2. Points To Be Covered Today:
• Gold Trading Tips
• Size Of Gold & Trading Points
• Efficiency Of Each Indicator
• Nature Of Market
• Attention To Volume
• Price Formation & Wait Conformation
• Analyze Market , Ratio & Time Frames
• Constant Lookout For Anomalies
3. Gold Trading Tips
• Some say that gold is one of the most difficult markets to trade and
there is some truth to that – gold doesn’t move like other markets
and if investors want to be successful trading it (and it can be very
rewarding), they have to keep several things in mind.
• Over the years of monitoring and analyzing the gold market we
noticed many profitable rules and patterns.
• We successfully applied them and are still applying them for our
precious metals trades and we will share our knowledge on this
• It took years of analyzing, testing and using our own capital to make
sure that these points are really useful.
4. Size Of Gold & Turning Points
• The tips that you find below should make trading gold
easier and much more profitable.
• Keep the sizes of your gold, silver and mining stock trading
positions small. The higher the chance of being correct, the
bigger the position can be (that’s why sizes of long-term
investments are bigger than sizes of short-term trades).
• Pay attention to cycles and turning points – many markets have
cyclical nature (for instance the USD Index and silver) and
cycles can be a great help in the case of short- and long-term
5. Efficiency Of Each Indicator
• Check the efficiency of each indicator that you want to use on
the gold market (or other markets) before applying it and trading
real capital based on it.
• Consider using RSI and Stochastic indicators for gold, silver
and mining stocks as they have proven to be useful over many
years. Other indicators can be useful as well, but be sure that
you examine them before you decide to make trading decisions
based on them.
6. Role Of Indicators
• If a given indicator works “almost as well” as you’d like it, but
you see that it has potential, don’t be afraid to modify it.
• For example in case of RSI, you see good selling opportunities
when this indicator moves to 65 or so instead of the classic 70
level) then it can be useful and profitable to either add additional
overbought / oversold level, breaking which would generate a
signal (in this case a sell signal) or to change the parameters of
the indicator, deviating from the standard values.
7. Use Of Moving Averages
• Use moving averages only if they have been working for a given
market in the past – if a given market has been ignoring a
certain moving average, most likely so can you.
• Keep track of the price seasonality – in our opinion its best to
use True Seasonals as expiration of derivatives can also have
an important impact on the price of gold, but if you can’t get
access to them, it’s better to use regular seasonality than none
8. Trend Lines & Channels
• Use trend lines and trend channels – they have often proven useful
as support and resistance lines / levels in the case of gold, silver and
• The more significant lows or highs are used for creating a given
trend line or channel, the stronger the support or resistance is.
• The previous highs and lows can and often serve
as support/ resistance levels as well – in the case of the precious
metals market, the strength of the support / resistance is strength of
the support / resistance created as rising or declining trend lines.
• The more significant the high or low is, the stronger the resistance or
9. Nature Of Market
• Note that markets have not only a cyclical nature, but a fractal one,
• The rallies and declines are self-similar, which means that price
patterns that we saw on a bigger scale are quite likely to be seen on
a smaller scale (proportionately).
• This observation can be of great help when determining how low or
how high gold, silver or mining stocks will move.
• We have a tool – the Fractalyzer– that can help determine the similar
sessions in their advanced mode, but even if you choose not to use
it, be sure to be on the lookout for the self-similar patterns (if the
current price move is similar to the previous ones, it’s quite likely that
the final part of the pattern – that’s still ahead – will also be similar,
which allows you to position yourself to take advantage of it).
10. Pay Attention To Volume
• Pay attention to volume. The volume is a very important, yet often overlooked,
piece of information.
• If a rally is accompanied by rising volume, then it’s likely a start of an even bigger
• If a rally is accompanied by low or visibly declining volume, then it’s likely ending.
• If a decline is accompanied by high or rising volume (unless there is a day when
the price visibly reverses), then the decline is likely to continue.
• If a decline is accompanied by low volume, then there are no meaningful
implications (yes, the situation is not symmetrical in this case).
• The above are general guidelines, and before applying them to the current
market situation, be sure to check if the above (the part of the above that
currently represents the situation on the market) really worked in the way above –
if it didn’t, then it’s generally better to expect the same type of reaction that
previously accompanied a certain price/volume pattern.
11. Price Formation
• Look for price formations (like a head and shoulders formation),
but before you apply them (believe that a certain formation is “in
play” and likely to cause a certain move which would cause you
to enter or close a given trade) be sure to check if this kind of
formation worked on this market previously.
• For instance “breakouts” (which are not a formation by
themselves, but this example illustrates what we mean) in silver
have quite often resulted in price declines (breakouts were
invalidated) instead of rallies, so their real implications were the
opposite of what one might have expected based on the classic
definition of a breakout.
12. Wait For Confirmations
• It’s usually best to wait for breakouts / breakdowns confirmation
before taking action.
