Page 17 - MEX-Yearbook-2017

for stop loss (SL) order. However, an SL may be
calculated during trading hours too with the help
of a technical indicator called Average True Range
(ATR). Simply, traders must be ready sensitively
to lose money before executing the position. If s/
he is not ready then s/he is simply not ready to
enter in the derivatives market. In a normal case,
more than 2-5% of total capital is not advisable at
all for taking the risk. Risk can be subdivided and
adjusted into a number of lots at one time.
Allocate Position Size: After defining the risk
capacity, traders should fix the overall position
for execution which must not go off more than
the predetermined risk. While defining the
position sizing, Risk/Reward ratio (1:3) need to
be maintained for good results which helps again
mathematically to win at the last on the theory of
probability. 2/3rd of the fund should remain in the
account as free margin while trading or to avoid
unwanted margin call due to anomalous price
movement. Position size should be balanced under
the consideration of total investment, free margin,
volatility level and pips. The single position
does not mean only the investment in terms of
the initial margin but thought to be the notional
value of contracts as profit/loss (P/L) is always
the outcome of total contract value although it is
leveraged trading.
Know Trend Indicator: Years of research work
opine to use well-known trend indicators rather
than popular ones which do not have confidence
among all the learned tools. This is the first thing out entry and exit points with help of support and
to use onto Trader Work Station (TWS) to identify
the trend with the help of technical indicators.
This can be done by drawing the trend lines, using
the Simple Moving Averages (13 Days Period)
in normal market condition, line charts with
broader time frame etc. It is advisable to go with
the trend, however, be cautious with the point of
reversal trend. “Buy with uptrend” and “sell with
downtrend” strategy should be prudent. Either
long or short decisions should be determined
here without any mystifications. One must note
the major economic news which may bring the
reversal at any point of time, however, there are
always chances to change the trend due to High-
Frequency Trading (HFT) but it might be for a
certain period of time.
Summarize the CFTC-COT Report: Technical
analysis is significant although, at the same time,
fundamental analysis can be used for better trade
results. If fundamental is justifying the technical
analysis then the trade has a maximum probability
to go to the green side. The Commitments of
Traders (COT) reports should justify the uptrend
or downtrend for our assurance where anyone
may refer net positions in gold that is basically
establishing the direction of the factual trend.
COT Reports are published every Friday at 3:00
PM EST. where gold position takers may have
a look for market’s gold holding or overall net
positioning. If the net position is long then it
supports uptrend and netting is short then this
supports the downtrend. Along with this report,
other major fundamentals should be kept an eye.
Fundamentals are basically used to find reversal or
continuation of a trend.
Have the Logical Pattern: Once long or short is
fixed then look at the chart minutely to find the
reliable candlestick patterns, breakouts. In case
the market is up-trending then W-top, reverse head
& shoulder, ascending triangle, falling wedge,
double bottom, bullish symmetrical patterns,
triple bottom, bullish pennants break out, bullish
flags break out should be looked for and if gold
is discounting or in downward trend then, Head
& Shoulder, descending triangle, rising wedge,
double top, bearish symmetrical triangle, triple
top, bearish pennants break out, bearish flags
break out need to look out. Once any of the above
reliable patterns appears in cooperation with a
trend, entry levels are traced out or noted. Price
action methodology may help the trader to find
current forming crucial patterns too. It may be
perilous to enter the trade until logical evidence
appears in the chart if we are considering trading
as a business.
Mark the Entry & Exit Point: After tracing
the entry level, look for entry point which could
have a deeper price point in uptrend and topper
in down trending. There are many ways to find
resistance, Commodity Channel Index (CCI),
Average Directional Index (ADX), Parabolic
SAR, Ichimoko Kinko Hyo, Relative Strength
Index (RSI), Average True Range (ATR) etc.
Although, while calculating the entry and exit
points, traders must recall the risk/reward ratio to volatility even in normal market conditions
avoid possible trading stress. Entry point should
be for lower time frame while the exit in the higher trade with calculated risk. If this is traded with
time frame. For bullish trends, bullish engulfing,
morning star, bullish marubozu, three white
soldier, bullish harami candlesticks signal may
be referred and while gold is in bearish, bearish
engulfing, evening star, bearish marubozu, three
black crows, bearish harami may be taken into
consideration. Predetermined and calculated exit
and entry point help the traders to avoid impulsive
emotional factors during the live market price.
Assure for Reconfirmation: It is advisable to
follow the trending patterns of parallel or non-
trending pattern for unparalleled commodities,
indices, securities which may be US Dollar Index
(-ve), Silver (+ve), Russia Stock (+ve), Dow Jones
(-ve), S&P/TSX Global Gold Index (+ve), GDX
ETF (+ve) where positive sign means positively
correlated and negative sign means negatively
correlated to the price of gold. As gold is globally proper analysis, position and risk management.
traded thus inter-market analysis is crucial for
support because the price is almost correlated and
fewer chances to jump unusually and if possible
then follow the world market clock. This helps us
to enhance our confidence for trade entry. While
trading in gold, a trader should watch US Dollar
Index (DXY) at least whether both are justifying
opposite to each other or not. Likewise, silver
is assumed to have a similar trend with gold
thus need to be checked if both are having same
patterns or not. This has been noticed several
times that fundamentals do not work in the case of
a major breakout and gold moves only technically.
Additionally, volume indicator may be followed
for the accuracy of trade. This step eliminates
the fear factor of entry decision and assists in
staying away from being trapped in temporary
bullish spike or bearish spike. However, price gap
provides golden clues for entry which has to be
filled sooner or later.
Note Down: Never delay in initiating orders or
putting limit order, otherwise, a single confusion
may lead to a wrong trade or ruin the whole set
up. It is strongly advisable to write down all the
essential details on the paper i.e. commodity
name, contract expiry time, entry point, exit
point, Stop Loss (SL), Take Profit (TP), indicator
observation, entry and exit price criteria,
fundamental supportive reason. When these are
done then have a time and keep away from the
trading system so emotional reactivity shall not
intervene in the trade. There will be only one
execution either TP or SL and even if trader needs
to be in the market before hitting any limit order
then try to use trailing TP or use SL as TP is used
in case the market is favoring with green profits
as trailing orders help to account the possible
prevailing profit.
Gold is the commodity which accounts for high
which imply a good chance to make a good
proper trade management and analysis then it
rewards the trader in expected ways than other
derivative commodities. This does not require
effort but numerous arranged sets of information
on real time basis. This kind of derivative trading
involves high risk and reward, therefore, without
knowing the contract values and its terminology
as well as basic trading principle, one must not
enter the market. However, one thing can be
assured that gold derivatives help those traders
who can ascertain gold price movement patterns,
market sentiments, overbought and oversold
region perfectly. Gold trade management is the
positive approach towards the logical trading
style for the commodity and business where risk
is minimized for winning profitability. Before
actual trade order placement, the trader requires
Gold lets the traders shine who catches the reason
of its price fluctuation.
MEX NEPAL YEAR BOOK 2017 | 16