Like other commodities, gold typically benefits from strategies that leverage the market’s trend-following nature.

This video explores two contrasting approaches: one adheres to traditional trend-following tactics, and the other employs a reversal strategy, going against the current trend.

As you'll see, both strategies have proven highly successful, generating over $46,000 since the start of 2023.

Interested in learning more? Watch the video now to uncover:
•How each strategy works
•Detailed performance insights
•Practical tips for trading gold futures

Enjoy the video! 😉

Transcription

Introduction

Welcome to this new video, where we will analyze the performance of some of the best strategies in our portfolio.

For today's video, I’m going to walk you through two trading strategies for gold futures. Gold is not only the most famous metal out there, but it’s also a popular choice for traders, even those starting out with less capital.

Because besides the standard contract, you can also trade in micro contracts, which are pretty liquid too.

Right back to the strategies, today we’re going to explore two, including a trend-following strategy. It’s definitely the most classic approach for trading gold futures, but that’s not all we’ve got.

We’ve also got a mean-reverting strategy.

With that said, I am one of the coaches at Unger Academy. Let's start by analyzing the performance of the first strategy.

Trend Following Strategy

This is the chart for the trend-following strategy. Check out these two excellent trades that occurred after breaking through a key level.

Specifically, I am talking about to the session's current high and low.

Take, for example, the first short trade.

In this case, we can see how the position was opened right after breaking below the session's low up to that point.

Clearly, this strategy stands out because it doesn’t just target breakouts on the highs and lows of previous sessions, it’s a bit different from the usual approach.

So this could definitely be a solid strategy to develop further.

The only thing I advise you to pay attention to is starting trading only after a certain time.

Indeed, by adopting this approach, we’ll have the opportunity to identify highs and lows that can be considered more significant.

Regarding the exits, the strategy has a stop loss of $2,000 and no take profit has been set.

So, quite simply, we will try to ride the trend until the opposite signal appears.

Let's now analyze the equity line.

Here you can see that the strategy has been out of sample for several years now and has continued to perform quite well overall.

Looking at the drawdowns, you’ll notice that there have been some significant ones in recent years, but all in all, it still holds up as a solid strategy.

Let's now analyze the long side.

As for the long side, nothing much to say, except that recently it’s been quite profitable.

This is definitely also thanks to the bullish trend that we’ve seen on this future.

Now let’s take look at the equity curve for the short side, and here too, we could say that it has performed very well.

Certainly, in the last phase, it struggled a bit more, but this is due to the reasons we’ve just mentioned.

Let's now analyze the average trade of the strategy.

Here we can note that the strategy makes approximately 1600 trades, which are well balanced between the long side and the short side.

Regarding the win rate, we are facing a strategy with a win rate of 45%, which means that we lose more trades than we win.

But this should not scare us off, because according to the logic of the strategy, it’s all part of the plan: when we win, we win bigger compared our losses, since the goal is to follow the trend.

As for the average trade, however, we have an average trade of $200, which is quite significant to cover operational costs.

Here we see a bit of a difference between the long side and the short side.

Indeed, the average trade on the long side is significantly higher compared to the short side.

With that said, let's move on to analyze the strategy’s performance year by year.

Here we can see that in the last 14/15 years, the strategy has always earned.

The only year that struggled a bit is 2008.

But on the other hand, if we analyze 2023, we can definitely say that it was an excellent year, ending with a profit of about $30,000.

Also for 2024, I would say that the strategy is performing excellently.

So we just need to give space to the strategy and see if it can confirm the excellent performances we have seen in recent years in the coming years.

Mean Reverting Strategy

Let's move on to analyze the mean-reverting strategy.

Here too we can see two excellent trades that reached the target.

But the unique thing about this strategy, as we mentioned at the start of the video, is that it is a mean-reverting strategy.

Indeed, in this case, we will enter against the trend, which is certainly a different approach compared to what is usually seen on this future.

Take for example this long trade.

In this case, we will wait for the price to cross downward the low of the previous session and then wait for a return to that low.

The moment the 15-minute bar closes above that low, we will enter a position, precisely against the trend.

The same goes for the short side. We will wait for the price to cross upward the high of the previous session and then enter a

position the moment the price crosses this high again.

Indeed, as you can see, the short position was opened.

Let's also in this case analyze the performance of the strategy in this case, and as always we’ll start with the equity line.

Here too we can see a decidedly linear equity line.

At a glance, you can spot just two drawdowns that are more noticeable than the others, specifically I am referring to this drawdown here and to this one over here.

But otherwise, the strategy has performed quite well, despite being a mean-reverting strategy, which as we said is not really the best approach for this type of future.

Let's see the long side and the short side.

And as for the long side, well, what can I say? We witness a decidedly steady growth.

A bit less on the short side, where perhaps the drawdowns we previously analyzed are also more evident, but all in all, it remains a good strategy even on the short side.

Now let’s analyze the average trade.

Here we can note that the strategy makes fewer trades compared to the previous strategy.

This is clearly because it is necessary to add operational filters, as otherwise, it would be more difficult to obtain a good strategy going against what is, we can say, the basic nature of this future.

In any case, for this strategy, we can note an average trade of $144, which, by the way, is well balanced between the long side and the short side.

Now let's analyze the returns year by year of this strategy.

And here too the discussion is very similar to the analysis made previously, that is, in recent years the strategy has performed very well, it only struggled more in 2009.

Certainly, 2019 was not a great year either. Indeed here, considering slippage and commissions, it would have been a losing year.

But from 2020 onward the strategy has recovered quite well.

So I would say also in this case to give space to the strategy for 2024 and see how it will perform in the coming months.

Conclusion

With that said, today we have seen that it is possible to benefit from this future even using different approaches.

And after all, this is the goal of us systematic traders: not only to diversify by type of financial instrument but also by type of strategy.

If you are interested in trading and want to learn how to create strategies like the ones I have shown today in this video, then click on the link in the description. From there, you can watch a free presentation by Andrea Unger, or get a free copy of our best-selling book "The Unger Method", or even book a free strategic consultation with one of our tutors.

With that said, thank you for watching this video and I look forward to seeing you in the next one. Bye-bye for now!

NEXT UP ON THE BLOG

World Cup Award Ceremony

Interviews

Read More...

---

Robbins-PFGBEST World Cup Trading Championship Awards Presentation at CME Group

Interviews

Read More...

---

On forex markets - Dukascopy

Interviews

Read More...

---