Gold spikes up to see the first 4% plus daily net change in two and a half years. Not the kind of move you see every day, obviously, and a bit of a surprise to the majority who were ‘caught short’ after a long period of depression for both producers and Gold investment ‘bugs’ alike. Does the move signify the end of the bear market? Maybe. A more relevant question from a short-term trader’s perspective should be, “did I catch the move and if not, why not?”
When building a trading system/algorithm/EA to capitalise on these kind of opportunities one should always ‘start at the destination’ and work backwards. Reverse engineering I think they call it. I have found that the best way to ‘learn the markets’ is by observation, theorising, testing and re-testing (and re-testing again). I like to look for what I call PTO’s or “Profitable Trading Opportunities”. Mark clearly on the price chart several examples of the kind of move you would like to capture in the future and then look for the ‘common thread’, i.e. the price dynamics just before the move. Was the market ‘overbought/oversold? Was there a particular bar/candlestick pattern set-up just prior to it? Etc. etc. etc. An almost unlimited range of ‘set-up’ criteria can be examined but so long as they can be quantified they can be coded and tested.
Now I consider myself to be a complete system trader and, barring the occasional risk aversion on ‘Big News’ days, not one to interfere in the workings of my systems. However, I think that one can be forgiven for calling “TIME!” when an exceptional move sees such a large ramp up in open profits. To this end I ‘cashed in’ on the balance of my long position (entry $1192.45) just below $1250.00 last night (market currently at $1232.00).
A bumper ‘Harvest’ indeed which should help see my trading account through the next winter, whenever it comes.
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