Gold is Sending a Warning... – Transcript

00:00How do you know when gold is about to hit a low and start actually rallying higher, not just for a day or two, but sustainably higher? Well, a lot of times when newer traders get into this stuff, myself included, I was obsessed with the idea of spotting reversal points. When was the chart going to hit the low so I knew when to buy or when is it going to hit a high so I know

00:23when to sell? And this obsession I think grips new traders so solidly because it's a very logical question. You're new to this stuff and you say, okay, basically how do I know when the bottom is in? How do I know when to sell? How do I know to buy? Like, what is the magic formula that is going to make it so that I can enter and exit with great timing and lock in a profit? And I can tell you after having obsessed over markets and trading and learning

00:48everything I can about this stuff for the last 10 years that I don't believe that there actually is a reliable simple signal that tells you exactly when prices are going to bottom or top. Basically, it's way harder than it looks. When you see traders with wonderful positions on like here with this gold position, it's easy to be like, oh, so what told you exactly when to sell this

01:13so that you knew it was going to make this move so you can make such nice gains? Well, I can tell you again, here I am with a great position. This was not a perfectly calculated I knew this was going to happen type of scenario. Instead, this was a trade that met my criteria for an entry but very well could have stopped out and been a losing position. In fact, I take many losing positions before ultimately catching this kind of move. Instead of trying to find the perfect

01:43tops and bottoms in markets and trying to find a strategy or price action signal that's going to tell you that, that is what I refer to as chasing a holy grail in trading that doesn't actually exist. Setting your expectations so high and basically believing that market gurus know how to call exactly when markets are going to turn back and forth is actually kind of a facade that a lot of traders lose a lot of money trying to pursue. Their expectations are perfection when real

02:12trading is very imperfect and profitable trading just requires you to longer term make more than you lose. That is it. I always like to think of this as a P&L graph. A lot of times new traders think that their profits over time should look like this. And again, they will say, no, I understand like you're going to have little downs before you go up, but they still think that's the expectation. That is the expectation of a profitable traders equity curve when you first get into

02:40trading for a lot of people. That's what I thought it was. Now I can tell you after all of my interviews of successful traders, after becoming a successful trader myself, it doesn't look like this at all. It looks like this and it is all over the place and it is inconsistent and it is all of a sudden, you know, you're back and forth and this is psychologically very difficult for people. And I think that's why trading, even when you have an edge, even when you know, long term, you're going to make money if you stick to a system

03:08or you have a very solid chance of making money sticking to a system. It's still psychologically hard because you inevitably have periods of just losing streaks and drawdowns that have you questioning yourself. So as we get into today's video, I'm going to be sharing my thoughts and how I'm managing this gold position and what I would at least be looking for to sign that maybe a gold reversal is a foot if such a thing can exist.

03:34And basically the precipice for my thought process on how to call markets is to not really try at all, but instead look at the macro trends, look at the technical trends, and try and follow them until something flips the other direction. So I went short on a gold and when I took this position, which you may know as edge finder, which you can see here, I have my edge finder score plotted over time versus the gold chart. You can see I got

04:00bearish here right around September. What is the September 25th? I want to say right around there. Yep. September 25th. We got the bearish reading within edge finder, which matched up with my criteria for an entry. I took the trade and gold has been moving lower sense. By the way, if we zoom in here, you can see that the bearish reading is plotted right there on our overtime score history. And you can see I got bearish right just before it dropped. Now not of course, every trade from edge finder is perfect.

04:28But here's for example, when we got bullish edge finder ripped to the upside. Here's where we got bearish edge finder fell. Here's where we got bearish. It fell a little bit, but that one was not as good of a signal. And so the point here is nothing is perfect, but generally speaking, if you can win more than you can lose, that is all that matters in trading. So back to the question of the day, when do I get out of gold?

04:48When do I think it's going to reverse higher? Well, I actually don't have a very strong conviction for bullish setups at all at this time on gold from a shorter term trading perspective. From a long term investment perspective, I actually think gold looks relatively attractive. And that was a good time to remind you that today's video is not financial by trading as high risk. As always, I'm just sharing my thoughts and opinions here.

05:08That being said, I've moved my stop loss a couple of times here so far on my gold short position. My initial stop loss was just above this swing high here. I had my stop loss placed right there. And then when we flooded through the lows, I was able to actually start trailing a stop loss. And I moved my stop loss from here down to just above this high here. And then I was able to, after this recent plummet again in gold price, move my stop loss once again into further into

05:35profit, I should say. So how do I know if this is the bottom? Well, the answer is I do not know. I do not know if that is the bottom for gold or if there are fresh lows coming. Generally speaking though, the trend is still bearish. And so as long as that bearish trend remains intact, I'm going to stick with this trade. Now, my definition might be slightly different than yours, but I'm using simple technical price action to tell me where it might be time to cut the idea and the bulls are overwhelming

06:03the bears. To do that, I've marked some levels on my chart. Notice right here, this 4170 level of resistance looking left was a pretty critical spot where sellers took control, pushed price lower. And while we did initially push lower, you can see we're now backtesting into this area. I'm fine with this. This does not prove anything to me that the bulls are now fully in control as long as we do not start to break through that prior area where sellers held and pushed lower.

