Jun

23

 I noticed the great Lobagola move in gold of late. What can we learn from it this time?

[A LoBagola, as described in The Education of A Speculator
by Dr. Niederhoffer, is a phenomenon whereby a market makes an
historically large run in one direction, usually up, and then at some
unpredictable point begins an equally extreme run back to where it
started.]

1. The pace of the elephants on the way down set the underlying conditions for the reversal. The expectation studies must include the number of failed reversal attempts, as well as the usual measures.

2. In actual migrations, elephants selectively eat trees/plants without killing them, the plants re-grow and the elephants eat them on the reversal (coppicing effect). Hence, elephants are able to use the same migration route because they know that the resources in these areas will be available to them. In markets, the footprint of the move can be observed in the patterns of time and volume and untouched bids and offers.

3. The most difficult part of trading lobagolas is: "nobody knows when they come back". Qualitative observations about the nature of the migration might help. There are two main causes for elephant migration: resources and human intervention, the latter also is known to be able to change the path of the elephants. Some classification studies (not retrospectively) in market moves is appropriate.

4. One of the worst mistakes a speculator can make is to go against the reversal phase of a Lobagola without noticing is part of a sequence. And here, nobody knows if they will come back.

5. Lobagolas in currency markets follow different patterns, these seem to be mostly "resource" driven.

Any other thing specs have learned from trading lobagolas?


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