Last week, I analyzed the price of gold going back to 1975. Today, I will focus on gold, including “using your charting system is it time to buy gold?”
Let’s look at a current daily chart for gold. We will use my trading system setup that includes; price, my signal (blue) line, money flow and volume to identify possible buy signals. I will be looking for the price to close above the trend line (red line) and over my blue signal line. In addition, I want to see positive money flow (middle box). Tall green bars would indicate institutional buying-increased demand for the shiny stuff.
Finally, I would also like to see higher-volume buying days (green arrows-bottom box). Currently, my system is not signaling a buy signal and MAY be close to a take-profit signal.
You can see on January 25, 2014 a system buy-signal was generated when the price closed above the trend (red) line and blue signal line (top box) and generated three positive money flow bars (middle box). In addition, the tall green accumulation (buying) volume bar (bottom box) confirmed the buy signal.
On February 15, a secondary system buy signal hit when the price broke above the previous high of $1,279.00. If traders bought in at these levels, they would have used a bracket order providing downside protection in case the price drops after the purchase. This is how successful traders help control risk.
Traders who jump in and buy without a back tested system are only gambling-period. In my classes and seminars I instruct my students to paper trade different systems until they figure out what works and what does not. Trading is tough enough with the proper trading and in no means is a one way ticket to riches.
This example is for educational purposes only. I do not give personal buy or sell recommendations but teach what to look for in order to make better educated financial decisions.
What can we learn from this analysis? It is close to impossible to pick a perfect entry or exit point, but if we take the time to learn which signals gave previous (profitable) buy and sell signals we will have a much higher probability for (profitable) buying and selling decisions in the future. Like always, no system is 100 percent.
Some scoff at my trading systems. However, using my system would have kept many investors from buying in at higher prices. If you are interested in learning my trading systems, plan to attend my next seminar at John A. Logan College on April 4, 2014.
Next week, I will focus on the sources for buying physical gold plus gold securities traded on the US exchanges.
Plan you work, work your plan and learn to share your harvest!