Just when you thought trading the Market Vectors Gold Miners ETF (GDX) was a nightmare, you read this post and say to yourself, “hey, I can do this!”

Anyone who reads this post, gives it a little thought and uses an ounce of common sense will be able to not only trade GDX for profit, you will be able to trade GDX for as much money as you have the guts to risk.

Surely you think I am kidding.  But I am not.

Here is the thing.  There is an indicator that you can use at www.StockCharts.com that has the ticker symbol of $BPGDM.  It creates a chart of the percentage of mining stocks that have a bullish point and figure chart.  The last sentence sounds like lawyer talk, so here is the translation.  It creates a chart of the percentage of mining stocks that are going up.

Like a pendulum, over time, this data swings up and down.  When it is going up, more mining stocks are trading higher (you want to own GDX at that time).  Then the pendulum stops swinging and makes a flat horizontal line. When that happens it means mining stocks have stopped rising (you want to sell GDX at that time).

Other than what I just wrote, there are no other rules.  You just make up your own.  For example,  I chose to interpret successive higher ledges as successive selling points.  Then when a correction brought the ledge back down and leveled horizontal again, I took that as a buy signal when it began to rise vertically again.

Enough talk.  You will intuitively understand when you look at the chart.

Just to test this out over a longer period of time I made this next chart to cover not 6 months, but 18 months.  I chose to draw a GREEN line for the buy signals and a RED line for the sell signals.

My drawing produced 10 trades and every single one of them made the money, honey.  AND, looks like it is time for trade #11 :)

Almost forgot to mention this.  The smart thing is to put an RSI (14) above the chart as I did here. Without explanation, when green, you sell.  When brown, you buy.  You can use that additional information to make sure you do the right thing at the right time.

Your imagination should be flying.  Remember, you CAN do this!

OK, so I was dying to find out if $BPGDM works on GOLD.

The answer:  ta da…. YES!

For this chart the rules I gave myself were these:
1. Buy when line is black
2. Sell when line turns red

Not too complicated, is it?

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