Always Make an Even Number of Mistakes When Daytrading

Recently I was surprised when I decided to short gold by investing in DUST, the 3x Exchange-Traded Fund that is the inverse of NUGT.  For those unfamiliar with both, I'll give you the low-down.

When you think there is uncertainty or fear surrounding the market, people tend to move their assets into gold.  Gold goes up when the markets do badly.  For some reason unknown to me, people feel safe with gold when the markets could or are going sour.

Now, when people have confidence in the market, they sell gold and buy other assets.  For people playing the DUST/NUGT game, this means buying DUST.  DUST is confidence.  It means you expect the DJIA, S&P500, and a whole bunch of other capitalist money laundering organisations to do very well.

So in short, buy NUGT when you fear the worst, and buy DUST when you fear nothing.

Now, on the eve of the 2016 US Election between Clinton and Trump, I was very confident that Clinton would win, and I associated Clinton winning with stability.  I was wrong TWICE, and it ended up making me money.  Here is how:

First, I thought Clinton would win.  I thought Americans were happy with the state of their country.  I didn't realise more Americans preferred the admittedly atheist and in my opinion, a closet case liberal with a hidden agenda that I'm sure will surprise us before long.

Second, I didn't think Trump winning would bring confidence to the market the way it did.  I thought Clinton would help bring stability to the market, but apparently the market was adequately pacified by Trump's victory speech.  Who would have thought.

When I told a friend and a financial planner acquaintance that I shorted NUGT before the election, they both laughed and thought I was crazy.  I thought they were right, too.  It was stupid to short gold, I thought.  The day of the election my stock, DUST, went down 5%, and that night I could see it declining further in aftermarket trading.  It went down a further 8%.  I thought that I would just keep my position and wait for the rebound, and I got lucky because rebound it did.

The day after the election DUST took off and ended the day up over 24%, and then the next day it went up 25%.  I normally would sell off after a surge like a single day of 24% gains, but I found myself in the bathroom at the wrong time and missed the sell deadline, which led to a good day the next day.

Now, the whole thing makes very little sense because if the markets truly are tanking, what will gold do?  It isn't useful except to sell because it is shiny and sounds blingy.  You can't eat it, nor can you build a house with it.  It doesn't fuel our cars, or combine with any other element to create water. Now, a ETF in water makes way more sense.

So let that be a lesson.  Make two mistakes and they cancel each other out.  Make a single mistake and you'll pay dearly.