kind. I call it technical analysis witchcraft because it’s so far out there and it sounds so bizarre when you read some of the stuff that he wrote that it’s just crazy enough to make some sense and there is some day in the future when I’m going to look at that. I also think that way about Murray Math as well. Have you ever heard about Murray Math?
Neal Gilbert: I have, yes. That also fascinates me. When you go towards those very obscure methods to using or trying to predict where the markets are going. I’ve seen people use moon phases where it’s a full moon suddenly and people are a little bit crazier on the charts and they go around a little bit more. You actually had that podcast that one time with the guy who did ESP, I think it was.
Rob Booker: Yeah, great, Greg just actually competed for a world record in the furthest distanced paddled in a 12-hour period of time. He had the world record for 24-hour distance Jason, he went 244 kilometers in 24 hours non-stop pedaling on a boat. Can you believe that?
Jason Pyles: Wow.
NEXT PAGE: Don’t Second-Guess Yourself|pagebreak|
Rob Booker: That’s not one of those paddle boats you see on the lake in the summer time. We are talking like a boat he built by himself. It wasn’t necessarily ESP, it was remote viewing, which was used by the CIA to find hostages and bad guys and stuff like that. Speaking of moon patterns and then I’ve got a serious question for you, on my tradingview.com charts, there actually is moon phases. If you go to tradingview.com and you punch up moon phases on your indicator tab, you could actually, it does show a full friggin moon; look at that. I am going to turn that into a trading system if that’s the last thing I do. Last of all, I have a serious question for you. There are times when I look at a timeframe chart, Neal, and I’ve been thinking a lot about this lately and get a lot of these questions. I look at one timeframe chart; my favorite timeframe is the 15-minute and I’m pulling up the Australian dollar/US dollar, which is pretty much my favorite currency in the whole world and then I plan a trade and the next thing I do like an idiot is start scanning other timeframe charts to second guess myself because I like to confuse myself; it’s not enough to be decided on one thing. Then I start looking at other timeframe charts and then sure enough on some other timeframe chart, I get an indication that price is ready to move in the opposite direction of the trade I just finished planning. What advice do you have for me in that situation?
Neal Gilbert: I would say stick with what your original thought was. If you’re looking and let’s say just for example you’re looking at the 15-minute chart and you had previously said this is your favorite timeframe, right?
Rob Booker: Right.
Neal Gilbert: Right, so if it’s your favorite timeframe, then why would you look at something else or maybe you’re not really trying to confuse yourself, maybe your just trying to give yourself an additional level of security in the trade that you have actually placed, and in that case, great, you can find that extra security, you can find anything that you want usually in any of these charts in order to say they are going to go either up or down, so I would say just stick with our favorite. If that works for you and that works let’s say as far as statistically speaking, then why would you look outside of that original idea and just stick with your plan to begin with and ride it through and if it was wrong, hey it was wrong. As long as you’re managing your risk, as long as you make sure that you set up a stop loss to make sure that you’re loss isn’t going to be something that is catastrophic than it is a losing trade; it happens to everybody. Losing is a part of trading and you should never be afraid of having to lose one trade, nor to be able to set up perhaps another trade that might actually be a winner.
Rob Booker: Be afraid, be very afraid. I appreciate your time Neal. Neal is the author of Braving the Rapids. It’s a PDF eBook that is one of the simplest and most powerful trading systems I have ever seen. Neal it’s always a pleasure to speak with you. I’m looking forward to your next series of articles, which compare a famous sitcom to the markets.
Neal Gilbert: Seinfeld part two, right?
Rob Booker: Seinfeld part two. Neal, for those of you that don’t know is the author of a series of articles about trading that took episodes of the television program Seinfeld and applied them to the struggle to make money in the markets and it’s a great piece of writing. You’re a gifted writer Neal and a straight talker about the markets.
Neal Gilbert: Thank you, maybe I’ll have to done around Breaking Bad, I think; that would probably be a better idea.
Rob Booker: Now you’re talking. Thanks Neal I appreciate it.
Neal Gilbert: All right, thank you Rob and Jason.
Rob Booker: Talk to you later.