After a relatively long period of calm, Gold has come back from the dead. Half way through February, Gold prices have spiked by more than 12%. この, もちろんです, has got some traders scratching their head, wondering where the heck the spike came from… as if Gold moves materialize out of thin air.
まあ, Gold moves don’t just “happen.” In fact, the latest spike in Gold price provides some powerful trading lessons on trading Gold.
Charting Gold Volatility with MT4
Before we jump into the lessons to be learned let’s first focus on the cycles of Gold. That should help explain the latest Gold Spike. Despite what you may have heard, Gold does have cycles. 意外にも, the cycles are not in the price itself but in the level of volatility. In the past, I expanded on the advanced use of derivatives to predict an upcoming Gold move and direction. But the lesson here is far simpler.
In the weekly Gold chart below, we have measured Gold’s volatility through Standard Deviation (or StdDev), which is available in MetaTrader.
As one can see, Gold’s StdDev is remarkably simple to analyze. Every time the StdDev falls to 20 it jumps back up. And every time Gold’s StdDev jumps to 80 it falls down, back to the 20 低. The only exceptions were two extreme cases when the StdDev reached 145.
さらに, we can see that if StdDev has hit lows more than once the spike of volatility higher is almost certain.
First Trading Lesson
もちろんです, our StdDev analysis is not unique to the latest spike. But what can we learn? The first interesting lesson is that volatility spikes tend to concentrate around resistance/support levels. In our case, that is the 1,050 サポート, aka Point A. That means that Gold opportunities tend to occur around support and resistance levels. 今のところ, it may seem an obvious conclusion but here is what it actually means:
When you have a support or resistance level and StdDev is at 20 that’s the ideal time for entry. You will have both textbook support and resistance levels working smoothly. Then you’ll know that a strong momentum is coming.
The second lesson is a simple but important one. A spike in Gold volatility does not necessarily mean a break of support and resistance levels. When technicals suggest that the support level will hold look at the StdDev. If the StdDev is at 20 それはいいですね; it re-enforces that simple fact that the support level will hold.
The third lesson, which combines the first two, is perhaps the most interesting. It is the understanding that one jump in StdDev is not equal to one move. 詳しく述べさせてください。; say StdDev has hit the 20 low near the 1,050 サポート. Meanwhile, Gold prices have spiked but StdDev hasn’t yet reached the 80 high. That means that volatility is set to rise but it doesn’t necessarily mean that Gold will keep moving in the same direction.
むしろ, it means it will just move with a strong momentum. In the case above we can see Gold has hit the upper price channel resistance at Point B. But StdDev suggests volatility still hasn’t been maximized. And that means that the rise in volatility, next time, could come in the form of a short.
What Did We Learn?
So if we take our three lessons and try to summarize them, what did we learn? We learned that when StdDev is at its 20 lows it’s the best time to trade Gold. That’s because it guarantees that you will get a strong price momentum and it validates your technical analysis on Gold.
Russ Crites 言う
I tried two different FX platforms and cannot find the SMA50 anywhere. am I looking for this acronym or what it stands for?
thanks in advance.
It’s the 50 period Simple Moving Average. If you use MetaTrader, the indicator is “Moving Average.” You’ll need to select 50 for the period and Simple for the type.
I think Lior’s final conclusion in INcomplete. What will happen when Level 80 of SD is hit?
Do you draw fibonacci retracement lines for s/r levels or use fractals? Or triangle formation apex point
I usually eyeball the chart for congestion if I’m trading manually. Support and resistance goes above/below those congestion areas.
I’m sorry, but this article reflects a misunderstanding of both the Standard Deviation concept and the “アルゴリズム” of the MT4 StdDev indicator.
StdDev is not an oscillator, it has no midpoint value around which it oscillates – and more importantly, its values are in price terms, meaning that 20 または 80 or whatever (*even if they were statistically significant, which they’re not, not even in the chart above) are specific to a timespan+asset+timeframe combination and therefore are by definition always deduced on hindsight.
StdDev takes the MA period and sums up a root mean square for the candles in the period. Semantically it’s sort of an average price distance that bars run away from their MA during the MA period.
さらに, the default parameters for this indicator in MT4 use the Close price of the bars, which is not really the best reference point for measuring volatility. Highs and lows are what you need to look at when talking about volatility… And if you want to avoid messing with the code for this indicator (*since it has no option of using the maximum distance to either High or Low… It has only the constantly using the lows or constantly using the highs), the second best option would be to use the typical price.
So basically, What Did We Learn? That if you’re looking for a cyclic oscillator to use around support and resistance, use Stochatstics or something. StdDev is only useful in measuring the probable range of fluctuations, just like ATR.
+1 to Noam’s observations. The article appears to be written with too much hindsight bias and makes conclusions without looking at statistical signfincance:
“We learned that when StdDev is at its 20 lows it’s the best time to trade Gold. That’s because it guarantees that you will get a strong price momentum and it validates your technical analysis on Gold.”
Either the wordings did not correctly reflect what the author (Lior) wanted to say, or he has no idea what he is talking about.
リオル Alkalay 言う
あなたのコメントをありがとうございます. Although I was referring to levels of 20 と 80 and that might be mistakenly understood as if I was implying StdDev is an Oscillator, that was not the intention. STdDEV is essentially reflecting volatility. Of course this volatility has some sort of a range. When we identify this range we can then use it to predict the probability of price volatility.
Hope this clarifies my point.
こんにちは, can we get a gold update please
On the fundamentals?