Gold Break Out Strategy

Lets get straight down to the strategy. This strategy is a very simple concept but it is important you manage your risk. You must also know your risk tolerance as you may have a few false break outs and when you give in that is when the break out will occur. So as simple as the strategy might seem, be prepared have your risk well planned out. Here is a tip on how to calculate the average risk.

As we said earlier in the gold trading strategy post a break out will occur when the market has gone quiet and you are anticipating news of data that could move the market. In this you calculate the range of Gold and draw a line above the resistance and one below the support. You will place a break out order just above or below these two lines. Again your risk is if traders do a false break out, that is they test the support or resistance lines, but fail to break these.

As you can see from the picture above the prices stay in the range and try to break it a couple of times. Until there is a break. This break continues until it finds the next support and resistance level.

As you can see form the above scenario this strategy can be quiet profitable and tradable.

On the other hand here is an example of a sudden movement that is completely unexpected. This was during Ben Bernanke’s testimonial in front of congress, as investors were waiting for Bernanke to do more quantative easing, he disappoints investors. By Bernanke not pledging for more stimulus traders ad investors started taking their money out of the safe haven and inflation hedge, “Gold” and started moving their money into more riskier assets. As you can see in the graph below Gold was building up towards a pledge of more stimulus. It had been moving up from the 20th of February, but at the hearing it suddenly dropped 5% after Ben Bernanke’s comments. This had been the biggest drop in 3 years.

In this scenario a Gold Break Out Strategy

would have been very profitable. This was a scenario when you know that Bernanke is expected to speak, you draw your break out lines and you place our order. But Be carefull you are not caught on the opposite side of the trade. Your stop loss could get slipped.

Next Strategy I will discuss is the Gold Pivot Point Strategy

or you can return to Simple spread betting strategies

Well Now that you have just gone through the Gold spread betting example , I will now show you two different Gold Trading strategies. Gold like many commodities are still traded using Pivot Points.

There are two types of strategies one can use to trade gold. They are both commonly used but the trick to success is know what kind of market you are current in. Well I guess this applies to all strategies. Let me elaborate further, If there has been strong news in the market regarding inflation, prices on commodities or about the economy not doing to well, many will find refuge in Commodities, as especially gold, is seen as a safe have. In this case Trading a commodity break out strategy would be beneficial. You could expect to trade a Gold break out strategy even if there is economic data or if Ben Bernanke is speaking and you expect the data or Bernanke to speak about quantative easing. This will probably affect the gold market. In this case you are anticipating a dramatic move in the Gold market and thus can use the Gold Break out trading strategy. As you can see from the Graph below, this would mean taking advantage of sudden movements like the one below.

Gold Break Out Strategy

Gold Pivot Point Strategy

Instead if on the other hand there is no news expected in Gold, or the market has already made a drastic move and the commodity is currently retracing, You can use a Gold retracement strategy, Using Pivot points to trade Gold.

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