➖➖➖ Action: Sell at market asap, I got in at 1685 Stop Loss: 1720 Take Profit: between 1605 and 1555 Order valid: 24 hours from publication ➖➖➖ Not Financial Advice
- (5) clear waves upwards
- Bearish divergence on the RSI and MACD (daily timeframe). This means there are lower highs in the indicator with higher highs on price.
- An ending 5th wave diagonal allows a tight stop loss at 1720 creating a great risk to reward ratio.
- The FTSE 100 looks like it is due for a bounce soon and this should lead to a drop in the price of Gold.
freddie1996
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@TradewithLu, Or fundamentals like the coronovirus mean a 5 wave pattern, regardless of how clear it may be, is not as strong as a bearish indicator as you think. Gold has been doing great the last couple of years, I think this is probably quite a risky trade as your'e going against the long term trend and general fear sparking from the Coronovirus is only going to mean more people are going to buy Gold in my opinion. I still think it has a lot of room upwards. I'm holding gold longer term now. At least 5 months.
TradewithLu
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@freddie1996, I understand and agree with your fundamental analysis, but the technical signals here cannot be ignored. Gold, in my opinion, is due for a reasonable correction before continuing its an uptrend. If I did not think it was going to drop, I would not have bet money on it. But if you are planning on holding for 5 months, you may as well add to your long position as the price drops instead of switching to a short position.
freddie1996
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@TradewithLu, A tip I will give: Why take trades when you know the technicals and fundamentals are not aligned? You are only reducing your probability of having successful trades.
Why not wait for this one to have the correction you think it will have, then buy, why short? This sort of mindset I see as a little FOMO related. There are opportunities in the market when fundamentals and technicals align, while the fundamentals do not need to be complex. Just take high quality trades.
TradewithLu
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@freddie1996, The reason why is because I don't believe that fundamental analysis drives markets. My trading strategy is based on the premise that the markets move mainly because of human psychology and they are not rational (i.e. news does not always lead to price changes in the way you think). I don't trade based on news / fundamental signals as all the information is already imprinted on the chart and tells me what I need to do.
However, every trader is different and I respect all other opinions, so thank you for raising the potential issue. I am sticking with the short position though, but wish you all the best with this trade.
freddie1996
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@TradewithLu, Psychology, technicals and fundamentals are all important. To say you don't believe "fundamental analysis drives markets" is like saying you don't believe that earning reports have anything to do with market movements, of course they do. Technical analysis does not predict movements after earning reports. Not just that, but on a fundamental level, if the company is clearly exceptional with it's products, has a gap in the market, few competitors, ahead of the competition, important patent(s) etc...that is going to drive the markets. Yes technical patterns will form, but the main driver is of course the fundamentals. You don't have a market without fundamentals.
Now chasing news is a bad idea of course, the big traders always move the market before a retail trader has a chance to get in. But with the Coronavirus it is different. You can make your own prediction about the severity of it, is China being honest etc?...That is your Alpha and the markets a few weeks ago clearly hadn't priced that in. Just look at what has happened to the markets over the past 3 weeks and tell me that is not fundamental? No technical analysis can predict that.
TradewithLu
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@freddie1996, Each trader is different mate, and I prefer to follow this strategy which does not need to factor in fundamentals. If I did not enter the trade, just because I thought the price was going to go up due to the virus, then I would have missed out big time. Best of luck with your trading though, and hopefully your strategy will work out in the long term. I am more of a short term trader.
It looks like there will be a buying opportunity soon in Gold, so I may post an analysis soon.
- (5) clear waves upwards
- Bearish divergence on the RSI and MACD (daily timeframe). This means there are lower highs in the indicator with higher highs on price.
- An ending 5th wave diagonal allows a tight stop loss at 1720 creating a great risk to reward ratio.
- The FTSE 100 looks like it is due for a bounce soon and this should lead to a drop in the price of Gold.