For those who start to think I am a GOLD fan, think again. This time I
short GOLD instead of buying that yellow metal.
I shorted GOLD using my Dukascopy Forex platform. Yes, I do not always just buy GOLD. This is a countertrend trade.
GOLD broke the uptrend on 26 Sep. Alas the positional risk was too great for me then at 1750, because I determined a stop above 1795. My target is at just above the 350 SMA at 1680. Hence the Reward/Risk ratio is 1.5. Not good. So I did not take the trade there and then.
Then on 1 Oct, GOLD reaches 1795 before closing with a bearish upper wick of a candle at 1777. Nice. What's my Reward/Risk ratio? 5.3 (1777-1680 divided by 1750-1777). And because my R/R ratio is big, I can now command a bigger position at the same risk I take for most of my trades, which is 1% of my trading capital.
Along the way to my profit, I was almost stopped out just below 1796 on the 5 Oct.
On 2 Nov, I took my profit at 1678 for a 5.3R gain.This is my big profit for this year.
Well not quite my usual trade of following the trend. This is a countertrend trade supported by MACD divergence. One of my favourite supporting indicators for countertrend trades. It is just an idea from one of many setups I learnt during my 6 years of trading. I took the trade as usual on 1% risk to my trading capital.
Trade small, at 1% of trading capital, my decisions tend to be better.