As everyone knows, there seems to be a very good correlation between gold and various currencies. Of course, gold doesn't behave exactly like currencies as gold is driven mainly by speculators while currencies are driven by central banks and government policy and the likes, but if you're trading on a long enough timeframe the correlation can be useful.
Here is a long-term end of day system I have made for Trading Gold
You need to keep track of the following: The number of days since the price closed higher than it has ever closed in the previous 120 days, the number of days since the price closed lower than it has ever closed in the previous 120 days, the highest closing price in the previous 10 days, and the lowest closing price in the previous 10 days.
We are aiming to buy on a dip during a strong uptrend; or sell (go short) on a peak during a strong downtrend. This is generally the best way to trade commodities. It is not (in my opinion) the best way to trade currencies, when a currency is making new highs or lows it is, in my experience, best to just go long or short there and then without waiting for a retracement as there is more chance of the price continuing to move in that direction than there is of a retracement. But currencies behave differently to commodities as speculators have far more influence in the commodities markets than they do in the currencies market.
The rules are –
Here is a long-term end of day system I have made for Trading Gold
You need to keep track of the following: The number of days since the price closed higher than it has ever closed in the previous 120 days, the number of days since the price closed lower than it has ever closed in the previous 120 days, the highest closing price in the previous 10 days, and the lowest closing price in the previous 10 days.
We are aiming to buy on a dip during a strong uptrend; or sell (go short) on a peak during a strong downtrend. This is generally the best way to trade commodities. It is not (in my opinion) the best way to trade currencies, when a currency is making new highs or lows it is, in my experience, best to just go long or short there and then without waiting for a retracement as there is more chance of the price continuing to move in that direction than there is of a retracement. But currencies behave differently to commodities as speculators have far more influence in the commodities markets than they do in the currencies market.
The rules are –
- If the price of gold closes at a new 10 day closing price low AND it made a new 120 day closing price high more recently than it made a new 120 day closing price low AND this 120 day closing price high happened in the previous 60 days – then we have a dip in a strong uptrend. Go long with a 40 day time-based exit.
- If the price of gold closes at a new 10 day closing price high AND it made a new 120 day closing price low more recently than it made a new 120 day closing price high AND this 120 day closing price low happened in the previous 60 days – then we have a peak in a strong downtrend. Go short with a 40 day time-based exit.
The results from the beginning of the year 2000 to the end of May 2011 are –
179 winning trades
87 losing trades
6206.40 gold points won
1899.55 gold points lost
Money won to money lost ratio (before the costs of trading) is 3.267 to 1