Trend following strategies are perhaps the simplest of all, yet can be very effective provided that the market is trending either up or down, as opposed to sideways. The trader simply buys gold if the price is trending up, or sells it if the price is going down. While this strategy is simple, it does take practice, experience and some degree of intuition and faith. It is very difficult to know in advance if a trend will continue, or if it will reverse. In many instances, it will seem as though this strategy unfailingly convinces the trader to buy in an uptrend or sell in a downtrend at the precise moment that gold prices retrace or reverse.
Countertrend strategies attempt of find these reversal points and trade against the trend for trades of brief duration that attempt to capture small profits over the course of many trades. This strategy is riskier than trend following and should only be attempted by experienced individuals who recognize prior support and resistance levels in gold prices that indicate a decent probability of success. Newer traders should keep their position size very small when employing this strategy. Gold prices do not always trend, however, and it is necessary to devise trading strategies for when prices are hovering for long periods of time within a narrow range, which is likely to be the case more often than is the presence of a strong trend.
Swing trading strategies rely on prices remaining in a sideways channel. The trader will sell gold at the top of the range and buy it at the bottom. If the range is broken, it could indicate that a new trend is developing, and the trader must exit long trades if prices break the lower limit of the channel or get out of short trades if the upper barrier is broken. The other part of this strategy is to place orders to buy above the upper limit of the channel, hoping to take advantage of a new uptrend, or to place sell orders below the channel to catch the beginning of a downtrend. Many variations of these gold trading strategies exist. Investors will combine these basic concepts with technical and fundamental indicators to predict the emergence of a new trend or the continuation of a channel as accurately as possible.
Perhaps the best advice regarding gold trading strategies is that those that are personally developed, tweaked and tested by the person who is going to use them will be at least as effective as those developed by some anonymous expert.
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