Monday, November 4, 2013

Trading the turn in gold

Last Thursday, Oct 29, we signaled the possibility of a turn in the dominant trend in gold. Having the prospect of such a turn is one thing, but the question then arises of how to profit from it. The above chart shows the way to do it, and how OmiCronFX put on the trade.

The first thing to notice on the four hour chart above is the fact that price started to retreat on Oct 30th before it managed to make a high that was above that achieved previously, which happened to be on the 28th Oct. As the drop proceeded it became apparent that if price passed the point of the last low in the trend, on the way down, then a new lower low was a certainty. Remember that a lower high and a lower low is the defining characteristic of a downtrend. Therefore the point at which a new lower low, to match the existing lower high, occurs, is the place to put a stop entry order. It naturally is on the short side in this case.

The rest is history. The order was filled and the price continued in the downward direction. The OmiCronFX Silver Trigger routine is being used to manage the trade, which means that the Stop Loss Order has been trailed downward as well, in the direction of profit. The length of the “handle” on the trailing stop had been previously determined by historical analysis of the price action on gold, to give the optimum value.

This trade is still live at the time of writing.

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