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The Gold futures market is futures trading where the main subject is of course the price of gold. This asset is to be treated under an agreement between the buyer and the seller as a futures trading commodity through a definite certified dealer or commodity futures exchange.
This is performed by the strength of a futures contract ending on a particular date for future delivery of gold precious metals. In short, it does not need gold to be exchanged. But the contract obligations by the buyer to purchase a defined amount of gold at a preset price at a future delivery date in time.
The investment is a small portion of the entire value, which is widely known as margin. The speculation of the gold futures seller is expectation gold prices would decline at that particular date whereas the buyer speculates gold prices will go up enough to give him the leverage of profit in the commodity futures trade.
The market price of gold on that day is considered as the settlement price on which either a profit or trading loss is calculated based on the gold futures trade closing price.
Trading gold in the futures and cash market took place all over the world but the major activity is found in the New York commodity Exchange (COMEX). This trading is considered as a safe regulated trading activity and the infrastructure has a high level of security and transparency for traders and investors in gold futures. Exchange participants are the members of the futures exchange who possess strict requirements an rule issues by the commodity exchange, which includes solid financial standing.
Investing or trading in gold futures require certain skills, they are: You must be clear about the strategy which you are using for investing or trading in gold futures markets. There are several ways and possibilities like using the services of a good commodity broker in the gold futures market and the choice of either a discount broker or a full service broker, who gives more personal service trading the commodity markets. You can opt for investment in futures funds also.
It's not enough to simply note only the advantages of trading the Comex Gold futures market. On the contrary, you must scrutinize the risk involved in the futures markets in general. Trading in the gold futures market is a tremendously risky proposition and you must weigh your tolerance level that comes in trading gold futures and other commodities markets.
It's vitally important for your decision. The gold futures market is liable to be affected due to various other reasons not directly connected with the market. Social circumstances may jeopardize the activities of the futures market like the breaking of war or down sliding of the economy or the political turmoil and so on. It may not be at all feasible idea to trade at a certain times because of high risk.
Remember, the prices of gold and other futures markets can literally collapse (especially when trading at very elevated levels after a big bull market) at anytime such as the tulip bulb market did long ago. Tulip mania or tulipomania was a time period in the Dutch Golden Age during when contract prices for tulip-bulbs of the recently introduced tulip reached incredibly high price levels, but then abruptly and without warning collapsed.
At the peak of the tulip bulb mania in February 1637, tulip contracts sold for greater than ten times the annual income of skilled craftsmen. It's was the first recorded speculative economic bubble bursting. Today's term "tulip mania" is now used metaphorically to refer to any large bubble which has burst.
This is why you must always use a stop-loss order to avoid a huge loss. Be willing to take a small loss if the trade and trend turns against your position. That way you have some funds left to recover and make winning trades again. Refer to the amazing tulip price chart below and keep in mind the price of Gold (or any other commodity) could also burst one day!
Determine the value of your investment and the negative effects of the market and calculate the loss. It is wise to learn that the losses in the future markets happen quickly and in huge quantity. Take all these situations in account to judge your risk tolerance level and overall financial capacity before you decide to trade the gold futures market.
Select a good commodities broker for expert brokerage about commodity futures trading and open a brokerage account for gold futures trading. We also suggest you make a reservation to buy our new gold trading system.
Technical View of What’s Next for Precious Metals, Stocks & the Dollar
Last weeks price action unfolded just as we expected. Money poured into stocks with the focus being on small cap, banks and technology stocks. The fact that these sectors are showing strength while utilities, health care and consumer staples lag is a good sign that investors are once again taking risks in the market.
Because investors and traders are bullish on the stock market again the money flow into the safe havens like Gold and Silver decrease. I believe this is the reason stocks moved up last week while precious metals drifted lower.
Below are three charts (Dollar, Gold and Silver) showing what I think is most likely to happen in the coming week or two.
US Dollar Index – Daily Chart
The US Dollar has put in a very nice bounce/rally since the low in November 2009. Last month the dollar finally reached a key resistance level of 81. I have been talking about this major resistance level since January as the Dollar would find it difficult to break above this level.
Take a look at the daily chart below. You can see a head & shoulders pattern and a neckline which appears to have broken late Friday afternoon. There is a strong chance we could see 78 reached which is the measured down-move. If we get follow through selling this week then I would expect 78 to be touched within 5-10 days.
GLD & SLV ETF Trading Charts
Precious metals have been moving very well for us recently. From looking at the charts using technical analysis we were able to catch the Feb. 5th low and also the Feb. 25th low on a several ETF’s.
As you can see from the GLD and SLV charts, both metals are not in an up trend showing bullish chart patterns and trading at support. If we see the US Dollar break down next week then be ready to go long gold, silver and stocks.
Precious Metals, Stocks and the Dollar Trading Conclusion:
As a technical analyst the above charts are pointing to higher prices in the coming day’s which is exciting for us all. BUT when things are this perfect looking we must be very cautious as the market has way to suck people into setups like this and spit them out a couple days later for a nasty loss.
Understanding how the market moves is crucial for avoiding and/or minimizing losses when trades go against us. That is why I continue to wait for my signature low risk setup before putting any money to work.
My focus is to take the least amount of trades possible each year, only focusing on the best of the best setups. My low risk setups require downside risk to be under 3% for the investment of choice when the broad market shows signs of strength, as well. I use several different types of analysis to confirm if a setup has a high probability of winning and those which do are the trades I take along with my subscribers.
It is very important to wait for the market to confirm a move higher before taking a position with this type of setup. The market could go either way quickly and jumping the gun is not a safe bet.
If you would like to receive my Free Precious Metals Trading Reports please visit my website: www.GoldAndOilGuy.com