Koos Jansen
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Koos Jansen
Posted on 17 Jun 2015 by

Interview Gold Futures Trader Petko Bankoff

Out of my interest in every participant in the gold market – not only physical gold advocates – I’ve interviewed gold futures trader Petko Bankoff from Bulgaria. Thanks Petko for your time to answer my questions! 

What’s your background?

I graduated the High School of Maths and Natural Sciences with the specialty “Earth sciences and English languages” in my hometown in 2001. After graduation, I joined the army where I spent 1 year. Then I signed up at a university to continue my education but never really graduated it – I decided that they can’t give me the knowledge I need to succeed in life so I quit. I consider myself self-taught – in the era of the internet if you have the will to learn, you can learn anything you want, there’s no excuse for ignorance. I became proficient in SEO (Search engine optimization) and website administrating, audio engineering – recording, mixing, mastering, and obviously trading which is my latest passion.

What’s your affinity with trading? When and how did you start trading, what do you trade?

I started trading in 2009-2010 influenced by a friend of mine who made a lot of money in the 2007-09 period. To be honest, the first trading instrument that I traded and caught my eye was gold. I remember how expensive gold was back then, near the all-time top, everybody was so bullish…  I traded with demo account for 2 weeks before I put in real

money. It is always better for a new trader to start trading small but with real money instead of demo. It’s the same market but the emotions are different, when you know you’re risking real money the feeling is totally different, your thinking changes dramatically. Demo accounts are only suitable for model testing, nothing more.

How do you trade? What markets?

In the first few years I traded gold and FX, later I quit FX due to the enormous amount of randomness in this market and I concentrated on gold entirely. You can’t be good at everything, you have to specialize in one market, learn its dynamics, learn to “breathe” with it and feel its “heartbeat”, every market has its own peculiar dynamics and you must learn to tap yourself into it. I specialize in technical analysis. I have developed a model based on technical indicators and psychology of the crowds so I guess I can call it a behavioral financial model too. Basically I’m looking for some kind of imbalance in the market.

What do you know about your big “colleague traders” (bullion banks) in the gold market?

Everybody has his own model and his own unique way of trading and approaching, some are good, others not so much.  What I know for sure is that Mr. Market is equally mean to everyone, regardless if you’re a retail, institutional trader or big hedge fund manager.

How did the gold market develop over the past years? What changed trading?

Change is something so constant that you don’t feel it until it’s actually there. The markets are a vast random system that is constantly shaping its laws. They’re dynamics are always changing, just like the climatic system on our planet – it’s never constant. Over the past 5 years the markets’ conditions are going through really big shifts, influenced by the Central Banks’ erratic money printing. It is a historic time we live in now, it is turbulent and I think that the laws and dynamics that are gonna drive the markets in the next 50 years or so are shaping right now, you better keep your eyes and ears open. One major factor influencing trading nowadays is the HFTs or algos, I’ll talk more about it.

How do you define value?

Value is defined by the sum of all trading combined. Right now the gold market value is 1203.45, that’s it. We can talk all day and night about whether gold is undervalued or overvalued, but in the end all that matters is the ticker, that’s all. The market is always right.

Do you aim only for a fiat profit? More precise, are you interested in macro-economics as well? Do you think macro-economics and geo-politics influence the price of gold?

I trade for profit, i.e. fiat capital appreciation. My model is based on technical analysis and perception of the traders, I do not consider macro-economics into it. I don’t think geo-politics influence the price of gold, at least not in the current conditions, unless a war errupts or some other big event happens.

How does HFT trading influence trading?

That’s a very interesting question, Koos, thanks for asking me. This is a very wide subject that could take us a whole night of discussion so I’ll keep it simple. The HFTs, or also called algos, are very popular recently and their influence of the markets is becoming

Increasingly strong. Basically, these are computer programs that operate at a very high frequency – they take a few hundred trades a second and thus create big sharp spikes or selloffs that usually happen so fast that no human brain can react to it. What they usually do is hunt for stops on both sides below support and above resistance. For this behavior of them, the traders observing the market have the impression that it is rigged or manipulated and they’re not far from the truth – they’re programmed to screw the traders. So if we talk about manipulation we should talk about algos.

