Forex Trading: Gold, Trend Followers still long

by Joe Oliver, Forex Trading-Pips

Forex Trading: Despite the recent sell-off in Gold, trend followers trading Donchian 4 week rule are still long the precious metal. If Gold continues to appreciate trend followers will continue to benefit. If Gold declines they will exit at the 20 day low, locking in decent profits from the recent run up.

Below is a chart of Gold continuous futures contract with Donchian 20 day price channels (blue). Trend followers trading Donchian 4 week rule entered long on 07/12/11 at 1546.1. Yesterday gold closed at 1829.8: an 18 % paper profit in less than 2 months.

The 20 day low on Gold is currently 1642. As gold climbs, so too does the 20 day exit point locking in additional gains.

For alternative trend following exit strategies take a look at Forex Strategy: How to Exit Trades.

One of the reasons that systematic trend following works so well is that price action is the only input in the decision making process. Price action discounts everything.

Forex Trading, Gold daily bars Donchian

Forex Trading, Gold daily bars Donchian