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My 200 Tick Gold Trading Strategy

Will gold futures rally?

Hey everyone, Josh Martinez here with tradersagency.com and welcome to this week’s idea. Behind me is gold futures. Now this is a one hour timeframe. We have a wonderful up channel. The market’s at the bottom of the channel. Remember with the full contract, every tick is worth $10 and with a micro contract, every tick’s worth a dollar. It’s going about 200 tick opportunity here.

If you’re a full contract traders, about 2000 US dollars of buying opportunity if the research holds true and it’s about $200 with a micro contract. So what do we have here? Well, in trading, there’s a couple approaches that you can take. You can take a buy and hold approach, which is basically you buy the market and because you kind of believe in the overall position, you believe gold future’s going to rally. There’s a lot of reasons why fundamentally that will happen.

gold futures

A lot of it was printing of money, devaluation, buying power and inflation going up. Those are usually reasons why gold will increase. The other approach is which we like to take is taking little pieces at a time taking, make more of a trading approach, not an investing approach. And normally when you trade futures, you normally take a trading approach where you buy the bottom blue level, take profit at or near the top level.

You buy low, profit high, buy low, profit high buy low, profit high. And you try to do this a handful of times. Now as a trader, well what we look for specifically is we look for patterns in the marketplace. We look for areas where the market is forming equal lows. And we look for an area where the market is forming equal highs. What we do with that information is we use it to our advantage.

When the market is near the bottom blue level, we buy to the top level. Then we wait patiently for the market at the bottom level again. Now we like to do this in the direction of the trend because ultimately we never really know when the breakout’s going to occur. And the overall trend is up. We could always get a bullish breakout on the way up. So we never like selling the market on the way down or trading against the trend.

We always like to look at this like a one-way highway where this is a one-way street and if you trade against the trend, it’s kind of like driving against traffic. It increases the odds of getting into accidents. Some people are really, really good at breaking the rules, but we’re not one of them. So what we like to do is buy low, profit high, buy low, profit high, buy low, profit high and buy low and ideally profit high.

Is this guaranteed to work?

Nothing’s guaranteed in trading. There’s always going to be risk. But at the end of the day, what we’ve realized is if you trade in the direction of the higher winning percent move and return, you should get higher winning percent trades. Now we take a look at gold futures. We can see that we have an uptrend and up channel off the one-hour timeframe. When the mark comes near the bottom below level pushes the top level. So buy low, profit high, buy low, profit high, buy low, profit high. And here we are buy low could be profit high.

Could we be wrong? Absolutely. This market could break bearish and the structure fails. That’s a possibility. It’s always important to have a stop. We always like to put our stops in the opposite zone. So if we put our stop below this blue level, we should be okay, risk management’s going to be key. What does that mean? We place 10 trades. We lose four of them. We win six of them. That’s the overall goal. If we can win more great, but it’s kind of what we expect. Place 10 trades, win six, lose four.

gold futures trend line

Which means if we risk 20% of our money in a single trade, then we’re going to lose 20% of our money in a single trade. And that’s really not a good idea because if you lose four trades, that’s 80% of your account. And that’s not a good idea. What’s really good is always having a methodology to say, “Okay, I’m going to risk a little bit at a time and I’m going to make a little bit more than I risk. And then over time, I’m going to allow the winning to stack up.”

And why do we do that? Because we could be wrong here. Even though this worked one, two times already, three over here, if you caught it early, but even if this works out, we don’t really look for double your money opportunities, triple your account opportunities, quadruple your account opportunities. We call that flash in the pan success. And frankly fast up, fast down, anybody can double or triple their accounts within a week because they over risk. But those are the same people that also lose all their money within a week because they’re risking all their money.

We want success over time. We want to find patterns like this. This week’s idea is gold futures. We have an up channel. We’ll be looking for a long idea for about 200 ticks with a full contract. That’s $2,000 with a micro contract that’s a dollar. Hope this puts you in the right direction. Again, this is research.

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