My thoughts, target and trailing method on the gold trade
Updated
Hello,
I have been a gold bull for a while and 6 months ago I posted a long idea.
Last week the price has gone way past my target so I think it might be a good idea to post an update.
I am going to divide this in 3 parts:
- First taking a look back at this trade and the decisions I made
- Second I'm going to check what analysts are saying and upwards versus downward potential
- And last, based on the previous two points and TA I'll conclude with a trailing methodology
1- If you were able to get in this was a pretty good trade, easy to hold, but I found it really hard to add to it. In the 2300-2400 area I tried buying the pullback but it was too choppy and random for me, which does not happen that often, usual it's more clean.
So in the end of all my winners this year this was the worst one, while the Yen was the best one. If you look at the trends it makes sense, the Yen was a "creeper trend" slow and steady with opportunities to add and on top of that it skyrocketed at the end of that trend, while gold was this skyrocket with a crazy correction that went in all directions. Slow and steady always wins in my opinion.
The important thing to remember I think here is to not insist, if the market does not want to offer an opportunity, no point insisting and losing 10 times in a row. Fortunately I did not get chopped out.
Opposed to that is the following examples on the Yen, it is choppy, but in a good way, there actually are bottoms, and higher lows, it is pretty clean actually when you look carefully. When the market offers gifts, keep pressing your advantage. That simple.
2- So what are the analysts saying and how far could it go? Permabear (and bull on gold) Peter Schiff is calling 10k, but I think we can dismiss this - not saying it won't happen.
Analysts are claiming that the commodity to S&P ratio is quite low and we can prepare for a supercycle.
The situation is the same that it was a year ago, only it got even better, countries are continuing to move further away from the USD and are looking to buy gold, stock markets just like currencies are still not very reassuring. Rates had increased but they seem to be going back down after all. I see plenty of reasons for the demand to be high, and little reasons for the price shooting down.
It does not appear we are in the euphoria stage, or even close, so gold might still be underpriced and there could be a lot of upside left.
The price being at all time high, there are no usual resistances, no bagholders that waited 10 years to breakeven, so logically the only wall I can think of is $3000. No reason for a major pullback till then, which does not mean it won't pullback before 3k as I have no crystal ball. All I know is I have thousands of hours of backtesting, experience, and my analysis.
3- From my knowledge this was a trade with a great risk reward and good likelihood of winning, was aiming for 2500 and since we went well past that price without a major pullback - we had minor ones and a moderate one in the 2300-2400 area - my rules say I must consider holding till the next target, which is 3000.
A minor to moderate pullback would be 100ish of less, according to the chart below.
Trailing my stop with hops of 100 will still give decent risk to reward (at 2700 I'll be risking 100ish to make 300 or better), and at 3000 a stop of 100-200 is worth it as it could go parabolic and I wouldn't be giving much back.
But I have no reason to increase my stop size at 3k, the price might drop by a 3rd (1k in this case) like it did the first time it got to $1000, or by nearly 50% like it did the first time it reached $1900. If there is a major pullback I might as well exit and look for an opportunity to take a new trade. It is unlikely I just keep getting "poop patterns" like I have shown in figure 1 up there, and if we do get these choppy random looking patterns that is too bad, knowing when to sit on the sidelines is the name of the game.
I have been a gold bull for a while and 6 months ago I posted a long idea.
Last week the price has gone way past my target so I think it might be a good idea to post an update.
I am going to divide this in 3 parts:
- First taking a look back at this trade and the decisions I made
- Second I'm going to check what analysts are saying and upwards versus downward potential
- And last, based on the previous two points and TA I'll conclude with a trailing methodology
1- If you were able to get in this was a pretty good trade, easy to hold, but I found it really hard to add to it. In the 2300-2400 area I tried buying the pullback but it was too choppy and random for me, which does not happen that often, usual it's more clean.
So in the end of all my winners this year this was the worst one, while the Yen was the best one. If you look at the trends it makes sense, the Yen was a "creeper trend" slow and steady with opportunities to add and on top of that it skyrocketed at the end of that trend, while gold was this skyrocket with a crazy correction that went in all directions. Slow and steady always wins in my opinion.
The important thing to remember I think here is to not insist, if the market does not want to offer an opportunity, no point insisting and losing 10 times in a row. Fortunately I did not get chopped out.
Opposed to that is the following examples on the Yen, it is choppy, but in a good way, there actually are bottoms, and higher lows, it is pretty clean actually when you look carefully. When the market offers gifts, keep pressing your advantage. That simple.
2- So what are the analysts saying and how far could it go? Permabear (and bull on gold) Peter Schiff is calling 10k, but I think we can dismiss this - not saying it won't happen.
Analysts are claiming that the commodity to S&P ratio is quite low and we can prepare for a supercycle.
The situation is the same that it was a year ago, only it got even better, countries are continuing to move further away from the USD and are looking to buy gold, stock markets just like currencies are still not very reassuring. Rates had increased but they seem to be going back down after all. I see plenty of reasons for the demand to be high, and little reasons for the price shooting down.
It does not appear we are in the euphoria stage, or even close, so gold might still be underpriced and there could be a lot of upside left.
The price being at all time high, there are no usual resistances, no bagholders that waited 10 years to breakeven, so logically the only wall I can think of is $3000. No reason for a major pullback till then, which does not mean it won't pullback before 3k as I have no crystal ball. All I know is I have thousands of hours of backtesting, experience, and my analysis.
3- From my knowledge this was a trade with a great risk reward and good likelihood of winning, was aiming for 2500 and since we went well past that price without a major pullback - we had minor ones and a moderate one in the 2300-2400 area - my rules say I must consider holding till the next target, which is 3000.
A minor to moderate pullback would be 100ish of less, according to the chart below.
Trailing my stop with hops of 100 will still give decent risk to reward (at 2700 I'll be risking 100ish to make 300 or better), and at 3000 a stop of 100-200 is worth it as it could go parabolic and I wouldn't be giving much back.
But I have no reason to increase my stop size at 3k, the price might drop by a 3rd (1k in this case) like it did the first time it got to $1000, or by nearly 50% like it did the first time it reached $1900. If there is a major pullback I might as well exit and look for an opportunity to take a new trade. It is unlikely I just keep getting "poop patterns" like I have shown in figure 1 up there, and if we do get these choppy random looking patterns that is too bad, knowing when to sit on the sidelines is the name of the game.
Trade active
Closed my position (I got 12R), opened a new one 2670/2640(KO) I think it follows GC. I used more size than last time when I opened gold in February but less size than I usually use today on regular trades I scaled hard this year. 
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