So before we get rolling on making those great trades, let’s talk about a few things we need first.

Gold Trading Rules:

(Obviously I know that you don’t have to listen to a word I say here, but that doesn’t mean that I shouldn’t share with you what I think the skills/time requirements should be for trading this market.  Also, for those of you who want to “get your feet wet” and trade demo only should still work on getting the requirements met)

1) A moderate to strong understanding of Support/Resistance analysis, particularly horizontal support and resistance, trend lines and fibonacci levels (major)

2) Time to devote CONSISTENTLY to one to all three major market opens, ESPECIALLY London and NY opens and the couple hours following each.

3) Discipline and patience. I mean this. Many if not all good moves REQUIRE waiting until the candle closes before making a decision. Many times, we will get “close” to a good entry and then price will reverse. Jumping in the market before confirmation, or because you’re sick of waiting for “the move” to happen can EASILY destroy any chance you have of making profits with gold.

4) Confidence in your own analysis and trading methods

5) A WRITTEN trading log to keep track of each trade taken. Today’s Video is my example of this. (No, I will not check up on this, but you are only hurting yourself by not doing this step)

6)  A COMPLETE trade PLAN for trading hours, limits (daily, weekly), and approach as well as stops, take profits and goals.

Gold Trading Rules, Risks & Challenges We Face:

Trading the gold market is not simply like looking at another forex pair.  There are specific risks and challenges to gold which may not be exclusive to gold only, but are definitely worth discussing so we get all this out on the table.  The last thing I want is someone getting upset with me later about things like slippage or volatility.  Let’s talk about the boogey men NOW.

VOLATILITY:  Gold has MONSTER volatility at times.  It is NOTHING for gold to swoop down 60 pips and then 100 pips up IN THE SAME HOUR.  Yes, we need to understand this and what it means to our trading.

• We cannot simply leave more “breathing room” or move our stops out more just to be able to walk away from the trade.  Gold can make that distance in a moment.  We must either choose a stop that if hit means we should reverse position, OR we should use a smaller stop that just makes it easy to make back on a win.
• Since gold can produce big wins, using a mechanically small stop can keep the R/R high since one win can eat up many small stops.  Keep in mind though that we can’t use too small a stop or the normal price fluctuations or “noise” means we have been poked out of the order for no reason.
• Gold’s volatility also means that we have to be very careful HOW we bring our stop to b/e or better.  Move the stop too soon, and you miss the move you were supposed to profit from as gold can hit our areas 5-10 times before finally moving away in a more dramatic fashion.
• Move our stop too late and we risk not only losing the floating profit, but getting dinged on a full stop loss as gold makes it’s move on the reversal.

SLIPPAGE:  This is where the rubber meets the road with your broker, TRUST ME.

• I have seen otherwise good brokers go bad here.  Keep in mind that even with a very good broker, slippage is possible.  Gold can move so fast at times that literally your broker cannot close out the order at that price and has to wait until it can get a fill at a price that’s close.  A good broker should be able to keep a wicked move against your stop to 10 pips or less slippage, at very maximum 15 pips.
• DO NOT USE STEALTH STOPS!!!  I cannot stress this enough.  You will only compound the problem.  The best chance your broker has to not experience slippage is if the order is already on their books and in the market.  A market signal from your MT4 will be the slowest by comparison.  As much as possible we should try to use limits, and stop orders held by our broker, and use market orders only at certain times, NEVER to try to close or open a trade in a fast-moving market.
• Slippage is a real risk that no amount of planning or great trading can avoid.  This comes down to your broker’s execution and the market.  I’m not trying to scare anyone, but EVERYONE must know the real risk here.

Documentation Requirements:

1. Trading Log:  To ensure you keep an accurate record of your trading, you must create a trade log.  Since the beauty of the gold market is that we really only need to take 1 or 2 good trades a day MAXIMUM to make AMAZING profits, it’s not that daunting of a chore.  Make sure you are honest, and keep track of ALL your trades.  After all, not keeping an accurate log will not help you make even better money in the future.  You want to make great returns??  Then invest in keeping an accurate record of your gold trading.  The more time you spend on this, the better you will do, I can assure you of that.  I have made a video showing an example of how I record each and every one of my gold trades.
2. Trading Rules and Plan:  Make sure you have a written set of rules outlining, when and how you will trade the gold market.  This is the discipline part.  The more you can put to a rule, the easier it will be to have a checklist of how you will trade.  This will keep  you from making emotional decisions based on a fast-moving, ever-changing market.  Trust me, once you start watching gold, you will start to see many more opportunities on a daily basis than you planned for.  Knowing your limits, goals and approach rules will help you keep from getting carried away, and doing potential damage to your account by over-trading or getting caught in a downward spiral of bad trades.

In the next post, I will get into some basic details of what the gold market looks like and what we are looking for.  I will also discuss some of the finer points I have learned about the gold market itself and we will revisit the list I gave you in last week’s introductory post.  Until then, get those plans ready!!!

Omar Eltoukhy

GOLDTRADEMASTER.COM

Gold Trading Rules