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Potential 'Long' Gold Trade

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@gautamhait,

I do not understand the way you have wrote your question but I shall answer based on assumptions made.

Firstly I do not physically buy or sell Gold. I am simply trading Gold using price action. I am doing this via IG's Spread Betting platform. However there are many ways in which you could invest in Gold such as acquiring it physically or using a company like Bullion Vault which I have done in the past. You can also use ETF's and ETN's to take a position on Gold. 

For the purposes of this specific trade then I have opened 'long' positions on both Gold and Silver using IG's Spread Betting platform. The benefit are the tax free profits and use of leverage. 

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@Caseynotes,

Yes indeed!

To the rest of the IG Community including @Caseynotes of course.

My 'long' Gold trade at the time of writing though was higher earlier is currently up 7 points.

My 'long' Silver trade at the time of writing though was higher earlier is currently up 9 points. 

I just have to make sure I add to my positions on the way up 'pyramid' as the price increases. Adding positions when the price is increase is psychologically very difficult to do as human psychology is to purchase as the price declines attempting to get better value and more for your money. Humans love getting a good deal and a discount. Trend following requires a reverse of this natural human instinct which is why even a lot of trend followers cannot add to their position as it increases. This method really helps to maximise the profit potential. As the price increases each addition to the position then is in profit. So in other words all previous trades are in profit on the position. 

I am sharing my live trade with the IG Community along with my thought process and rationale behind any decisions to help others get a peek at the mindset of TrendFollower. 

I have kept how much leverage I am using on both 'long' positions secret as I do not wish to disclose everything and be totally 'naked' to the IG Community. It is nice to keep a little bit private and personal.

I am considering setting a 'Trailing Stop' with 'Distance' and 'Trailing Step' as both my positions are now profitable live trades. A trailing stop is set at a certain percentage level which you can determine. You can also specify a certain amount of points away from the current price.  Now this gap is known as the trailing step and your stop will move to maintain that gap from the current price. For me the benefit of using a trailing stop is that you do not have to keep on manually moving the stop loss. However, if you do not set the level correctly then you could be stopped out in a strong but volatile trend when it is unnecessary.  Currently, I just have a manual stop loss on both positions which are the previous 'main' higher lows formed prior to the recent higher lows. 

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Well after the US Federal Reserve raised interest rates which was widely expected my analysis is as follows:

It is reported that there are unlikely to be any further interest rate rises in 2019 but this cannot be ruled out as it depends on the US economy. If that is the case then it could be bullish for Gold. 

Also past performance is not a guarantee of future behaviour but when there was a major Gold bull run in the 1970's it coincided with the US rising interest rates so this notion of if interest rates rise then it is negative for Gold is not entirely correct. The data suggests otherwise and does not fully support this view though does on occasions. Again this all depends on the US economy and what happens around the world. Supply and Demand still play a strong role in Gold's price behaviour. 

From an economic perspective when interest rates rise then money tends to flow out of equities and traditionally it has gone into the likes of Gold as a 'safe haven' as stock markets decline. That does not necessarily mean it will happen this time but it is looking likely based on the price action of equities and the price action of Gold.

I think Government Bonds may well be worth a look and though there was a sharp drop in Gold and Silver after the news I am not overly concerned at this stage. There was a sharp upward move prior to the US Fed decision which the market as seen before so was predictable. 

Gold and Silver are both volatile at the moment so I am worried that I may get stopped out and if that happens then will I have to reassess but I am still hanging in there for now. 

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Really appreciate you sharing your trade decisions @TrendFollower. I am watching and learning and it’s nice to see someone willing to not only share a trade idea but actually say they have put their money where their mouth is. I have thought of doing this but haven’t quite got the confidence yet.  

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@Nelsy-Boy,

Thank you very much for your kind words. It is very much appreciated.

I think there are a lot of people who will provide analysis straight from the text book and post chart after chart with lines after lines. The question is does this increase the value from the perspective of the reader within the IG Community? I think the reader would have to have an appreciation and more importantly an understanding of the analysis for it to really provide any meaningful value. There will be a lot of readers who are new to trading, find it difficult and have no or very little experience in technical analysis. One must take this into consideration when posting which is why I try and keep my posts simple and basic. 

In terms of both my Gold and Silver trades they are far more volatile than I had expected. Gold is making a new 'higher high' which is what I want to see and Silver is looking to catch up with Gold and make its own new 'higher high'. 

