Here Are Some of The Top Tips For Day Trading Gold ETFS

One of the most straightforward methods to trade gold is through exchange-traded funds (ETFs). There are several liquid gold ETFs available, and unlike futures, the ETFs never expire. Additionally, gold ETFs provide variety by allowing you to trade the gold price or an ETF linked to gold producers. Like other assets, gold follows long-term trends when moving. At various points, those patterns draw a lot of traders, creating the best conditions for day trading. Here's how to benefit from this.

 

•    Because gold moves in long-term trends, it is appealing to many traders and offers favorable day trading circumstances.

 

•    ETFs, unit investment trusts, and gold miner stocks are just a few examples of the various gold-tracking securities that technical analysts might utilize while trading the precious metal.

 

•    Unit trusts like GLD and IAU actually purchase and hold physical gold, in contrast to ETFs, which track the price of gold indirectly through derivatives contracts owned by the fund.

 

•    Understanding these multiple instruments' price behavior can assist trader’s spot entry and exit points for short-term trades as well as confirm trends and reversals.

 

Even while the shares Gold Trust (IAU) and the SPDR Gold Trust (GLD) are sometimes referred to as ETFs, they are actually unit trusts. The gold that is held by these unit investment trusts (UITs) is genuine gold. An ETF, on the other hand, is a type of investment that often invests in commodities like gold futures that track the price of the metal. Both ETFs and trusts are suitable for day trading.

 

With an average of more than 8 million and 17 million shares changing hands each day, the aforementioned gold investment trusts are the most liquid and actively traded.

 

The price of the iShares Gold Trust is roughly one-tenth that of the SPDR Gold Trust, and as a result, there will be less intraday fluctuation in absolute terms, but bigger volumes can be traded due to the lower price.

 

The SPDR Gold Trust is more suitable for day trading due to its pricing and volume.

 

VanEck Vectors Gold Miners ETF (GDX) and VanEck Vectors Junior Gold Miners Fund are popular gold-miner ETFs, which are funds that invest in gold-mining firms and reflect their performance (GDXJ).

 

The friend of the day trader is volatility. Liquidity plus frequent price volatility increases the possibility of quick gains (and losses). Pay attention to gold ETFs and trusts when the daily price variation is at least 2%. Apply a 14-day average true range (ATR) indicator to a daily chart of gold, divide the result by the current price of the ETF or trust, multiply the result by 100, and you'll have your answer. The market is not suitable for day trading gold ETFs or trusts if the number is not greater than 2.

 

Compared to gold trusts, the Gold Miner and Junior Gold Miner ETFs are often more volatile. Due to their higher volatility, gold miners may provide a little bit more day-trading chances when the price of gold is stable. 

 

Pay attention to the SPDR Gold Trust when it moves more than 2% per day. Trade one of the gold-miner ETFs if the trust is only moving by 2% or less. Although the gold trusts and ETFs can be traded using the following approach even during non-volatile (less than 2% daily movement) times, these are the suggested circumstances for day trading.

 

Only trades that follow the trend are entered. For an uptrend, the price must have recently achieved a swing high, and you want to enter on a pullback. The price must pause for at least two or three price bars at some point throughout the pullback (one- or two-minute chart). A pause is a brief period of consolidation during which the price stops moving downward and begins to move more laterally.

 

Assuming the price will continue to trend higher after the pause, purchase when the price crosses above the high of the pause. The low of the pause must be higher than the swing low. If not, it serves as a warning that the upward trend might be in jeopardy, and no trade is entered. Put a stop loss immediately below the low of the pullback after the entry: The strategy is the same for a downtrend, you want to enter on a pullback when the price has recently made a low drop (in this case, the pullback will be to the upside). 

 

The price must pause for at least two or three price bars at some point throughout the pullback (one- or two-minute chart). Assuming the price will continue to trend lower after the pause, short-sell when the price drops below the low of the pause. The high of the pause must be lower than the high of the previous swing. If not, it serves as a warning that the downward trend might be jeopardized, and no transaction is entered. Put a stop loss right below the pullback low after the entrance.

 

The technique aims to capture trending movements in trusts and ETFs that deal with gold. The best time to do this is when the market is sufficiently volatile. If not, the trends are more likely to fizzle out and fall short of our profit goal.

 

The profit goal is determined using a multiple of our risk. Aim for a profit target that is twice as high as your risk when daily volatility is close to 2%. Aim for a profit target that is three or perhaps four times your risk when volatility is close to 4% and there is a strong intraday and daily trend.

 

The plan is not without its dangers. One of the primary problems is that the pullback's pause, which increases the stop and risk, might be rather large. Additionally, there can be more than one pause during a pullback; choose which one to trade can be quite arbitrary. The technique will leave you without a trade if there is no pause, only a rapid pullback and sharp move back in the trending direction.

 

To reward traders for taking that risk, the profit target is set at a multiple of risk. But before the target is met, the price can start to reverse.

 

Moving the stop up to just above new highs as they occur during an uptrend or down to just below new lows as they form during a downtrend is an optional step. The stop is a trailing stop that follows the trend and works to lock in some gains or lessen losses if the trend changes.

 

Because gold isn't always in demand, day traders should avoid investing in gold ETFs and trusts when the price of the metal is scarcely changing. Day trading is justified, nevertheless, when volatility rises. Keep your attention on trend trading. Watch for a price pullback and a halt. The pause acts as the signal to start the trade. Take the trade when the price resumes moving in the direction of the trend after the halt or consolidation. Immediately outside of the pricing halt, place a stop. Set an objective that is two times your risk—or even more in erratic conditions—because your goal should make up for the danger you are taking.