How to Trade Price Breakdowns in Gold, Silver and Mining Stocks

This week I want to share with you a very important trading tip and strategy that can be applied to trading anything (stocks, commodity, currency, and index). Understanding how price moves is critical as a trader and investor if you want to be successful. So let me tell you how to trade breakouts when price breaks to the downside. In this report I use the chart of gold as my example.

This article is the second half of my report from last week which I wrote a piece on how to trade the breakout and rally in gold stocks and what to do if you miss the breakout – Read Here

A Major Problem With Most Traders… Not Having A Process

One major problem, I think, is not having a process or what we as traders call it a clearly defined trading strategy. If you want consistent results then you must have a repeatable process. Having a proven trading strategy is not an easy task by any means, but with some focus and dedication almost anyone can create one to be profitable over the long run.

Do not get me, developing a winning trading strategy with clearly defined rules is difficult, and it will teach you just how hard it is to make money trading, and that almost everything you think you know and do actually does not work. It is a very sobering experience to say the least. Many trades seek professional help from seasoned pro’s who have built and trade systems for some advice, others give up and subscribe/buy proven systems to save themselves the time, money and effort of creating and managing their own strategies/systems.

But sometimes people have a great ideas/strategy but are missing a key aspect or component for their system to highly successful and this article may be just what you need to fine tune your strategy when trading or navigating a market when price is falling.

Below is a chart of gold which I annotated to show you how falling prices happen typically in two ways. When I learned this information years ago, it changed the way I traded literally overnight. This information works on any investment, and on any timeframe.

Gold Chart Explains How To Trade Falling Prices

When price breaks down from a pattern that is the time to get short, or buy an inverse ETF. Fear is very powerful and in most cased price does not test the breakdown level, rather it keeps falling quickly. Huge moves happen quick so be sure to take advantage of the market when breakdowns occur.

In the off chance you miss a breakdown, the market could provide on last opportunity to get short. After this bounce, the market typically falls and will bottom after that without any other high probability trade setups with good reward ratio.

How To Trade Falling Prices Conclusion:

In short (no pun intended), it is critical to be aggressive when shorting a falling market. Get in, lock in gains quickly, tighten stops, and get short on the bounce again if there is one. Rule number one… do not short stocks when the broad market is still clearly in a bull market…

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Chris Vermeulen