We can use the stochastic as a basic instrument for the purchase and sale of futures on gold in the cases of trading both short and long term.
The stochastic will show significant changes of momentum of the price of gold.
Used in combination with the fundamental analysis and other technical instruments, the stochastic will add an extra dimension to your trading.
When you talk of the market of gold, data of supply and demand are readily available.
An investor eager to deepen can quickly find in internet data on annual production, annual consumption and the total of world stocks.
Look if the production or the consumption is increasing or decreasing compared to previous years.
The cost of production of an ounce of gold is increased or decreased?
The answer to this question may shed light on the condition of the bottom of the gold market.
Gold Fundamental Analysis
It is necessary to use the knowledge of the fundamental to determine the tendency of the basis of the price?
The knowledge of the fundamental alone does not make money by buying and selling a commodity like gold.
This is true for short-term trading.
The stochastic oscillator is a technical instrument to test a trend.
Measure if a market has the enthusiasm to continue a trend or if this trend is short of energy.
The stochastic oscillator correlates the closing price of gold for a period to the range of its prices for another given period.
When the price of gold grows, it closes on the maximum values for the whole period under examination.
When the price of gold is weak, the price closes to the minimum for the whole period under examination.
There are two types of stochastic that traders use, fast and slow. In a market as gold the Slow Stochastic is preferable since the Fast Stochastic gives too many false signals of purchase and sale.
Use the stochastic with a time-frame in combination with a range of price or a moving average set three times on this time-frame.
This method works for any time-frame, monthly, weekly, daily or even for intraday trading.
The important things to remember about stochastic for stochastic oscillators, a value greater than 80 reports that the price of gold is in overbought’s area.
A value less than 20 reports that the price of gold is in the territory of oversold.
Be careful to consider the signals for the sale or purchase more important.
Stochastic and Moving Averages in Gold Trading
When in the stochastic intersect the moving averages, signals of trading induce to act to buy or sell?
When the moving averages intersect, in stochastic, in the rise, this is a buying signal.
When the value of the stochastic is under 20, is a signal that the commodity is in oversold area and is an excellent buying signal.
The stochastic are only one part of the overall framework.
The gold price may remain overbought or oversold for long periods of time.
That is why it is so important to use the moving averages of the stochastic that intersect giving a signal of sale.
Use a process multi-step for trade gold. You decide the general trend of the direction of the price using the fundamental analysis.
Once you have decided on a trend, the opening of your trade should always reflect that tendency.
Wait patiently for the correct technical signal.
The stochastic is not the only technical instrument to use but is a powerful tool for a variety of reasons.
As a trend indicator, shows a displacement of trading activities, which expects a reversal of the direction of the price.
The stochastic are used by so many technical operators that the signal itself can often create a prophecy that will become true.
For choosing the right moment to take a profit or cut a loss on a position in the gold, the stochastic is a powerful tool.
Both if you are new in trading and investment or whether you are experienced professionals, use all the tools at your disposal.
A combination of fundamental analysis and technique will give you a complete overview.
Keep up to date on the fundamentals of supply and demand.
Pay attention to purchases or sales of gold by the Central Bank.
Try to keep you informed on the increase or decrease in the demand for gold in the different parts of the world.
Some changes of the fundamental can cause strong sudden movements in the price of gold.
When certain your directional trends used the stochastic oscillators to locate the best areas for buying and selling.