Gold on 11-Year Winning Streak: Pro
Let's talk turkey about a seasonal gold trade that is on an 11-year win streak.
Before you overeat and start watching football this Thanksgiving, you may want to grab a gold chart and consider some seasonal stats. If you have been buying a February gold contract on or around November 19, and holding it until about December 4, you've made money every year since 2000.
Before you hop right into this trade, though, consider the bigger picture. It has a success rate of just 55.6 percent over the last 37 years, which is a little better than a coin toss.
So why has this trade worked 11 out of the last 11 years? Well, gold has been on a solid bull run, and it's easy to understand why. Growing inflation concerns, due to the global debt crisis and deficit spending, weaken the dollar and boost asset prices. And all of these conditions, I would add, are still in play.
I consider the seasonal trade to be another tool in the tool chest. As a trader I am trying to swing the odds of a successful trade in may favor. By using a combination of technical levels, seasonal trends, and fundamentals, I am able to make a more informed decision.
So what's the trade?
I'm buying gold at $1,721.5, with a sell stop at $1,709.1. This limits my risk to $1,240. My target is up at $1,743.6, for a potential profit of $2,480.
A final note: If my entry is not hit by today's close, all orders are canceled.