There is a definite seasonal bias for gold, which can mean that, come the festive period, it’s a nice way to bump up the Christmas fund. And of course, if you miss the day trading, the weekly timeframe will do nicely as well – gold has that kind of comforting reputation about it.
Knowing as we do that there is a season bias in gold where it will go up during December, into January and even perhaps into February, the seemed little doubt that trading gold was the way to go at this time of year. This is where understanding the past markets and doing research pays off. Since this is something that happens each year, we can – with a fair amount of certainty (although remember that nothing is 100 percent certain in trading) assume that it will happen again. And it does.
There is more to how we traded gold than just looking to the past and having a hunch that the same will happen though. There are technical pointers that show us what’s happening too. These include a Fibonacci cluster (we can look at the low of November 2015 and see that we’re now at the three two Fibonacci retracement, and if we take it from the higher low from this time in 2016, we can see that the recent bullish pin bar reversal totally rejected the 50 percent Fibonacci). On top of all of that, there is the completion of the ABCD pattern with a Fibonacci extension from A to B of 1.618.
Now that we can see three higher low, the reasoning behind how we traded gold becomes even more cleaner. So you should start, if you’re not in gold already, by trading the break of last week’s high.
Have an entry above last week’s high and a stop loss below the low and you should be all set. As for what return you might realise, since the swing has gone towards the 1.618 historically, it makes sense to suggest that the return could be the same again, and that makes a 7.6 percent reward to risk ratio, which could be a rather interesting 15 or 16 percent gain if you’re risking two percent. That’s why we like to trade gold, and why we want you to know how we traded gold!