GOLD futures: If the History repeats, this is our trading plan
Today we will take an in-depth look at the Gold Futures chart.
On the main chart, we can see the Daily timeframe, and before starting with the analysis, we want to share the Weekly view + The similarities we are observing with the previous bull run of 2009
Current Weekly Chart
Weekly Chart 2009
Daily Chart 2009
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With all that clear, let's start with our analysis:
General View: We observe clear similarities to the conditions prior to a bull run using 2009 as a template. The main characteristics are:
-The price makes a New ATH after a year of Draw-Down.
-After the New ATH, a massive corrective pattern happens on the edge of the previous ATH
-The Bullish movement does not start after the breakout of that pattern. We have a smaller correction on edge, and the breakout of this last one represents the beginning of a new bull run.
Also, it is important to say that we use a statistical approach. What do we mean by that? If we are right with our view, we can reach a risk-reward ratio on this setup of at least 1: 5, which means that for every dollar we are risking, we are aiming to make 5. The key concept of this is that even after failing 3 times to catch the movement and succeeding on the 4th attempt, we keep having a positive expectancy on the trade. Remember that: Profitable trading is about positive expectancy, is not about crystal balls.
Ok, so what is our trading plan?
The main idea here is waiting for the correction to be finished. We think that the consolidation will keep moving on the current area at least for 70 days (currently 40 days). The specific pattern we are looking for is a double bottom inside the correction. Here you can check some examples of what we mean by that.
Suppose we observe this pattern (main characteristic: the 2nd movement that makes the double bottom MUST NOT SURPASS THE FIRST ONE). If that happens, we will set our bullish setup above the previous local high.
We will be risking 1% of our capital. THIS IS VERY IMPORTANT. We never risk more than 1 to 2% of our capital. By doing that, you take the chances of blowing your account almost to 0. And the chances keep improving in your favor if your style is Swing Trading.
Target? The main idea here is that when Gold starts trending is not a good idea to close the setup, is better to trail it using higher highs and higher lows as references. But as we explained before, our main idea is getting at least a 1:5 Ratio.
How long can this movement take? Let's assume we are right; the previous bull run lasted for 800 days almost.
And what if this setup fails? Two options here, Either we have a stop loss, or the setup is never executed. It would be logical to observe a bearish movement towards the next support zone.
Thanks for reading; we hope this can bring more clarity to your decision-making!
On the main chart, we can see the Daily timeframe, and before starting with the analysis, we want to share the Weekly view + The similarities we are observing with the previous bull run of 2009
Current Weekly Chart
Weekly Chart 2009
Daily Chart 2009
---------------------------------------------------------------------------
With all that clear, let's start with our analysis:
General View: We observe clear similarities to the conditions prior to a bull run using 2009 as a template. The main characteristics are:
-The price makes a New ATH after a year of Draw-Down.
-After the New ATH, a massive corrective pattern happens on the edge of the previous ATH
-The Bullish movement does not start after the breakout of that pattern. We have a smaller correction on edge, and the breakout of this last one represents the beginning of a new bull run.
Also, it is important to say that we use a statistical approach. What do we mean by that? If we are right with our view, we can reach a risk-reward ratio on this setup of at least 1: 5, which means that for every dollar we are risking, we are aiming to make 5. The key concept of this is that even after failing 3 times to catch the movement and succeeding on the 4th attempt, we keep having a positive expectancy on the trade. Remember that: Profitable trading is about positive expectancy, is not about crystal balls.
Ok, so what is our trading plan?
The main idea here is waiting for the correction to be finished. We think that the consolidation will keep moving on the current area at least for 70 days (currently 40 days). The specific pattern we are looking for is a double bottom inside the correction. Here you can check some examples of what we mean by that.
Suppose we observe this pattern (main characteristic: the 2nd movement that makes the double bottom MUST NOT SURPASS THE FIRST ONE). If that happens, we will set our bullish setup above the previous local high.
We will be risking 1% of our capital. THIS IS VERY IMPORTANT. We never risk more than 1 to 2% of our capital. By doing that, you take the chances of blowing your account almost to 0. And the chances keep improving in your favor if your style is Swing Trading.
Target? The main idea here is that when Gold starts trending is not a good idea to close the setup, is better to trail it using higher highs and higher lows as references. But as we explained before, our main idea is getting at least a 1:5 Ratio.
How long can this movement take? Let's assume we are right; the previous bull run lasted for 800 days almost.
And what if this setup fails? Two options here, Either we have a stop loss, or the setup is never executed. It would be logical to observe a bearish movement towards the next support zone.
Thanks for reading; we hope this can bring more clarity to your decision-making!
