It's time to trade with Gold?

 

We are beginning the month of March and we realize that there was a funny made in February: Spot gold had a wider range in that only comparable month that recorded in August 2013, which was two and a half years. It seems as if the volatility has returned to this market, and volatility means that traders have a good opportunity to make some money!

Most Forex brokers offer trading spot gold, or even monthly futures contracts gold, both equally good when it comes to speculate in gold. That means that, whatever the broker you use, the option of negotiating with gold will be there when you want.

As life seems to return to the gold market, we'll see if it's really time to trade the precious metal.

Rational Trade Gold

Gold gives a special feeling to many people when purchased. If that is the case, then you should try to think of gold less passionate way. Think only about price fluctuations, not the metal itself; try to imagine that you are buying or selling something opaque like aluminum! Unfortunately, many traders lose their heads for gold and begin to negotiate rationally rather than emotionally

Since the US dollar was detached from the gold standard in 1976, the precious metal has floated freely against the dollar. Gold has made two surprising upward trends against USD since: the first at the end of 1970 and then again from 2002 to 2011, when it went from $ 275 per ounce to more than $ 1.900! Many economists believe that gold functions as a "store of value" alternative to fiat currencies like the US dollar, which are entirely based on debt, and is forced to increase in value during periods of relative currency debasement, as might be happening now. If so, it might be time to trade gold.

Historical facts

I have always believed that traders can make money in the markets more easily by following trends and the proper use of stop loss. In Forex, a method that has worked well in recent years to trade currency pairs including USD is trading on the price direction of 3 and 6 months, if not conflict. Although gold against USD is often considered just another currency pair tends to move faster and stronger than the Forex currency pairs. We can see this by looking at the results of a test that used historical data from 1998 to 2014. In the test, gold is bought or sold on a weekly basis and held for a week, depending on whether the price at the weekly opening was more higher or lower than it was 6, 3 and 1 month before.

The results are shown in the following table:


Gold Historical Data

Analysis

There are two key points that are revealed by this test of historical data:

1. Going short on gold is a statistically problematic and was not profitable operation based on the drive, regardless of the period in retrospect used.

2. Going long on gold was profitable in any historical period, but the best results were achieved by operation when the price was higher than it was one month, 3 months and 6 months; that is, when the pulse was extremely strong. This differs from the Forex currency pairs, which tend to be oversold when the momentum is very strong.

If we apply this analysis to the current market situation in terms of gold, you can see that this is definitely a good time to trade gold as its price is above where it was 1 month, 3 months and 6 months ago. This is the kind of market situation that produced the best results when applied to historical data.

Day Trade Gold

Day trading gold can be very difficult in short periods of time, and this differs greatly from Forex, although there are some similarities. The price discovery process can be very difficult to gold, because nobody really knows how much gold bullion held by banks. In addition, the spread in the gold trade is relatively higher than in the major currency pairs, so it will cost you more proportionately. For these reasons, it is generally going to be much easier to negotiate gold in the time frames H1 or H4.

An interesting aspect about gold that has been observed is that there is a statistical pronounced tendency in which the price falls around the time of opening of London and up around the time of opening of New York. Therefore, the opening of New York could be the best time to trade gold now.

conclusion

Technical evidence suggests gold is in a strong uptrend that probably will not persist, especially as the price is above where it was done 1, 3 and 6 months. This means that it may be a good time to trade gold at this time. Entering gold transactions over when a stop loss to justado is available and aiming to take profits on risk ratios of maybe 2 or 3 to 1, while a part of the operation is allowed to continue running could be a strategy successful trading.