Saturday, May 20, 2006

A traders market in Gold

What do you buy, if you don't like the USD for political reasons, but don't want the Euro fearing repercussions. Yen? I don't think so. Gold might be a good alternative Middle Eastern Central Banks can diversify in, if they fear their US or UK accounts might get frozen in the future by some UN-Resolution.
First thing I do when reading some Iran news, is looking at Gold and Oil prices. Did they react? Yes, then it might be something behind the worrisome news I just read, if not, well it's nothing and I disregard it.
I don't see Gold going down a lot as long as Iran is playing around with nuclear power, as long as Iraq is on the brink of civil war (actually it already has broken out, just nobody calls it so) and there is no alternative fuel source available, which can easily replace the middle eastern oil and our dependency from it.
Sure, Gold has been going up too far too fast in a very short amount of time. And it might become a traders market for a few months consolidating this huge move up. But what the heck, if there is something moving 200 ticks a day up or down or even going both ways within one day, I trade it. You can learn great lessons trading gold instead of investing in it:
1. Keep your stops and NEVER, EVER dream of moving them against your position
2. Never add to a losing trade
3. Use Reverse Market Stops, as the swings in Gold are so big, that in Gold you usually can make your stop easily back, if your Stop is not too far away
4. Add to a winning trade, as a move can easily go 5 to 7 points (or 50 to 70 ticks)
I trade ZG, which is 10$/tick, but there is also a very liquid mini contract (YG) both traded electronically on ECBOT. Current front month is still ZG M6. But watch for rollover end of month if you trade the futures, as it does not follow the quarterly cycle the US index futures do.



Dennis said...

"What do you buy, if you don't like the USD for political reasons"

That is probably the most ignorant comment you have ever made to date. Comments like that show that you obviously are biased, which leads to poor trading.

Who cares whos behind what currency. Trade it like you are a trader and move on.

Globetrader said...

Dennis, actually what I buy or sell doesn't interest anyone. Neither you, nor anyone else. And it won't matter anyway.
I agree, the article I wrote can be misinterpreted, but do you really think I believe my 1 or 2 or even 5 contracts will make any difference to the direction the Euro, the USD or Gold or whatever I trade will take? Do you really think I'm this blind?
What I meant was states, especially middle and far eastern states buying or selling or avoiding the USD for political and not economical reasons. They can make a difference, they can move the USD one way or the other.
Me, I'm just following news of these events taking place, putting a piece of the puzzle some place it seems to fit and trying to fit in the next one I see coming along.
I go long or short as I see the signals, I don't care as I know at the end of the day I'm out of the market and flat.
But the news are like a trend I see on the chart, they provide support or resistance, if you can interpret them correctly. I don't say I do, I just try as it's something I do anyway, so it's better to try to profit from it and go where the action aka volatility is. And that's the reason why I mentioned Gold in the article.