• In the case of the precious metals market, based on our
experience, it’s worth waiting for three consecutive closing
prices below / above the critical price level before viewing the
breakout / breakdown as “confirmed” and thus meaningful.
• Invalidation of a breakout is a bearish sign and invalidation of a
breakdown is a bullish sign.
13. Analyze The Market
• Analyze more than the market in which you want to trade.
• In today’s global economy no market can move totally independently.
• Gold and the rest of the precious metals sector are no exception – their price
moves are often linked to the moves on the currency market, moves on the
general stock market, interest rates, Fed’s comments, and performance of gold
stocks and silver stocks are just the most important ones.
• Be sure to check what markets were moving in tune or in the opposite direction to
gold before and make sure that their impact is likely to be supportive of the
trading position that you are about to open.
• For example, if gold was moving in the exact opposite to the USD Index and
you’re considering opening a long position – if you see that the USD Index is very
close to a major resistance level and it’s already heavily overbought, then the
odds are that the USD Index will top and contribute to or even trigger gold’s
14. Analyze The Ratio
• Analyze ratios. Of course, not just any ratios – the ratios that have proven
to provide important signals for gold (like the gold stocks to gold ratio
or gold to silver ratio – they both have a history of leading gold, but this
has not been the case during the post-2011 decline), that are important
due to fundamental factors (gold vs. bonds ratio – both can be seen as
safe-haven assets and major bottoms and tops in this ratio take place
along with major tops and bottoms in gold, so it can be used as a
confirmation) or because they are often discussed (gold to oil ratio).
• Sometimes ratios can be utilized to see something from a non-USD
perspective (gold to UDN ratio is the weighted average of gold priced in
currencies other than the US dollar, with weights as in the USD Index –
this ratio can be used to confirm major moves in gold or suggest that these
moves are just temporary as they are only visible from the USD
15. Analyze Time Frames
• Analyze other time-frames than the one that you’re focusing on.
• Even if you are placing a short-term trade, be sure to check the
medium- and long-term trend.
• Generally, the longer the time frame, the stronger the support
and resistance levels, so even if you analyzed the short-term
picture, it can be the case that a given move will be stopped by
a medium- or long-term resistance.
• If you’re focusing on the medium- or long-term trades, the short-
term picture can help you fine-tune the moment of entering or
exiting the market.
16. Constant Lookout For Anomalies
• Be on the constant lookout for anomalies.
• When you see something odd, investigate and find the reason
behind it and check if anything similar happened previously – if
yes, check what happened next.
• If similar things were always followed by the same kind of price
pattern in gold, silver and/or mining stocks, it might be a good
idea to trade it.
• If not, then perhaps the reason behind the anomaly resulted in
something else that had a more specific effect on the precious
17. Monitor investor sentiment
• If the vast majority (!) of precious metals investors and traders are bullish, then
gold is likely close to a top (in this case it makes sense to look for selling signals
and / or confirmations that the top is in and – if they are present – exit long
positions and / or enter short ones).
• Conversely, if everyone and their brother is bearish on the market, then a bottom
is very likely close to being in or already in.
• The ways to estimate sentiment include checking how often people look for gold-
related terms (like “gold stocks”) in Google Trends, monitoring outcomes of
surveys with questions like “where will gold price be in 3 months” and similar
queries, and also checking the traffic of gold-related websites on Alexa.
• On a side note when you see that a certain, big gold-related website is very slow
or crashes after a big move up or down, then it likely means that the traffic /
interest in gold was enormous, which is another way of detecting that a major
price extreme is well-nigh (we saw that in 2011 when gold topped).
18. Gold As Long Term Investment
• Even if your primary approach is to trade gold, we still encourage you to
consider dedicating a part of the capital to long-term investments – it
should lower the overall variability of your returns and making gains more
• There are also other benefits that we outlined in our very first report in
which we discussed whether trading gold or investing in it is more
• Our gold portfolio report includes a sample portfolio for “Trader John”,
which might serve as an example (of course, it’s not investment advice) of
how traders could structure their portfolios and benefit from diversified
• Before you decide to follow a given analyst, be sure to check how long
they have been in the business and if they are known for their good
19. Gold As Long Term Investment-I
• If you do decide to follow someone, it’s usually a good idea to
stay with them even if they happen to be incorrect about the
market one or even a few times in a row as markets are
sometimes moving almost randomly (they are emotional, not
logical in the short term) and everyone has to be incorrect
eventually (that doesn’t necessarily imply following what they do
using your capital.
• It means monitoring their performance to see for yourself if they
can grow your capital over time
• The above is not a 100% complete list of what we discovered
on the topic of gold trading (we can’t provide all the details
publicly – we can’t cover the details behind our in-house-
developed gold & silver indicators), but it includes the majority
of things that we found to be very useful over and over again.
• If you found the above list useful and / or you would like to learn
more about trading precious metals and other markets we invite
you to sign up for our free mailing list.
• Once you sign up, you’ll receive 7 days of access to our daily
Gold & Silver Trading Alerts and you’ll be able to see how we
use all the above live