Gold is one of the most liquid markets around the world. When you trade it you need to make sure that you use a great strategy. Let’s discover how you can trade gold with the use of Fibonacci Retracements.
A VERY LIQUID MARKET!
Gold may be very liquid but oil outranks its liquidity. However, in discussing this strategy it is ideal to stick with gold. Why is gold great to trade? Well, it is literally being traded 24 hours a day all around the world. The fact that it is used in departments stores and jewelry shops and it can be easily stored makes it a very ideal item to trade. Put in mind that even if global trading arenas are not open, people will still buy and sell it everywhere. This is primarily because of the fact that it is liquid. This is also why gold is ideal for technical analysis. Gold is greatly influenced on a daily basis by events that scare and/or support markets. However, gold trends are motivated by long term essentials that are very well distributed all through the market.
HOW DOES THE GEEKY GOLD STRATEGY WORK?
In using this strategy, you might need to use Fibonacci. These retracements are ideal for predicting probably support and resistance areas that are founded on the so called Golden Ratio and Fibonacci Sequence. What is the Golden Ratio? It is a numerical arrangement of explaining relations of natural objects that has been known to man for many years. Typically, Fibonacci Tool is being used for line predictions and/or retracement levels that are based on magnitude and height of bear and bull markets.
If you want to have a good look of long term trends you can begin with a weekly data of ten year chart. You can then use a Fibonacci tool for drawing retracements of the trend that was last completed. Do not mind if the latest trend was bearish or bullish. This will give you retracement lines. After doing this, you need to glance at the charts and look at how the lines relate to the present trend and price. You need to know if the price is going to the Fib line or if it is bouncing from it? Here you will see that the prices of gold have gone to the bottom and have started retracing. You will also notice that the prices have gone up to the primary retracement level and even broke through it. What depends on the direction is an established break through that has targeted the subsequent fib line. Since the subsequent fib retracement line’s break the succeeding target will then be the retracement of at least 38.2 percent. When this will be broken it will b followed by a fifty percent retracement. As per this chart, the next target of gold is probably at $1475. This then sets trends upward for the present trend.
When you have identified weekly chart trend you can then go down to daily charts so that you can have shorter term signals. When you see prices break above fib line then you have to look for bullish signals on your daily charts. Moreover, when you will catch an early break on weekly it is probable that you can trade before prices will cross $1400. If not you may wait for prices to be a bit cooler and then confirm the support prior to trading. When you have confirmed in a few days up to a week would be an ideal choice.
When you see that there is a drop below a Fibonacci line in prices on weekly charts, this is when you have to trade bearish on your daily charts. This also applies for bounces. When prices are bouncing from the Fib support on weekly charts then you will have a bullish trade on your daily charts. When prices are decreasing from the Fib resistance then there is a bearish trade. In spite of whichever signal, you must only allow an expansion of not more than one week. The nearer it is to the succeeding Fib level, the expiration must be shorter.
WHY IS THIS STRATEGY GOOD?
This strategy is good because it makes use of popular tools for technical analysis and it also makes use of numerous time frame analysis. It can also be used in both directions and offers targets. Many strategies can provide positive signals but how many of these bring targets? Targets may not be vital to binary traders as compared to other kinds of speculators but they can still be of great use. With the help of targets, you can decide the ideal expiry date.
WHY IS THIS STRATEGY NOT SO GOOD?
The fact that it does not follow trends makes it quite bad. It is actually non-directional despite of the fact that it offers an impact on trend analysis by making use of market directions with regards to Fibonacci Retracements. It is also not good because using this strategy is requires being more artistic than scientific. The strategy makes a strange job of forecasting where the prices can turn but it is merely than a hypothesis.
This strategy is quite likeable. It can work for any experienced trader and using it for gold trading might be quite tricky. This can really work very well especially when gold is trading strongly. When gold has a sideways trend it can also work but may provide false signals. This strategy can be highly recommendable to fully understand how to trade using this technique.