-- Posted Monday, 15 October 2007 | Digg This Article
| Source: GoldSeek.com
One of the hardest commodities to trade this year has been the gold market. If you go back to the first trading day of the year, gold collapsed $20 only to rebound $80 the next two months only to give it back again. This was an indication of what kind of year gold traders would have and we still have a whole quarter left in the year! What a ride! In my opinion the volatility will only increase beyond anybody’s wildest expectations. With that said, how do you trade these wild swings without getting hit by a freight train?
With all the advanced indicators, oscillators, Fibonacci numbers, Gann numbers and moving averages, there has been one tool that has worked remarkably well during these volatile periods and that is the trend line. Sometimes the simplest answer is right under our noses! Just a simple trend line could have kept investors out of danger on four hard reversals. Also, the breaking of the trend line on the four buy reversals on the upside averaged over 35 points.
Another strategy that works well is applying channel lines in conjunction with trend lines and to sell one-third of your position into strength when the upper end of the channel has been reached. If the market continued upward, you still have two-thirds of your position with no regrets. On the flipside, if the market corrects you will be presented with a buying opportunity when and if the market breaks the trend line to the upside.
Charts Courtesy of QST
A year and a half ago, gold exploded to 730 and a strategy that worked quite well had us buying on new highs with trailing stops. Today the gold market is a different trade when we take into account Central Bank selling. It also seems to mirror the equity markets when the equities are volatile. That being said, the gold markets should be bought on hard dips with the simplicity of the trend line as a guide and then sold on upper channel lines. This should keep the gold trader from getting repeatedly whipsawed in these volatile times.
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George J. Cocalis
Senior Market Strategist
Brewer Futures Group, LLC
A Division of Brewer Investment Group, LLC
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Chicago, IL 60604
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DISCLAIMER: Futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
-- Posted Monday, 15 October 2007 | Digg This Article | Source: GoldSeek.com
