Help with Trading Gold

[snsdmonkey]

Hey guys,

I'm usually just a passive user of these forums and just want to thank you guys now for how much I've learnt. But on to my problem now

I recently started up a practice trading account with etoro to get some experience with trading gold, probably the closest I will get to the real thing without risking cash. I think I'm pretty good when the market is fluctuating and the general trend is flat or upwards. I can handle slight down trends as well, I made about 29k through short-term trades with 100x risk over a period of 5 hours in 3 days.

Well I've only been trading for a week, so I know it's not a huge sample space, but I seem to struggle when the market drops quite significantly. Last night I lost 19k in the space of less than 30 minutes as gold dropped from $1650 to about $1630, and continued to get hammered afterwards. Could anyone give me some tips on how to avoid these things happening again, just want to test them out over the next few weeks using the practice account and then hopefully someday putting them in action.

Cheers

 

[skyQuake]

Hey guys,

I'm usually just a passive user of these forums and just want to thank you guys now for how much I've learnt. But on to my problem now

I recently started up a practice trading account with etoro to get some experience with trading gold, probably the closest I will get to the real thing without risking cash. I think I'm pretty good when the market is fluctuating and the general trend is flat or upwards. I can handle slight down trends as well, I made about 29k through short-term trades with 100x risk over a period of 5 hours in 3 days.

Well I've only been trading for a week, so I know it's not a huge sample space, but I seem to struggle when the market drops quite significantly. Last night I lost 19k in the space of less than 30 minutes as gold dropped from $1650 to about $1630, and continued to get hammered afterwards. Could anyone give me some tips on how to avoid these things happening again, just want to test them out over the next few weeks using the practice account and then hopefully someday putting them in action.

Cheers

Stop losses in place?
No offence, but from what you wrote I cant see much strategy other than buy and hope, thus the smashing when gold drops.

Perhaps also reduce position size.

 

[GumbyLearner]

Stop losses in place?
No offence, but from what you wrote I cant see much strategy other than buy and hope, thus the smashing when gold drops.

Perhaps also reduce position size.

I have no paper position at this time. I understand the frustration skyQuake.
Too hard to call. Too many possibly covering possibility. I'm sticking with the fizz.

 

[snsdmonkey]

And you're quite right. I usually buy into shares and hold them, I'm no way used to the volatility of gold. However unlike shares I'm not quite sure how to calculate the value of gold, are there resources which would be useful in helping me learn?
As I said I've only been trading gold for less than a week just to see if I 'enjoy' it and will probably do more constructive things later on.

 

[skc]

And you're quite right. I usually buy into shares and hold them, I'm no way used to the volatility of gold. However unlike shares I'm not quite sure how to calculate the value of gold, are there resources which would be useful in helping me learn?
As I said I've only been trading gold for less than a week just to see if I 'enjoy' it and will probably do more constructive things later on.

Based on the very limited information you've provided I suspect...

- You already have a relatively fixed opinion that gold should rise in value so you don't know what to do when it falls.

- That you are trading positions way too big for your account size (even it is just paper) and your trading skill. A $20 fall in gold cost you $19k means you are trading ~1000 oz...or something with face value of $1.6m. Think about that number for a few moment and let it sink in.

- Just search around the forum and pick up the basics like stop loss, position sizing, expectancy etc etc.

- You can't fundamentally value gold in the way you value shares. There is no information in this world that will allow you to do that. The most valuation people tend to come up with rely on price history... but that assumes the gold was priced correctly at whatever reference point.

- Like all futures and commodities contract, the price is simply driven by supply and demand - long and short term. To trade gold is to predict (if that is in fact possible at all), understand, or catch changes in supply and demand. Coming up with your own valuation will be a complete waste of time imo.

 

[snsdmonkey]

Based on the very limited information you've provided I suspect...

- You already have a relatively fixed opinion that gold should rise in value so you don't know what to do when it falls.

- That you are trading positions way too big for your account size (even it is just paper) and your trading skill. A $20 fall in gold cost you $19k means you are trading ~1000 oz...or something with face value of $1.6m. Think about that number for a few moment and let it sink in.

- Just search around the forum and pick up the basics like stop loss, position sizing, expectancy etc etc.

- You can't fundamentally value gold in the way you value shares. There is no information in this world that will allow you to do that. The most valuation people tend to come up with rely on price history... but that assumes the gold was priced correctly at whatever reference point.

- Like all futures and commodities contract, the price is simply driven by supply and demand - long and short term. To trade gold is to predict (if that is in fact possible at all), understand, or catch changes in supply and demand. Coming up with your own valuation will be a complete waste of time imo.

Yeh I have a graph on the side while I trade to try and hit the lows and sell at the highs during periods of fluctuations. I know you guys are hammering me with my strategies but you have to know I posted this in the Newbie section before it got moved :
I kinda figured out that commodities weren't things with intrinsic values but I want to know what kind of news would investors react to for changes in the market price of gold?

 

[skyQuake]

Yeh I have a graph on the side while I trade to try and hit the lows and sell at the highs during periods of fluctuations. I know you guys are hammering me with my strategies but you have to know I posted this in the Newbie section before it got moved :
I kinda figured out that commodities weren't things with intrinsic values but I want to know what kind of news would investors react to for changes in the market price of gold?

Supply and Demand..


:

But seriously gold moves more on technicals than news. News that will move gold: CME raising margins. News that may move gold: Key econ figures, and big fx moves.
It moves a lot on perceived risk and defaults. Although sometimes it asks as a risk asset, and other times it acts as a safe haven.

 

[Billyb]

Well I've only been trading for a week, so I know it's not a huge sample space, but I seem to struggle when the market drops quite significantly. Last night I lost 19k in the space of less than 30 minutes as gold dropped from $1650 to about $1630, and continued to get hammered afterwards. Could anyone give me some tips on how to avoid these things happening again, just want to test them out over the next few weeks using the practice account and then hopefully someday putting them in action.

The most important tip: Risk Management. Read Van Tharp's or Brent Penfold's book for more on this (I'm sure there are others too). basically without it you wont be trading for much longer

I kinda figured out that commodities weren't things with intrinsic values but I want to know what kind of news would investors react to for changes in the market price of gold?

Be careful with news! which kind of investors and traders do you think react to news/gut feeling/etc?? I think some experienced people make money from news but I think it does require experience.

 

[snsdmonkey]

Thanks for those resources. Also are there websites designed for beginners in commodities trading?