Tradefair Weekly Update / Editor / 29 August 2008 / Leave a comment

Buzzwords of the week; tip #9

Many traders like to trade trends, and there are many definitions of a trend. One of the oldest and simplest is this: an uptrend is a series of higher highs and higher lows, a downtrend is a series of lower highs and lower lows.

Technical Tip of the week

Traders trade on many different timeframes depending on preference and objectives. Whichever timeframe you choose it is also often a good idea to check the chart on a longer timeframe, to get a better overview of what is going on. If you usually use daily charts, have a look at the weekly charts as well. On the Tradefair Spreads platform you can reset the timeframe on your charts with one click. The range goes from weekly right down to tick by tick charts.

Gold bugs in disarray

There has always been a group of traders who are keen fans of gold and they are sometimes referred to as gold bugs. They enjoyed another strong uptrend starting in the middle of 2007, as can be seen on the weekly chart of gold obtained from the Tradefair Spreads platform. Gold went up from around $650 to over $1000 by March 2008, and during this period made a series of higher highs and higher lows. But in July 2008 there was an important new development. Gold tried to get up above $1000 and failed, so the first requirement of an uptrend, higher highs, was no longer evident. Some early birds took the opportunity to sell gold at this point. More recently the price has also fallen below the April low, so now there has been a lower high and a lower low, and the trend has moved from up to down.

One possible trade based on the failure of gold to make a new high was to sell gold as it fell below the low of the week in which the failure to make a new high occurred. Gold bets are priced per $0.1, so if you had gone short based on this weekly chart at $949.0, £1 per $0.1, with a stop at $989.0 (above the high of that week) your risk would have been £400. Moving the stop every week above the high of the previous week, you would still have been in the bet by the August bank holiday, with the stop at around $840, locking in a £1090 profit so far.

Happy trading!

The Tradefair Spread Betting Team