David Fuller's view Precious metals continue to range, probably in support building phases as suggested by the upward dynamics within some of these patterns. However, today's setback reaffirms that they have yet to achieve sufficient demand velocity for sustained upside breakouts. I think the next significant move will be a rally, probably commencing within the next six weeks if earlier trending consistencies are repeated. More QE and low interest rates also support this hypothesis.

For these reasons I have been positioning myself for upside breakouts in precious metals because the best percentage gains are achieved by successfully anticipating recoveries when the crowd is still undecided and fretful. I think this is now a timely strategy for those who prefer bullion funds. Personally, with precious metals I prefer to spread-bet in futures, for its UK tax advantages and also the leverage available. However, the tradeoff is that this is a much riskier strategy. To mitigate this risk, I often place breakeven or slightly in-the-money stops on leveraged trades once a modest cushion of profit is showing. I know that many of these will be triggered in choppy market conditions and this can be frustrating. Nevertheless, I usually find it preferable to a strategy of maintaining looser stops or no stop for recently established trades. Another alternative is to keep positions small, relative to one's capital allocated for trading. My degree of conviction, which may or may not prove to be correct, is a factor in determining the size of an initial position.

Trading is hard work and often frustrating because markets generally range much more often than they trend. The risk / reward ratio does not move decisively in one's favour until a consistent trend develops. When this occurs one can leverage up behind trailing stops. Traders are always looking for those opportunities and finding them is both a matter of judgement and luck. Most of us find that our perspective is improved by the use of price charts in our search for opportunities. By luck, I am referring mainly to the emergence of some big trends. Meanwhile, you and I can only deal with the reality that markets provide.

Lastly, on this digression into the practice and philosophy of trading, in my observation successful traders start by observing others and then developing their own methodology and strategies, to complement their temperament and abilities.

For the record, here are my transactions for today in gold, palladium and silver. My August gold opened on 29th June at $1600.7 was stopped out at $1601.4. My September palladium opened on 29th June at $584.6 was stopped out at $587. This reduced my stake in these two metals by 50 percent. I had been hoping to buy more silver on a setback and this afternoon I doubled my silver long, paying $27.74 for another September position. These prices include spread-bet dealing costs.