The following three rules for learning a lifelong trade in a short amount of time are short and simple, yet very important.

1. Get a picture in your mind. This reminds me of Chevy Chase in Caddy Shack. “See you future, be your future.”

2. Isolate the key features. In other words focus on what is important.

3. Take the stair approach. Work in a progressive manner doing a little more each time.

After watching the short video of Olympic gold medalist hopeful Shaun White practice half-pipe snowboarding tricks, check out thetalentload.com for more info on high velocity learning.

The following video, by Robert Kiyosaki and his colleagues at RichDad, is very good and I thought it worth sharing.  I’m finishing a book on banking, markets, real estate, etc. that is not commonly taught.  Just like my book, I’ll show this video to my kids.

Gold has been going up at record pace.   Will it continue.  Maybe, maybe not.  Will I buy gold or silver?  Maybe, maybe not.  What I won’t buy is the hype.

Instead of buying hype, I’ll look at charts.  There are people who are technical traders and understand the complexities of analyzing charts. However, here is something that I consider to be very simple.

The Gap. The gap is a movement from the open to close in prices from the previous day where the price has a “gap” instead of being at the same point.

I’m not saying you should do gap trading, but I do think this is a good indicator or where prices will go. And the reason I say this is because of the expression “all gaps get filled” or the “market abhors a vacuum”.

When it comes to gap trading there are many things to consider and you should at least familiarize yourself with them. My point is not to advocate gap trading strategies, but rather to get you to be able to glance a chart and see possible opportunities or threats to your investment.

The reasons I like ETF vs. mutual funds are several as I’ve previously stated.

At the same time, mutual funds can’t hold cash – they have to buy. To clarify, my understanding after talking to people who actually deal with mutual funds (not just investors like you and me) say that the funds cannot hold more than 10% of the portfolio in cash. So if I give my money to a broker, he has to invest it. That’s partially why they tell you to average down when the value is dropping.

Back to the gap. I was looking at an exchange traded fund last year and the price was in the $90′s range and going up. However, there was a gap in the $60′s range.

So why would I buy at $90? Well, the price went up to the $140′s that’s why.

But I’m not buying and holding and I’m glad that I didn’t because this year it went down to the $30′s range!

What I actually did was buy an option to sell around $90. A put option.   Buying a put option gives you the right to sell the underlying position at a particular price.  Although the ETF’s price went up and my option was losing value, after the price topped out and began to fall, my option value started to increase. As the price fell into the $80′s and $70′s range, I was making money.

Are options risky and gap trading risky? Anything is risky if you don’t know what you are doing. I’m still continuing my education as well.

But I do look at one thing before I put money in, and that is the gaps. I don’t know that all gaps will be filled as prices are going up. I hope so. But I do look for the ones at the bottom to see if I could potentially lose a lot.

On the chart shown, #2 at least partially filled #1 on the way back up. However, notice the gap with the arrow that has not been filled at the bottom? I’m not buying just yet. I might just sell an option for the price in the gap in the mean time to get paid.

Selling options I get paid.  Buying options I have to pay.  Therefore, if I decide to buy an option, I’ll probably LEAP right in.  Check out my post on LEAP options. But until then, I’ll keep shopping the gap.

(The above chart is not for gold or silver, but used as a reference.  Yahoo Finance has charts that can be converted to candlesticks for any position.)

Okay, I know it’s not Christmas in July just yet, and the first of spring is not exactly the right time to be thinking snow since the trees and flowers are blooming.

We watched the old Christmas specials on DVD this past season and this song popped into my head after watching gold prices this week.

“Silver & Gold” by Burl Ives.

So I was wondering if it is a good time to buy gold since the “sky is falling” according to Chicken Little.

Gold is around $950 per ounce.  Silver is around $13.75.  Therefore, gold is 69 times more expensive than silver.

The one ounce silver American Eagle has a face value of $1.  The one ounce gold American eagle has a face value of $50.  That’s a 50:1 ratio.

I would think that silver is the one to buy and gold is expensive.

Since neither gold nor silver pay dividends, swapping one for the either at the appropriate times may allow me to accumulate more ounces over time.  But that would depend on if I had the time and enough ounces to begin with to justify the effort.  Also, it would involve more risk since this is something that I don’t do all of the time, but I do understand the concept.  (Lack of knowledge is risky, not a strategy.)

As far as gold and silver being an investment.  Sure it is.  If you sell it someday.  I’ve mentioned gold as a hedge in a previous post.  The price will be determined by demand.  Depending on when you or I buy will determine if we made a good investment or not.

I also like to shop the gap.  There may be golden opportunities down the road vs. buying the hype.  I may use options until it’s time to go for the real gold.

But this is just my opinion and little food for thought.

If you’ve read my other post “Gold is at $1,000″, you would probably come to the conclusion that I don’t think of gold as a hedge against inflation. You’d be fairly correct. I don’t think it is (or at least not a good one). If my insurance goes up for the same amount of coverage, that’s inflation. Gold didn’t keep up.

Increasing income is what I think is a hedge against inflation. If I have more left over after everything else has gone up, I beat inflation. If my income breaks even, then I guess it would be a hedge.  I know that is not the definition you read in dictionary, but the dictionary is not balancing my checkbook.

However, I didn’t say that gold was not a good investment. Gold can be a good investment.

As you see gold is well above the face value of $50. In 1986, gold averaged around $350 an ounce. If the price of gold could average around $1,050 in 2009, then your money will have tripled. But that is in 23 years, or about 4.8% annual rate. With this return, I’d say all that glitters is not gold, but it’s probably close to the official inflation rate.  However, gold was in the $600-$700 range just last year, which would not be near 4.8%.

But this still doesn’t mean that gold is not a good investment. What if you use gold as a product? Buy, sell or trade. I’m not suggesting this, but a grocery store buys and sells apples and makes money. They do it with inventory turnover. Would that be an apple turnover? (I wanted one the other day and Arby’s was out of them. That’s when I thought this would be an appropriate analogy.) You can look at the historical prices of milk and eggs in 1986. I couldn’t find apples.  But the prices are not that much higher than back then.

A business invests in inventory, and need turnover – not a buy and hold strategy. Turnover is how they make money even when prices haven’t changed a whole lot over time.  Commodity traders do this with gold.  Banks do the same thing with money.