For a trend follower, Gold, is showing some bullish indicators to the long side and they are:

  • Gold is trading above its 20, 50, 100 and 200 DMA
  • Gold is making new 'higher lows'
  • Gold is making new 'higher highs'
  • This is without a big increase in volume so when the volume increases and short positions on Gold start to close then this could create serious pressure for a strong upward move. Real volume is yet to come!
  • Momentum indicator is getting stronger and positive

Gold and Silver are both looking good this morning after the US Fed rate rise so things are really looking up for these two precious metals. I have not traded Palladium but that was the trade to be in relating to Precious Metals. I think 2019 is setting up nicely for Gold and Silver and I would like to think I have got into both these trades as early as I could. 

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My Gold trade is up nearly 20 points. 

My Silver trade is up nearly 10 points. 

I am happy with the performance of the trade to date. It is playing out like I envisaged which is a nice confirmation to the assumptions I had before I placing the trade. 

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I see a 'spike' in Silver coming to $15.00. This is based on my 'gut' and 'instincts' with a little bit of knowledge and experience mixed in. The market loves round numbers that traders like to target. Also Silver is lagging behind Gold at the moment so I expect Silver to do some catching up which is why I think $15.00 is imminent.

If Silver does hit $15.00 then I expect fresh capital flooding into the 'Long' Silver trade with speculators and Hedge Funds driving the price up higher. If that happens then I will be extremely happy as I am already in the trade so I can take full advantage of the 'profit potential' should that happen. Also it may close any 'Short' positions still open which could 'amplify' any move upwards. 

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As you can see from my post above, I could see $15.00 coming.

I stated as much on Monday and it is now Wednesday and Silver delivers above $15.00. 

Gold will now go for $1280.  It will then go for $1290. If it hits $1300 then the new longs will enter, speculators will jump in and trend followers will add to their positions taking Gold even higher. 

Whilst the US Government shutdown continues the outlook will remain positive for Gold and Silver. 

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Latest update is as follows:

My Gold trade is up 26 points so the same as yesterday.

However, it is my Silver trade which has played catch up as predicted and is now up 53 points. 

 

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Silver is now trading above its 20, 50, 100 and 200 DMA. 

The 20 DMA is moving upwards, the 50 and 100 DMA are moving sideways though 50 DMA seems as if it wants to creep upwards. The 200 DMA which has just been hit moving downwards.

What I would like to see to add further strength into this trade is all four of 20, 50, 100 and 200 DMA all moving upwards. So though the price is above all four of these moving average timeframes, the trend will be strong if they were all moving upwards in direction which they are not in this moment.

Gold is different. Its price is also above the 20, 50, 100 and 200 DMA and it got there before Silver. The difference is that Gold's 20, 50 and 100 DMA are all now moving upwards which is extremely positive. Its 200 DMA is moving downwards but if this begins to move upwards the strength of the trend will be beautiful for Gold. It really will begin to shine.

So we are not quite there yet on both Gold and Silver but certainly heading in the right direction. Now some may ask why not wait for the above before entering the trade. Yes that would be a valid entry point but I wanted to get into the trade as early as I could and it met my personal entry point indicators. The above for me will be trend and trade confirmation at its best. 

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The markets are now closed for the weekend so how did my trades do? Below are the results:

'Long' Gold trade finished 31 points up

'Long' Silver trade finished 66 points up

These are open and live trades so until they are actually closed then such results are only on paper and have thus not actually been achieved.

I look to follow strong trends and ride them as long as possible. I have tried to get into Gold and Silver as early as I could based on price action and indicators which led me to make a decision on both. I shall remain in both these trades until there is a clear trend reversal so I have no price target or timescale in mind. I will be in as long as necessary. It could be days, weeks or many months. I do not know. I have no idea what price both Gold and Silver will go to. I have no 'crystal ball' to show me and nor do I have the skill to be able to predict with any accuracy. I want to let my winners run and not exit and take profits too early.

It is those big winners that make up for the losses. The key is to ensure that the profits from your winners are bigger than the losses from your losing trades.

Gold and Silver may not move 500 to 1000 points in a day like the Dow recently but with effective and managed use of leverage one can trade an asset which moves less number of points per trading session but still earn enough profits per point movement based on leverage and use of sound risk management.

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Guest IanBower

Just want to thank TrendFollower for sharing his knowledge and approach. You mentioned in one of your post that big volume is yet to take place on gold if it hits $1300..where do you get information on that. I have used IG charts and used the volume indicator but not sure if I fully understand how that works. Grateful if you could explain that in relation to Gold. Thanks again. 

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@TrendFollower I have jumped on the long silver band wagon but one thing I find difficult with my trades is the extent to which I would move my stop loss as the trade moves in my favour. Can you offer any advice on this please. At the moment, I follow my trades quite tight only because of volatility. I only trade on daily TA.

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@Nelsy-Boy,

Congratulations on entering the 'Long' Silver trader.

I can offer my opinions and thoughts but you must conduct the necessary research and reading along with analysis to come to your own decisions. You must not just blindly follow any of my thoughts or opinions.

