A Holistic Approach To Trading Gold

Since the beginning of time, gold was a special place in history. It has been used for the construction of religious idols, and the settlement of political differences and the kings of honor, proving that love, as a currency and, more recently, has been used in commercial operations. Until 1971, supported by the U.S. dollar and gold is still held by central banks around the world for use in times of emergency. It also holds promise for traders - if they can find a trend in this volatile commodity in most cases. (To learn more about gold, see gold standard and re-consider what is wrong with gold?) Background
The Roosevelt administration during the month d the Great Depression in the 1930s until President Nixon took the country off the gold standard in 1971, was fixed price per ounce of gold for $ 35/ounce.After removing the gold standard for currencies, gold prices rose 2200% in U.S. dollars over the next nine years, peaking briefly above $ 800 in 1980. Then spent the next 19 years in a bear market, falling to $ 260, low in 1999 before the start of the next assembly in the long term. But thanks to the easing of restrictions on the currency after the recent recession, the Fed is facing increasing challenges. Effectiveness and usefulness of federal funds over 6% in early January 2001 but by early 2004, the rate fell more than 80% to 1% and the Fed did not start to increase the rate again until June 2004, more than a year after the demonstration had begun. Council has adopted the Federal Reserve position much more adapted to interest rates, which lasted until 2007, and the weak dollar and commodity prices rocket during this year are evidence of this: more than $ 800 gold again in 2007. Although we will not know how high the peak will be new so it's behind us, and increase the volatility seems to be the reality of modern gold. There is a way to trade gold
As you can see in Figure 1, one strategy is to monitor the cases where the Relative Strength Index (RSI) shows the level of extreme poverty, which falls in many cases the tops of the market. It is also common to observe lower levels because the maximum of these signals is often the bottom of the market (shown by red circles). In this case, do not spend all signal RSI has not been confirmed by the crossing of the moving average. It features all trade with the message. In this scheme, we use (blue line) for nine days (Purple Line) and 18-day simple moving averages (injection). (For more information on these indicators, moving averages and read the tutorial.)Another powerful tool for trading, known as the difference, including looking for cases when the price of the asset and move the pointer in the opposite directions. As you can see from the chart below, the numbers from 1 to 3 areas of differences with a positive signal (green), and negative differences (in red). Another good way to increase the signal strength of the stresses to look for support or breach of trend lines (dashed blue lines.The challenge for the trader in the short term as well as bug buy and hold gold is to find tools to help determine when to buy and sell.Let's take a look at some of the ideas of other technical and fundamental to help prevent you from getting overwhelmed by the emotions that accompany this precious metal highly volatile. (For more information about the gold trade, see the use of technical analysis in the gold markets and trade of gold and silver futures contracts.)
Technology tips
One of the simplest technical tools are also among the most useful, and this is the direction. Trend lines are also a great way to confirm the other brands, such as those created by RSI or moving average crossing. Whenever possible, it is best to wait until the trend line has been breached by the implementation of any trade. As you will see from the tables below, you are creating lines of the increasing trend by linking a series of simply measuring the height of the bottoms of the stock where you will find potential support levels. On the other hand, is created by the downward sloping trend lines by connecting a series of lower levels. This simple tool and a perfect vehicle for traders to use to determine the direction of the asset. (For a basic overview of this concept, see the path of stock prices with trend lines.)Moving averages business tool has become popular because they are easy to use and easy to generate in most graphic programs. The idea is to buy when the short term, the medium is moving faster crosses above the slower one to sell faster when the average crosses below the average slower. This works great in the market direction, but not so well in the markets of a specific range. The trick is to know what type of market where you are because of the direction of the market at about one-third on average, and rely on moving averages tool your base can become very expensive. This is where you can help on the lines of direction.RSI is a momentum oscillator which measures the prices. It is also very useful in view the differences with the price. As shown in Figure 1, the RSI hits in many cases, levels of extreme poverty and a decline in the gold price turning points. For example, with the first red circle on the chart, the relative strength index reached an extreme, such as gold in 2006 reached the peak around 725 $.Looking at the concept of the difference in Figure 1 (above), note the differences between the RSI and price. The first green lines on each of the show, and was low relative strength index in the second higher than the first, while the low price of the second was low less than the first. This warns that the merchant is to build purchasing power. Certainly, followed by a rally. Red lines at points 2 show an example of the negative difference.

Basic considerations Intermarket
Intermarket relationships can be useful in the gold trade. As such, it is important to see the euro and the U.S. Dollar Index as well as higher crude oil prices for evidence of gold going to work, but are important for markets outside of the precious yellow metal.It is important to note that the prices of gold has risen in almost every time the dollar has declined (see Figure 3). And when gold rallies and gatherings usually with oil. Economic power, interest rates and two others of the importance of the basic considerations / intermarket. And generates a strong economy, confidence in the local markets, and increase their attractiveness to foreigners who need to buy U.S. dollars for the purchase of shares or other U.S. assets. What is good for the strength of the dollar. Higher interest rates would have a similar effect. Whenever the interest rate received by the Treasury or corporate bonds, more investors and attract these instruments and the better for the dollar.
Put it all together
Let's walk through the character is shown in Figure 1, and put together our analysis after the peak of 2006. First, we obtain the maximum peak in the relative strength index, and then turns down and crosses over the threshold of the RSI 70 (first dashed red line). Next, the nine-day SMA crosses under Saad, 18 days (point A). Did not break the trend line over the long term, but due to the high equivalent in gold leading to the peak, it is always a good idea to draw trend lines in the short term. This trend was broken in the short term on Figure 1 at the same time almost as a sell signal RSI.When comparing the numbers 2 and 3 and the dollar also began to mobilize before gold peaked in 2006, the federal funds rate rose from a low of 1% to 5.25%, which would be good for the dollar and bad for gold. As a result, leaving traders with three good reasons, and two basic technical / intermarket to sell gold.Next, the relative strength index fell to its lowest level before recovering extremist, warning of direction change is possible. This was confirmed by the moving average buy signal crossover (Figure 1, point (b)). And breaking the trend line in the short term (not shown). Looking at the numbers 2 and 3, and the dollar reached its peak, and was dropped again - a good sign for gold prices is stronger.
Find confirmation
Difference between the price of RSI and provides useful confirmation of trade as well. By waiting for confirmation in each trade, and is increased confidence. And more certain of the tools are not relevant, the better. Should be emphasized that comes from the indicators that have a low correlation with each other, and this is why using the technical inputs and essential to confirm the direction of the price and the value of that, but the use of data sets are quite different.

Conclusion
Gold schemes, both in the short term or a long, and tend to include a lot of noise. Because the hardest part of any trade to develop a plan and stick to it, and the combination of vehicles and fundamentals is important to prevent you from shaking of your trade by volatility.As long as the foundations of a sound gold and intermarket relationships strong, and stay in the program mode. But here is the beauty of this approach: if these factors change significantly, and are often accompanied by a technical sell signal is like a broken trend line. You can also get the best game in the gold trade, and will feel the development of the process so you'll be ready to execute when the time comes.