Gold Spike Trading System
This system was added on 5/26/2011. Gold Spike is a trading system taken from our stock index portfolio used to fade short term spikes in the Gold futures markets.
Strategies from the stock index portfolio are tested on commodity markets when price action in those commodity markets represents the type of system that has already been designed for stock indexes. Testing over the last 12 months showed positive expectations. Further analysis shows the positive expectancy is there for the last 18 months. The strategy was changed by limiting the entries per day to 3, expanding the trading window to 2 hours earlier, starting at 7:30 am EST, and adding a stochastic condition to the entry rules to make sure that short trades are not entered in oversold markets and long trades aren’t entered in overbought markets.
The strategy trades five minute charts but can also trade on one minute charts. The results are better on five minute charts. The Gold Spike trading system enters trades between 7:30 am – 2:30 pm EST and exits by 4:00 pm EST for any open positions so that no trades are held overnight. The stop loss is set to $800 with a maximum of 3 trades per day.
Why does this system work? Continued research over the last 12 months shows that there are more and more countertrending approaches working in the markets. We have developed more countertrend strategies in stock indexes, currencies, and now Gold. Traditionally trading systems have been more trendy. The more and more traders that participate in these markets, the more we can experience “gridlock” at times where there is less and less continuation of the trend. Also, as commodity ETF’s are added, more stock based investors and traders participate in these markets, applying stock based approaches. This is one of the reasons there is more and more correlation in both the direction of the markets and the way the markets trade.
Gold Spike Trading in March 2012
Capstone Trading Systems