When I am in a profitable trade I switch from a traditional stop loss to a 'Trailing Stop Loss'. You may wish to consider a 'Trailing Stop Loss' but I would strongly urge you to conduct some reading and research first. This will eliminate the need for you to manually move your stop loss as the trade moves in your favour. You can set 'No of Points'.

The way you would do this on IG's Spread Betting platform is to go to 'Stop' and select the 'Trailing' option. This will then give you the option to pick the points distance and the 'Trailing Step'. This part will tell the stop loss when to move upwards. You must do some work on this part and include it in your trading strategy. 

I hope this help. May I ask are you also 'Long' Gold?

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Thanks @TrendFollower. I have looked at trailing stops before but it didn’t suit my style. Whether that will change with confidence, who knows. I think that with such volatility, you may have to have a wider trailing stop to give your trade some wiggle room. I will revisit that one in the coming months. As for long gold, I was tempted but I felt like I was doubling up on a similar fundamental based trade and so it didn’t suit my risk management. I am still following it so that I can see how well you are doing though 😀

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@Nelsy-Boy,

Ok in that case if I was not going to use 'Trailing Stops' and then how would I set my stop losses in a volatile market? I would use price action and moving average indicators to assist me. So you may want to look at when the price reverses on a long position and goes below the 20, 50, 100 or 200 DMA depending on your risk management strategy. 

For day traders the stop losses will be pretty tight. For longer term trend traders they have more flexibility and can have wider stop loss range as long as they are trading with the trend and that trend is strong and bullish.

My Silver trade is doing twice as well as my Gold trade but they are both doing well and as I expected. Both are in profit. Yes, I will keep on updating on this thread with how both trades are doing. It will be very interesting to see how long I am in this trade from a 'Time Period' perspective. It could be days, weeks or months. Who knows?

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@elle,

I am making an assumption that you mean you have no position in Gold. I had to google 'FWIW' so I am making another assumption it means - For What It's Worth? Would I be correct?

What are you trying to show us on the chart? Are you able to expand or explain?

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2 things - price has sort of reacted to those parallel trend lines in the past, so there's a chance it will do so in the future & those red zones have been areas of "supply" in the past, ( sellers were there ) so may be there again in the future. I did post a link in another forum here with videos & stuff about supply and demand zones etc

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@elle,

Past performance (historical) does not mean future performance will be the same. If this was true then Cryptocurrencies should see an almighty rally making new highs! LOL. 

You use the word 'chance' well there could equally be the 'chance' that it does not react to the parallel lines. I am being '****'s Advocate' of course. Did you create the lines on the chart yourself or is the chart created by someone else?

For me are there any other indicators or signals that increases this chance? That is the key question, line and chart. What other indicators and signals can support any 'current' price action to increase the odds and probabilities in your favour when placing a trade?

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IG have posted an article today from @MichaelaIG. It contains a clip at the bottom which I have included below.

The IG Analyst must have read this thread and my posts on here. LOL. 😂

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3 minutes ago, TrendFollower said:

@elle,

Past performance (historical) does not mean future performance will be the same. If this was true then Cryptocurrencies should see an almighty rally making new highs! LOL. 

You use the word 'chance' well there could equally be the 'chance' that it does not react to the parallel lines. I am being '****'s Advocate' of course. Did you create the lines on the chart yourself or is the chart created by someone else?

For me are there any other indicators or signals that increases this chance? That is the key question, line and chart. What other indicators and signals can support any 'current' price action to increase the odds and probabilities in your favour when placing a trade?

It's my chart , I take full responsibility for everything on it. No other indicators are used. I totally agree with your first sentence - that what makes this stuff interesting. As far as "chance" is concerned , maybe the word "probability" would be better - sounds more technical :)     Best wishes for a Happy & Prosperous New Year

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@elle,

You may wish to consider using any of the following or even a combination of:

  • Moving Averages
  • Exponential Moving Averages
  • Weighted Moving Averages
  • Volume Weighted Moving Averages

This will add some real value to your charts as it will include and show how the current price action is affecting any details on the charts. 

You then may wish to look at other important supporting indicators like:

  • Volume
  • RSI
  • MACD
  • Parabolic SAR
  • Momentum

These is my opinion can all help to go into the 'basket of evidence' to aid in any decision making.

If you get a chance have a look at some of these indicators / signals and apply it to the Gold charts and you will begin to see why I am trading Gold.

Now these indicators do not guarantee any form of success in the trade or guarantee any profits from the trade. What they do is support my view of going 'Long' Gold and support my decision by simply increasing the 'Odds' and 'Probability' of Gold continuing to trend upwards, though no guarantee. 

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