By Omar Eltoukhy: You ready for the next big adventure in trading???
For some years now, I have looked at the gold market in awe.
As a precious metals physical investor (my real savings), the thought had crossed my mind many times in the past about trading various forms.
In fact, I had even tried it a few times, with wildly varied results.
My first foray into silver trading a few years ago was a scary one, as I had no idea how many dollars a pip was for the given lot size or how many pips the market can move in literally the blink of an eye. Luckily that time, the market moved in my favor and I was able to get out of the trade with some profits, although I had clearly risked way too much for the account size.
Another time, a friend had shown me a gold trading system he was working on. I idiotically started using it with real money right away, and with beginners luck pulled over 200 pips on my first trade!! Thinking this was a “fail-safe” system, I continued to trade it and over the next few days I quickly gave up all my profits and then some along with some extra money to horrible slippage. I decided at that point metals trading was out of my league and I would just stick to forex.
By 2012 my mind came back to gold simply because the forex markets had changed. Instead of the nice big daily ranges I was used to, most pairs were moving NADA on a regular basis, or the moves were coming in silly spurts with no follow through. I wanted to learn something new, something with some daily range. I dreamed of being able to trade gold. That big market that moves like crazy, that had burned my buns before. This time though, I wouldn’t just go diving in. I wanted to take my time and learn as much as I could before sticking my money back into it. After all, I had worked so darn hard on making forex work, that it almost seemed stupid to venture into something else.
10 Top Gold Trading Tips:
In 2013 I did some serious gold study. I wanted to learn the ins and outs of what seemed to be a very challenging but potentially rewarding market to trade. What did I find? Here are some of my notes from my studies:
- Gold has a huge daily range. Daily ranges of 300-500 pips are not uncommon and the average “small” day is 160 pips.
- Gold is volatile: Gold can easily swing 80-100 pips within minutes. Large reversals are common. An order that looks very good can turn into a loser quickly and an order in draw-down can also go into profit very quickly. The speed by which the market can move and change direction requires very good pre-planning or very quick decision making. If you wait too long to see if price will reverse after touching an s/r, you can lose most of your gain. Then again, many times, it blows right through the s/r after a short pause making your win bigger.
- Split Personality: Gold also can move a very big distance without looking back. Although pauses are made at important s/r, pullbacks on the best moves simply do not occur. It is difficult to tell when gold is “swinging” and when it is “running” until you see the actual moves
- Gold Respects S/R EXTREMELY well: This is a wonderful feature. Gold can be technically traded accurately and consistently from this aspect. Pivots, manually placed horizontal s/r and trendlines, and Fibs are very well respected
- Waiting for candle close is MANDATORY for decisions, especially entry: Price can reverse a long distance in the last few minutes of an hourly candle, a ½ hour candle and certainly a 4-hour candle. Jumping into a trade you “think” is going to close through a certain point can burn you badly.
- Reversal Candlestick Formations Are Extremely Accurate: By combining this plus a bounce off of s/r after a move in one direction, REGARDLESS of overall trend, usually results in a move of some distance, usually back to the next s/r at least. Higher timeframe, the better the move.
- Gold Trades Well Most of the Day: Really the only time gold doesn’t move very well is the last couple hours of NY session and first couple hours of Asian session. By time Tokyo opens, gold can be traded. Moves during Asian session are smaller than London, and London moves tend to be smaller than NY moves. Biggest moves occur when both London and NY are open.
- Price Action Dominates: The best indicator I have found for subsequent moves is simply price action. If gold moves strong through or off of an area, particularly after a period of “quiet” price action, the resulting moves are very consistent.
- Gold Can PUNISH Bad Trading: Oh boy, if you aren’t 100% good at identifying proper areas or the moves around them, gold can make you lose quickly and in both directions. Common mistakes like “shooting from the hip” by taking gut moves, or “revenge trading” which can usually be rectified after you calm down in forex, are usually too late to do anything about with gold. You need a plan, and HAVE to stick to it to even have a hope of success.
And Operation Goldrush was born. I want us all to monitor, analyze and profit from gold trading. I want us to be intimately in touch with our golden side. I want to scour the world for the best gold trading systems and methods. I have already created methods I am using in the current markets. In 2014, I implemented my studies into demo and then live trading. Before we take this any further, I must warn:
- GOLD TRADING IS NOT FOR BEGINNERS!!!
- IF YOU ARE STRUGGLING AT FOREX, GOLD WILL EAT YOUR LUNCH
- IF YOU ARE NOT DISCIPLINED AND STRUCTURED CONSISTENTLY, GOLD WILL RUIN YOUR ACCOUNT
I actually am not trying to scare everyone away, but I have to be straightforward and not lead anyone down a path to destruction of their account. I am doing Operation Goldrush as an alternative trading opportunity for our more experienced members. I know some of you already trade gold. I want to give us a format and a forum to explore this awesome market. The way I see it, gold is the “universal currency” since all nations and people all over the world are involved in gold. My recommendation is if you do want to try your hand at this market, do so from a demo account and stick to that for 2-3 months before going live.
Over the coming weeks we will be delving deeper and deeper into this subject. There will be weekly analysis to start the week, and we will check back towards the end of the week to review trades I have taken, or check out products that seem interesting to me. Of course, you are always welcome to throw your hat in the ring and recommend something for us to check out and test. I have a great track record getting vendors to work with us on trying new products so if you see something you want to check out, let me know and I will try to obtain it for our use and abuse.
I look forward to embarking on this new adventure and hope that you will join along, even if it’s from the sidelines!
This article was originally posted in our 5* rated Forex Mentor Program members area. Since when Omar has gone on to outline how he trades gold and how you may follow his lead.
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Author: Omar Eltoukhy
10 Top Gold Trading Tips