Is the gold market manipulated? If so, how? Only short term or also long term?

Depends how you define “manipulation”. To most people manipulation is one evil despicable guy sitting in his office and pressing the sell button to artificially drive the market down through excessive shorting. This is primitive thinking, markets are much more complex than that, not to mention that shorts do not drive the price down, it is entirely the buyers that create the huge selling waves – once enough longs have been accumulated, let’s say 70 – 80% of all open positions are long, it takes very little for them to become scared and to start liquidating, and the more they liquidate and drive the price down, the more new buyers jump in thinking that the market is wrong, undervalued, and thus creating an avalanche-like effect – the more snowflakes join the avalanche down the slope, the more powerful the avalanche/selloff becomes.

The gold market is too big even for an institution such as the Federal Reserve to be manipulated so directly through direct selling/buying. Is the gold market influenced? Yes, there is no doubt about it; you can clearly see the price action around events such as FOMC, NFP, Yellen’s speeches, etc. But is it manipulated? I don’t think so, it’s just too big. Nothing is stronger than an idea which time has come. If a market is matured enough to selloff or rally, it will selloff or rally, there’s no force or institution that can stop it from doing that. Take a look for example the CHF peg that the SNB was defending – that’s 100% manipulation and see what happened – after 2 years and $80bn loss, one of the richest banks in the world, the SNB, has abandoned it because they couldn’t afford to do it anymore and couldn’t handle any more losses.

The gold market is much bigger than the EURCHF pair, there’s no institution on this planet that can afford to take billions of losses every month to keep it rigged just to screw a few retail traders who think that the real value of gold is $10 000/ounce and the market is artificially kept subdued. The only manipulation going on in the gold market is the HFT algorithms that create fake rallies through excessive accumulation and thus simulating that there’s actual demand from investors/traders. The regulators claim that algos do no harm to the market structure because they create only intraday swings and do not influence the long term structure, but are they considering the impact on the investor confidence?

There’s decreasing lack of participation and liquidity in the last months and it is no secret why – would you risk your life savings if you knew that a bunch of robots are looking to screw you and hit your stop? Undermining investor confidence has a crucial long term impact on our global economy, I think that the CFTC is really underestimating this problem.

Where do you think the price of gold is heading in 3 months, 1 year, 5 years?

Nobody knows where the price of gold will be in 3 months, 1 year, or 5 years. What I can say is that I’m bearish, this bubble has burst and I don’t think it’ll be pumped again in the next 5-10 years. Until I see a substantial bottom in place, from a technical point of view, I’ll remain bearish on the short side of the trade.

Where do you think the global economy is heading?

I am not an economist, neither I am interested of the macro-economy as a trader, so I really can’t give my professional opinion about it. As a citizen, it seems to me that our global economy is going pretty well and is advancing. 2008 was a serious threat for our global society at all, if we lose trust in each other we’re left with nothing, our whole society is based on trust. Luckily it’s all looking bright now, the sun is shining again and confidence has been restored. Also, the world stock markets look pretty strong which is the main indicator that we’re far from a global crisis.

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  • http://www.bullionbaron.com/ Bullion Baron

    Perhaps Petko could expand on this point:

    “once enough longs have been accumulated, let’s say 70 – 80% of all open positions are long”

    All open interest on the Comex must have a buyer and seller, so how can 70-80% of all open positions be long?

    Otherwise an interesting peek into the mind of a trader, but plenty in there I don’t agree with e.g. stock market strength alone doesn’t seem like a great indicator of economic strength, especially when it’s against the backdrop of emergency level interest rates. If the Fed can normalise rates without incident and stock remain high, I will be well surprised.

    • SLK_R

      So that could be 20-30% of positions short, by # of positions – ie the short positions are much bigger… sort of make sense… but u look at concentration at the 4 biggest and 8 biggest banks in the banks report, the concentration is much higher.

