How to prepare best trade
with gold etf
Every day trading tips
for GLD etf trading
Every etf trader or etf investors would like to have gold etf in his list of commodity exchange traded funds. These precious metals etf exchange traded funds provide a lot of trading opportunities for traders and active investors.Commodity etf investor or trader wants to make money by trading these commodity exchange traded funds. Although it is common belief that commodities are in multi year strong uptrend, it is not so true. There are periods in last years when commodities were hit hard and dropped sharply. Also gold etfs were affected by these drops. And commodities were not so bullish before year 2000. They were trading also in bear market mode. So it is good to be prepared for both possible trading strategies. Gold ETF trading strategy for bull market and also etf trading strategy for bear market. And finally there are also times when it is better to avoid trading of gld etf or any other gold etfs as there are in neutral position and short term trend is not so clear.
What are major steps
for best trade with gold etfs ?
There are several points that should be done for every good trade with gold etf. I personally prepared this list of major steps for best gold etf trade although similar steps could be also used when trading
gold stocks.
Select best gold etf
for your trading system
This is important first step in process of gold etfs trading. Current list of gold etfs consists several different commodity exchange traded funds that tracks price of gold. They can differ in the way how they track the price. Some of them are linked to spot price of gold traded in London. Some of them are based on gold futures traded in USA. And finally some of them are
instruments that represent real stock
of physical metal stored somewhere in the world. Some gold exchange traded funds are only financial instruments that tracks spot price of gold and has no real backing by physical metal. Trader or investor should decide what is his/her best choice. I personally think that it is better to look for liquidity and popularity of gold exchange traded funds for short term trading then if such gold exchange traded fund is backed by physical gold or not. But as I mentioned you can have different opinion. Fortunately there are already plenty of
possible choices
available. But if you think that you can make more money trading or investing with
leveraged ETFs
for this metal, please consider that there is big risk for long term holdings of these leveraged exchange traded funds.
Check global commodity situation
This is next important step. Even you can hear a lot about bullish gold mood in TV or read a lot of articles about gold buying in Asia what really matters is how the price of gold in moving on the chart. There could be bullish public mood but price has already reversed and has been moving down in strong downtrend move. And when every everyone has been panicking about big sell-off in commodities then it could be good time to think about buying commodity exchange traded funds.Situation on general commodity markets is also important to see if gold fund shows
relative strength
or relative weakness to general commodity market mood. I prefer to buy exchange traded funds that presents best relative strength and sell short weakest etfs. The global investor's mood for commodities could be checked on the chart of global commodity etf with symbol DBC. Here you can see sample chart.
As you can see current situation is quite bearish and investors are not rushing to buy commodities right now.
Check chart of your preffered
gold exchange traded fund
I like to use GLD etf for gold trading. Here you can check actual chart of gold GLD etf.
As you can see GLD etf presents better picture than commodities generally. We can say that there is real relative strength in this exchange traded fund. There is
flag stock chart pattern
on the chart of gld etf. Although best trading strategy is to wait for breakout from this pattern it is also possible to use 50day moving average as support level and buy any pullback and bounce from this moving average.
Prepare you trade setup
So now you must decide what to do next. Do you want to wait for better position of price for trade setup or do you try to prepare etf trading strategy setup right now ? If you decide to prepare setup now, then there is necessary to find
good entry point,
ideal
stop loss level
and finally
possible target.
It is good to note that as global commodities are not bullish it will be better to reduce size of trade, i.e. number of shares, you want to buy. It decrease risk a bit.Another important point is that
risk reward ratio
for your trade setup must always be better than 3 to 1. If calculated risk reward ratio is worse, then do not think about such trade. Discard prepared levels and wait for more price development and better risk reward ratio values.
Manage trade
If you opened trade then you also must
manage this trade
accordingly to your trading plan rules. Remember that best trade is trade done accordingly to your
stock trading system
rules and stock
trading business plan.
Final gold etf trading tips
These points are almost universal for any type of gld etf trading strategy. You can use them if you are
daytrader
or if you are mid term
position trader.
It could be practical to prepare
check list
and check it during you
chart analysis
and trade preparation process to be sure that no points omitted. It is good to remember these instructions as routine and repeat it again and again. And finally, do not press yourself into trade. The patience is a key. Every good trader spends more time by waiting and doing "nothing" then real trading.
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