4/2/98 - Trade Recommendation to Buy Gold
Two minutes after the open, place a buy stop to go long at 302.20 (one tick above the high of the 75-minute price bar), or one tick above the high of the day at that time, whichever is higher. If filled, place a protective sell stop at 301.50 (one tick below the low of 4/1), or one tick below today's low (4/2) if lower at the time of entry.
NOTE: The blue text shows how the price was determined.

Outcome
You would have placed a buy stop 302.20 and been filled three minutes after the open, with a protective sell stop at 301.50. With skiddage and commission, the dollar risk per contract would have been about $125.

Taking Profits
The cyan line is a trailing stop and would have stopped you out at 310.90 with a profit of $850+. However, taking profits on strength can often bring larger profits. Gold opening with a gap on Monday would have offered an opportunity to get out immediately after the open at 315 with an extra $500.

Market Commentary

The Daily Trading Cycle - The up arrows on the Gold daily chart (370 minutes in a trading day) show the bottoms of the 18-day trading cycle.

• Following the trading cycle bottom at TC, a price rise above the high of the previous trading cycle confirmed a trend reversal.
• The red/blue lines are the daily EMA trend indicator. When the red line is above the blue line, the trend is up.
• The low at A is a ½ trading cycle averaging nine days from bottom to bottom.

The Trading Cycle in the 75-Minute Chart - Each 75-minute bar is 1/5^th of the daily trading session. The five trading cycle bottoms of this time frame are indicated by the up arrows. The trading cycle averages 15 price bars from bottom to bottom.

• The red/blue EMA trend indicator from the daily chart is plotted on the 75-minute chart. The pattern for trading with this longer-term trend indicator is -

  (1) When the red line is above the blue line and rising,
  (2) watch for a drop below the red line to be followed by
  (3) a setup bar with an entry signal of a rise above the high of the setup bar.
  (4) Once entered, place a protective sell stop below the cycle bottom.
  
  This buy signal is often 80-90% accurate in confirming cycle bottoms as at A.

• Prices dropped below the red line on 4/1, remained above the blue line, and generated a purple setup bar the last bar of the day. (The setup bar was generated by the upturn of the purple RSI3M3 detrend oscillator at the bottom of the chart.) The range of the entire 75-minute setup bar is a high of 302.10, and a low of 301.60 -- only $50.

This trade followed principles basic to low risk trading:

• Trade in the direction of trend for the safest trades and greatest profit potential
• Buy cycle bottoms using fractal cycles in smaller time frames to reduce risk and increase profit potential.
• Use mechanical trading signals to reduce judgment and stress.
• Always have a game plan to take profits, and a protective stop in the market to lock in profits on an unexpected reversal.

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