I decided to reply to @Mei on a post because her question is very interesting for today´s trade.
FED interest rate decision is something that moves the market immediately after release and presents huge instant volatility, however the first move is not a trustable indicator of the final direction, A rally can be sold off within the next minute and a dip can be bought back within the next minute as well. There is no formula for a successful trade, if you happen to be in the right direction cover yourself with a SL order, remember that no profit or even a small loss are always much better that a wiped out account. This is what I do: I use the 1 minute chart on the release and then watch the first candle close, if the second candle does not surpass the previous candle in the same direction then I make the decision to buy/sell placing a stop order above/below the first candle. If there is a continuation on the initial move (means second candle surpasses the first one) then I will have a small loss which does not bothered me at all, however if there is a continuation of the rally/sell off in favor of my position then I lower/raise the SL order to a break even point.
Finally don´t look onto data too closely because what matters is not the data in itself but how it fulfills market expectations. Sometimes the decision has been already been accounted for (which means the market has traded the instrument based on its expectacion) and then other than instant volatility the price returns to where it was before the news.
Watching EUR/USD and 10 YR Note (on price) is also helpful because those tend to determine direction for GOLD.
Summarizing you need to plan your trade and trade your plan, that means you make your own prediciotn and stick to it, if the market does not respond to your expectations DO NOT chase the move, just quit trading for the day.
I have attached an example of the 1 min chart trade. In this case there was an initial rally on the first minute candle and the second candle did not surpass the first one, so the decision would have been to sell with a SL orders above the first candle. The sell off scenario works pretty much the same but the initial candle would have been a red one. Always place yor SL orders quickly and stick to them.
FED interest rate decision is something that moves the market immediately after release and presents huge instant volatility, however the first move is not a trustable indicator of the final direction, A rally can be sold off within the next minute and a dip can be bought back within the next minute as well. There is no formula for a successful trade, if you happen to be in the right direction cover yourself with a SL order, remember that no profit or even a small loss are always much better that a wiped out account. This is what I do: I use the 1 minute chart on the release and then watch the first candle close, if the second candle does not surpass the previous candle in the same direction then I make the decision to buy/sell placing a stop order above/below the first candle. If there is a continuation on the initial move (means second candle surpasses the first one) then I will have a small loss which does not bothered me at all, however if there is a continuation of the rally/sell off in favor of my position then I lower/raise the SL order to a break even point.
Finally don´t look onto data too closely because what matters is not the data in itself but how it fulfills market expectations. Sometimes the decision has been already been accounted for (which means the market has traded the instrument based on its expectacion) and then other than instant volatility the price returns to where it was before the news.
Watching EUR/USD and 10 YR Note (on price) is also helpful because those tend to determine direction for GOLD.
Summarizing you need to plan your trade and trade your plan, that means you make your own prediciotn and stick to it, if the market does not respond to your expectations DO NOT chase the move, just quit trading for the day.
I have attached an example of the 1 min chart trade. In this case there was an initial rally on the first minute candle and the second candle did not surpass the first one, so the decision would have been to sell with a SL orders above the first candle. The sell off scenario works pretty much the same but the initial candle would have been a red one. Always place yor SL orders quickly and stick to them.
So interesting, thanks sir cesar :))
ReplyDeletethanks sir cesato, was wondering did you keep eyes on EU news? i notice there's no gold news on investing
ReplyDeleteI actually pay more attention to the market sentiment (it includes speculation). Gold is seen as a means to store value for investors and a hedge against inflation, it is also use as a safe heaven during unexpected geopolitical and financial disturbances throughout the world, however there is also manipulation by big banks and brokers and at the end of the day it can be read on technicals charts with some accuracy. In summary Gold does not move long term on one particular piece of data or news but on how confident investors feel about traditional markets (stocks, bonds etc), on the other hand speculators have lately moved to quick return instruments like cryptocurrencies however cryptos are meant to burst into flames (I said this 2 months ago on investing.com) because they have gone too far too fast and on top of that there is no support from governments or an a tangible asset. I expect speculators to move back into Gold next year as well.
ReplyDeletei see, thank you very much sir cesato!, just 1 more question for the day. what impact does Fed Interest Rate Decision on gold?, if increase gold down and reduce it will go up?
DeleteThank you.
ReplyDeleteamazing ! Thank you.
ReplyDeleteThank you Cesar for taking the time to give us this detail explanation.
ReplyDeleteIt is a combination of different factors (political, economics, etc) but in this particular case a rate hike would take the 10 yr note price down and possibly the EUR/USD down and considering that investors are sort of confident in the stock market, I would say is bearish for Gold which means it can be sold rigth away or after a rally to either 1336 or 1348.
ReplyDeletei see, thank you sir cesato!
DeleteThank you for sharing your strategy. It is very interesting!
ReplyDeleteAny update, sir cesar?
ReplyDeleteHow and when will you release your long position sir? Should I close my long too in a lose?
ReplyDelete