Adding Gold

As I have mentioned in earlier posts, I have been testing my own contrarian methods based on moving averages. The trading frequency is relatively low (just to my taste), but it’s all relative. For instance, yesterday on the close the method was supposed to close a short position in a double leveraged gold ETF initiated at the close of Dec 29. Using DZZ as a proxy, this trade would have yielded ( 8.49 – 8.11) / 8.11 = 4.7%.

Now I have decided to start posting these signals too. The first one was triggered today – at the close gold was a buy according to my short term contrarian system. Using DGP as a proxy (the bull version of DZZ), I will assume that we entered this imaginary trade at the close – $39.86. It is reasonable to have a 5% stop ($37.86).

How do I know to enter on the close? The overbought/oversold situation is triggered on the close of the previous day. A trade is entered, when the closing price on the next day is within a certain range. At some point in the afternoon (trying to be random here) I check the markets and if all holds I may take the trade. As you can see this is as real trading as it gets except that I can automate the whole thing:).