Tanzanian Royalty Exploration Corporation - Chairman's Corner - Golden Rules

James E. Sinclair,
Chairman & CEO,
Tanzanian Royalty Exploration Corporation

	August 02, 2002 Golden Rules Author: James Sinclair
	Suffered a lot of pain in Phase #1 Gold Reaction? Want to do it better in Phase #2? 1. You MUST have a FIRM view of what you believe is the fundamental condition of the gold market. Is it a Bull or Bear Market? This has to be a firm conclusion that is valid when prices move adverse to the direction of that conviction. Once you have this view, it should not be easily changed. Nobody makes real money without a firm opinion on what the character of the market is. To review my firm view please go to www.financialsense.com or www.lemetropole.com 2. You must not overextend financially in terms of the percentage of your liquid net worth committed to gold-related investments. In gold, a moderate amount position will go a long way. If you are overextended now, cut done in the upcoming rally in gold investments. Start immediately! Overextension is the madness that always precedes disaster. 3. You must be willing to systematically sell 1/3 of your position into strength and commit not to buy it back unless it comes cheaper. In the inception period of a bull market, you can expect the price of gold and gold-related investments to have to climb a wall of total disbelief. Climbing a wall of disbelief means in terms of prices that gold entities tend to move ahead ten steps and fall back eight. 4. Your portfolio of shares should be made up of 2/3 non-hedged producers and 1/3 junior exploration and AVOID significantly hedged gold producers as one would avoid a person with EBOLA. They failed to perform well recently on the up or resisting the down. 5. You must study basic technical analysis so that you have a working knowledge of trend lines, support and resistance. This does not require the talent of a brain surgeon. It will not take up a great deal of your time. If you refuse to do it, you are an accident looking to happen. And, I assure you, that accident will happen! 6. Regardless of your fundamental conclusion, you must have predetermined "Stop Loss" points at which no matter what you believe, you limit your loss by automatic liquidation, in case you are wrong. 7. If you are "Stopped Out,", you do not reenter this investment field because it simply is not for you. Remain in cash. Buy some physical gold. Increase your liquidity at every opportunity and relax. ADDENDUM TO RULE #7 - Stop Loss Orders By James Sinclair Harry Schultz, friend, ace trader and author of the just released "Bear Market Investing Strategies" available from www.amazon.com, commented that a stop loss order should not remove the technically competent or competently advised gold stock investor/trader from the market place as a participant. For this category of investor/trader, the stop loss order and execution should be used as a tool of trading to maintain liquidity, control loss, and position for re-entry. I concur. My earlier comment in dealing with the use of stop loss orders was my reaction to the present-time problem of the many that have recently reported to me via email at www.tanrange.com Many present participants who communicated with me, after the fact, were not positioned in accord with our guidelines, eg. hold 1/3 juniors and 2/3 non-hedged gold producers. They were over-committed and had made no appreciable sales on the rally to capture profits & reduce their exposure as we recommended. Those who have not studied basic technical analysis or do not have competent, proven trading advice, if they adopt rule #7, should use it to reduce their commitment in the next gold rally back to an acceptable risk level by not reentering the marketplace with the money developed via execution of stop loss orders. We both strongly recommend that you study the three simple concepts of trend lines, support and resistance. We believe, in addition to studying the text on technical analysis, you should read at least two additional books to get the feel of markets.

	You can view the Previous Chairman's Corner item: Mon Aug 5, 2002, Uncommon Valor in Markets is to Say it Succinctly, Simply and Directly You can view the Next Chairman's Corner item: Tue Jul 30, 2002, Gold & Silver Derivatives as Tools of Money Laundering You can return to the main Chairman's Corner page, or press the Back button on your browser.