06:31If we come up and test this area and then we roll over, nothing has changed structurally in my bearish view on a technical basis of gold. However, if we come up to this area and then sellers are overwhelmed and the bulls start breaking through up to 4195, I will take my profits and I will move on to the next idea.

06:49When it comes to trading, I am a big fan of trying, but more so to react to what is happening, not trying to predict what is happening. I personally think that if you're trying to tell me that gold is, you know, due for a huge short-term rally, right now you're trying to predict against what is a very solid downward trend on the four-hour and even the daily chart. And for that matter, even the weekly chart is looking pretty bearish. So for me, I look at this and I'm like, okay, well, from a technical perspective, this is a downtrend,

07:18right? We have solid reasoning for this. We have yields ripping higher globally, borrowing costs going higher, rates going higher, Fed interest rates expected to continue to be hiked. This is a scenario in which, you know, most roads for me right now point to lower gold prices. Now, at some point that changes.

07:38I'm just telling you that I don't claim to know exactly when that is. Instead, I will react to what price action and macro trends are telling me rather than trying to predict what they're going to do next. Right now they're bearish. I'm going to stay bearish until that changes. I also wanted to take a look at some setups here according to the top setups page here within Edgefinder. Now I'm looking at the compact version, which just kind of consolidates a couple of columns.

08:01But just so that you know all of different columns, feel free to pause the video and zoom in if you would like. We'll pull up the full top setups page where you can see it's a little smaller text. That's why I like to use the compact version when I'm filming videos, just so it's a little easier to read along. But what we have here is we have COT, crowd sentiment, GDP, PMI metrics, retail sales, consumer confidence, inflation readings, et cetera, et cetera, et cetera.

08:24Edgefinder is tracking monitoring and looking at all this data to determine which currency pairs, commodities, indices, et cetera, are showing strength versus expectations to these data points or weakness. And it's generating a watch list automatically for me.

08:39Now you can see all the different things that we track here, but what we can also do is go back to our compact page and I've actually done some filters here. I've removed major currency indices just so we can look at the major currency pairs only. And then we also have indices, metals, crypto, commodity, and bonds in here. Now also I have filtered out neutral readings. You can see if I add neutrals, we have a lot more charts, but I've removed neutrals just so we can get a very compact view. And when it comes to my own personal

09:07trading when I'm not filming videos, this is exactly how I find my trades. I figured it would be a good example of how I might do that using Edgefinder because a lot of people are using Edgefinder who watch these videos. Here's how I approach this. Okay, so we see dollar yen is getting a very bullish reading. If we want, we can dissect that plus eight score just means basically broken down. Technicals look solid.

09:28COT data seems to heavily prefer the dollar over the yen. Economic growth metrics and inflation metrics basically favor the dollar over Japanese yen at this time. Okay, so we take a look at the dollar Japanese yen. We pull this chart up and we say, okay, is there anything here?

09:43Well, this isn't a nice overall upward trend. We could apply some moving averages to kind of see that we've got our moving averages now aligned. Technicals look fairly strong here. And if we actually get our four-hour levels out here, let's just draw in some resistance. I would love to see from a technical bullish perspective, either a retest down into some support like for example, down here at this 157.6 level or a breakout retest

10:10opportunity around the 158.4 level. I generally continue to look bullish because again, Edgefinder is giving me that confirmation and I like these levels to the upside. Now, just to clarify, Edgefinder being bullish like nothing else in trading does not guarantee that dollar yen is going to move higher.

10:31All it's telling me right now is that several of our conditions that we track within this, technical and sentiment analysis, macro fundamentals, are generally suggesting the dollar yen can continue to move higher. So I figured that's a good thing to show here in my videos is like how I practically fine trade. So like when I took the gold short, this is exactly the process that I followed. I liked the technical down trend. I liked Edgefinder's readings, combined the two, took the trade and off to the races. So dollar yen is a watch list item for me if we come

10:59back down into this area or if we break and retest this one here. By the way, if you're looking to trade with a brokerage and you are outside of the United States looking for a deposit bonus, check this out. ACAP is currently offering a 20% deposit bonus to new traders joining their platform. ACAP is well known in the industry.

11:15They are also very well regulated. You can of course do your own due diligence. See if this is right for you. Scan the QR code that you see on your screen right now or click the link in the description down below. If you're interested in taking advantage of this offer, it's pretty generous considering a 20% bump to your deposit means you have more capital to play around with in markets. Thank you to ACAP for sponsoring today's content. Now back to the video. Let's now take a look at some of the bearish readings that we've got. So for example, the Dow Jones and Russell, I'm going to look at these two in combination because they are both U.S.

11:44indices. Now notably, the tech side of things is not getting a bearish reading. That's actually more of a neutral reading with an Edgefinder at this time. But look at the difference when we look at the Russell 2000. This index looks very weak. And actually if we do rally up into this past resistance area plus 38.2% retracement zone, this is probably a short trade that I would be interested in taking off the daily. So that's a setup that I'll continue to monitor. Next up, we can take a look at the Dow Jones.