Buying Gold; long and short term strategies for technical day traders

– Buying/Selling/Holding Gold Futures

o Our relationship with gold is a little different than most people

 Fundamentals = printing money at a record-breaking rate = buy gold
 Technical = at the all-time highs = sell the highs

o So we know we should be bullish on the gold b/c of the monetary policy of the FED
o But our technical charts tell us to avoid buying at these all time high

 Buy the pullback

o Short term strategy = trade with the current short term trend, and avoid buying the highs

 (not much to do with the long term overview on gold)

o Long term strategy

 Economic outlook for the dollar = DOWN
 Outlook for Gold = UP
 Monetary policy = LONG GOLD

o Using the Dollar

 Negative correlation (DX moves up, GC moves down
 Looking for long entry opportunities

• Gold support = long trades
• Dollar Resistance = Gold LONG trades

 If I want to trade long on the gold I need support, which will be shown in dollar resistance

o Open a slower DX 12-10 chart

 90 days of data
 No template needed, im looking for trend lines, OHLC, etc, S/R

o Once you identify the Dollar resistance, now look for your entry on the Gold

 Not just buying the gold when I see DX resistance
 I need to have an entry pattern on gold futures

o There are many ways to invest in gold in the long run

 Buy gold Futures Contracts

• Buy at support and hold overnight
• Contact your broker and make sure you’re overnight margin is acceptable

 Physical Gold

• Coins
• Bullion
• Bars

o Lots of fees associated with buying PHYSICAL gold
o Handling fees, storage fee

 Buy Gold Stocks / Individual companies that make more profit as the cost of gold rises

• Anyone selling gold

– Using your stop strategy, when to move your stop and different scenarios

o My first two trades on crude oil, left the stop at -5ticks
o Scalpers

 Always move my stop to entry after my first target is filled

o Day Traders

 Little different

• Move my stop to entry at my first target
• Move my stop to the same number of ticks as my first target

o 10-tick T1
o Move stop to -10t
o This way you wont lose money, it will be a scratch trade.

– What are the different timeframes we’re using

o Range: no TIME variable, just range

 All the patterns look similar, easy to learn

o Tick : tick is the variable
o Time: time is a variable

o Different chart types:

– 3-Strike Rule

o If I don’t get my target filled within 3 tries, then move your target up/down to FORCE the target filled.
o Why not trade the DAX or the ES?

 The Crude Oil, Gold, Euro, and Russell have the best opportunities with the lowest amount of risk
 We make more money trading these than we will trading other markets
 This method will work on ANY market

• The DAX and the ES were two of my FAVORITE markets before the 2007/078 credit crunch
• ES = high volume, low range (fewer patterns, and less movement)

o Fake out breakouts

• FDAX = low volume, and high volatility

o High margin = $2500usd/contract

 Very expensive to trade DAX
 Many new traders will require WIDE stops on the DAX, and that’s too risky
 $38usd/point
 Use 10 point stop
 $380/point/contract

• 4 lots = 1200 stop
• Very expensive!!

 Rule on FDAX = 100,000 contracts < 800am EST

– Can we trade the Bonds (ZB)

o Just like the ES e-mini
o High volume
o Narrow trading ranges
o Very sluggish

– Can you trade Thursday and Friday?

o Holiday, closed thurs and fri
o You can trade, but it will be very slow and very high risk

– Where do I use the new divergence indicator?

o Slow
o Fast
o Trade Management
o Medium (you can also use these too)

– Review the Euro
– Review the Russell
– Review the auto trader

o Work in progress every day until the end of the year
o My first step was to find the best possible pattern, and use that as my starting point

 2-step price reversal at the highs or the lows
 Using divergence to spot the high and the lows