Calling The Tune In The Gold Market

by Donald W. Pendergast Jr.

This trading system shows a glint of promise in trading the volatile precious metal.

Just about everyone seems to be aware of the long-running uptrend in the gold market, one that is now about 10 years old. Gold market traders, on the other hand, realize that the shorter-term swings and cycles in this highly emotional commodity are chaotic and unpredictable, and that a highly disciplined discretionary or mechanical trading system is an absolute must in order to make and retain trading profits. Here is a closer look at an intraday, fully mechanical trading system for gold futures.

A gold trading system
Recently, I wrote an article based on an intraday gold futures trading system. The strategy trades the full-sized, front-month Comex gold futures contract and it showed some promise, but after much forward-testing and further optimization, I decided to lay it aside until I could learn how to garner more consistent profits in the daytrading environment. I discovered, however, that a swing trading system, one that is allowed to hold positions overnight (as needed), seemed to allow for more consistent equity growth with fewer drawdowns. Here, we’ll look at the basic code for this gold swing trading system and examine why it appears to work. We’ll also determine if the method offers promise for budding system builders and traders as they seek to work with and even enhance this simple trading method (see Figure 1).

Image 1

Figure 1: the eldorado gold system. This gold futures trading system showed real promise in hypothetical, walkforward mode, and also demonstrated a reasonably good propensity to identify tradable reversal and breakout areas in a variety of market conditions.

…Continued in the July issue of Technical Analysis of Stocks & Commodities

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