      But I agree, plenty to disagree with here. A man of talents but has also learnt the ills of the finance industry, to hold beliefs like facts. That manipulations cannot last forever doesn’t mean there has not been any of it. And EURCHF operation was 100% successful if the aim was to provide cover for some printing parties, finishing with a wild and reckless bonus for some powerful folks.

  • B.

    Agnostic traders… what can one say?

  • geeee

    Not sure what world Petko is looking at but it’s not the world I see today. In my view stocks & bonds have been driven to bubbles with money printing & ZIRP with gold being a must own refuge to hedge the risks (at least 10% of assets & for me 25% since I have seen this movie before) which are higher today than 7 years ago.
    I have been an optimist all my life but only a young new trader starting in 2009 could have his view as this kind of QE driven agenda has never happened before & they will take his money before done as they always do rookies. For me I will bide my time & wait for the major re-set coming so my optimism on markets & economic prosperity for all not just the 1%ers can return once again as it began long ago. The last 15 years but a bad memory of an economy off the rails & terrible political leadership driven by debt, money out of thin air & terrible financial engineering by bankers.

    • Big_Shiny_Au_Nuggets

      Why cap your PM holding at 25%?

      any rational adult who has actually thought for themselves on the mattercertain of the statistical inevitably of how this global Ponzi scheme will end, we just don’t know precisely when. Looking at the S&P500, for example, suggests that the end is nigh…particularly when one stands back to properly view the economic fundamentals and the circling flock of black swans.

      So I ask again, why not hold 60/ 70/ 80 or even 90% in physical bullion?
      No counter party risk.
      No storage fees.
      No bank rehypothecation.
      No sleepless nights.
      No paper derivatives.

      Just solid, physical, in-your-hand bullion.

  • Doolie

    Mr. Petko Bankoff, if gold market is too big to rig, please explain LIBOR.

  • Tinky

    Traders such as Petko are myopic by definition, and it is obviously ludicrous to make long-term projections on the price of gold without serious, broad-based economic and geopolitical analyses.

    Those who will be in the best position to weather the upcoming storm are thinking well ahead, and understand the meaning, history and importance of good collateral, rather than technical analysts whose focus is often limited to days, hours, or even minutes.

  • Lofeal

    I think Petko touches the subject of manipulation but has the wrong thinking in it. He mentions the CHF but states ” after 2 years and $80bn loss, one of the richest banks in the world,
    the SNB, has abandoned it because they couldn’t afford to do it
    anymore and couldn’t handle any more losses”.

    To look at this Another way could be – How much did the Swiss CB actually lose on its manipulation. On one side u have the cost for the bank which equals to zero, and on the other hand u have the stockpiles of reserves. U do the math.

    Anywhere where CBs are involved, there is manipulation proved by the simple fact that they are involved. That includes physical gold (see China, Russia etc), UST, stocks, currencies.., u name it – it is manipulated.

    So why does a CB involvment mean that a market is manipulated – They don’t have the same costs of that investment as everybody else does, neither do they have the same incentives since if u can create all the currencies u like out of thin air – what other reason than manipulation is there to raise or lower a things value with those currencies they can create? Accumulation of reserves is nothing more than manipulating your currence lower.

  • paddlingfan1

    This guy is smoking dope! Talk about living in lala land. He must be a Mason. Doing his part for his “brothers”. Stay as far away from this guy as possible. He’s part of the system weather he knows it or not.

  • veerar

    Technical Analysis, “alone” is insufficient.Mr Bankoff is wrong regarding manipulation of not only Gold but almost everything the bankers touch.Central Bankers of the developed economies and the BIS,are reported to prefer Bonds and a strong US Dollar.
    Silver manipulation was resorted to by the UK,as Indian Soldiers under the British demanded pay in Physical Silver instead of Paper.
    Mr Bankoff is requested to google for:-
    Silver stealers Pilgrims Society.

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