How many times have you heard someone say this:
Once price gets above (pick a number) the coast will be clear to buy?
This is how retail traders consistently lose money. For whatever reason most traders expect that a breakout signals that a trend is starting, and once price gets above their target they assume it's safe to jump in the pool. Nothing could be further from the truth.
Most breakouts trigger a profit taking event. So buying a breakout, more often than not, guarantees that you will suffer an immediate drawdown. Buy high, sell low.
Strong trending moves in markets, such as Market Vectors Gold Miners (NYSE:GDX), are rare. Most of the time markets are either in a sideways consolidation or slowly stair stepping higher. Neither one of these patterns is conducive to making money buying GDX breakouts. In modern markets you need to buy low and sell high. This is where cycles analysis and sentiment are critical tools to use.
