Gold. Aye, aye, mate. Gold. What is it, and why for centuries have people killed for it? Well, it’s a transferable asset, so in contrary to say a country’s currency, the exchange rate between foreign currencies may not be favorable, and well in some instances, virtually worthless in certain regions. That’s why gold has always been viewed as a safe haven for investors, traders, and those looking to mitigate risk during uncertain times.
Well, guess what? We’re in some very uncertain times right now, and that’s why I wanted to talk to you about gold futures and the benefit that it provides any day trader like me to pursue opportunities. Okay. Let’s dive into the charts because I’m going to give you some statistics, a little bit more about leverage and how it works to pursue opportunities in gold futures. Look over my shoulder.
Okay, I’ve got on my chart here a continuous contract of gold futures. I happen to have a day trade timeframe, which for me oftentimes will be in this 10 minute time horizon. This is actually a chart from earlier today where I found a nice opportunity to get long. Now remember, getting long means you buy a futures contract, similar to like buying a stock. If the price goes up, or in this case the value of gold goes up, you’re going to be profitable in the futures contract. Now there’s one big difference about buying cash gold, bullion or bricks, in futures market, you’re never taking physical possession as a speculator, okay? You’re simply trading contracts. Okay.
Here’s how it works: a gold futures contract, as you see in the upper left of my screen currently, is at a six year high. It’s at $1,552 and 10 cents. The contract itself is worth 100 ounces of gold. Wow. That’s controlling $155,000 asset for just a fraction.
How much do you need to have in an account? Well, at the time of this recording, which of course is subject to change and set by the exchange, and brokerages can add margin as well. Currently it’s just under $5,000 for what’s called the initial margin requirement. That’s the minimum amount you’d need to have in an account. But if you’re a day trader and your firm offers day trade margins, it’s even less. At the time of this recording, most firms are offering day trade margin if you speculate on gold and you’re flat or exit your position by the end of the day, somewhere between 1,520 and $2500.
Well, let’s do the math. Let’s see, the asset is worth $155,000 that you’re controlling with your position, but you only need as little as $1,500. That’s right. It’s like a hundred to one leverage. You don’t need to put $155,000 into a futures account. You just need to have, again, about $5,000 or day trade, 1500 to $2,500. Again, keep in mind subject to change based on volatility and as set by the futures exchange that it’s hosted on.
Okay, so let’s take a look at a chart here. Okay, because I want to make this … bring this into the technical perspective. This is a 10 minute time horizon, and these are some analytics that I use, but we’re not going to focus on that in this video. I want you to focus on how the math works, okay? Today we were looking at this market breaking above some key zones here. We identified that in the short term as a day trader, the market was likely to head higher; and it did just that. You could see the market went up, up, up, up.
I’m to identify a zone down here. The place actually where I ended up buying this was 1545, 10 which is right about there. We had already started this bullish intraday trend. We scored a long entry at 15. I’m going to type it here as best I can. 15, 45, 10. Okay, there we go. Okay. Pardon my chicken scratches. Okay. Market continue to rally higher on this one, and actually with a very short lived amount of time in the chart, the market rally $2 and in just a handful of minutes, I was able to make guess how much? $200 per contract.
Well, how does that work? Okay, well, here’s how it works. Since the futures contracts for gold are leveraged contracts, a relatively smaller move in the market equals a higher return, but it works both ways. You have to manage risks. For every full dollar move, again, this is $1,552 and 50 cents. You can see it moving right now. Each dime move, which is the minimum tick fluctuation is worth $10 so a full dollar move from 15 52 and a half as you see here now, and it keeps moving to 15 53 and a half would be $100, so that’s right. A $10 move, just a $10 move in gold, which in today’s markets we’re seeing 10, 20, and even $30 moves would be worth one thousand, two thousand, three thousand dollars. That’s right. Isn’t that amazing? Again, that’s the power of leverage.
Okay, so let’s take a look … let’s take a look back at not only today’s session. This move ended up being so far today about a $10 move higher. If you were to kind of just run some simple math, there’s about a thousand dollars worth of opportunity there. Now, I’m not going to say you’re going to buy the low and sell the high. That is unrealistic expectations, but even making a little snippet in the middle as we did earlier today in the futures trading room for a couple hundred dollars for a few moments in the market is a tremendous opportunity.
But what about big picture? What if you have a perspective and you have really uncertain perspective on what’s going to happen in the world around us? Remember gold will rally the value of this safe haven tangible transferable asset will rally when stock markets are getting beat up, when global uncertainty and unrest is at its peak. Okay, so it ends up being a nice little speculative hedge against uncertain times.
Take a look over here on the far right. This is actually an equivalent 10 minute chart of the S&P 500 this is the mini contract. Look, as the market is selling off, you can see this is a $20 sell off in the S&P. Okay, down right there, and look what’s happening in gold. Again, proof positive that you don’t need to be feeling like you’re left to the mercy of the market from day to day if you take control and add perhaps a speculative futures account to your overall investment strategy, okay?
Let’s take a look at a little bigger picture. Say this is day trading, but let’s go out to a daily time horizon s you can really start to see how this market made its pilgrimage higher over the last six years. This is a daily timeframe. This actually goes back to just earlier this spring here. Look at what we see. The market rally and continuing to rally. Down here, the market was back around $1,300 where I’ve circled here and again, we’re $250 higher. What does that mean? That’s a $25,000 move. If you again have the discipline, you have the patience to initiate a long position back in this time; and this breakout here was the end of may and you still were in that position. That is a buy and hold. That’s a longterm hold in futures, by the way. A $25,000 move. It requires the right strategy, it requires the right discipline and patience, but let’s go back even further. Let’s go take a look at monthly time horizon.
Okay, I’m going to go live zoom way back here so you can start to see historically, I’m going way back. Look at, this is way back in 2000. Holy cow. I was just getting into the business actually right about here, 2001. This is where I started to really concentrate my efforts as a professional inside the trading industry, 2001. Look at this. Look where the market was way back then. This is actually a walk down memory lane for me. The market for gold down here was under $300 an ounce. That’s right. It’s over 1500 now. Same rules apply back then as they do now.
Now look what happens. Market ran up, up, up, up, up, and look where we peaked out. For those of you that are wondering, August of 2011, you can see that right here and September 2011. Look at where the market rallied up to almost $2,000 an ounce, so anything is possible. As I zoom out a little bit here. Again, here’s that rally that we started to see over the last six years coming back here. Boom, boom, boom, boom. Right here, look at the pilgrimage we’ve started to make already. Okay, look at the the technical breaks we’re making. This is all, again from a technical standpoint as well.
Now gold is one of these markets that you have to continue to be aware also of your fundamentals. Things like announcements from the Fed on interest rates, global trade policy, even weather has the ability to impact gold. Uncertain times equals price appreciation in gold, but you still can trade it technically on virtually any time horizon from just a few minutes in the market to, you can see, multi-month, multi year strategies. Isn’t that exciting?
Well, I hope this sparks your interest in learning more about trading gold futures, and guess what? Let me show you a little peek inside today’s activity in gold. Okay, I’m bringing this down. Look here symbol GCZ9. You can see on this particular day, $1,260; nice little trade for a speculative opportunity in gold just for a few minutes in the market. You can see in this chart here, some other markets that I tried today, Canadian dollar, light sweet crude was a good market over 2200. You can see I took a little bit on the chin in that S&P market today. That’s the eMini.
Again, just wanted to show you some tangibles, kind of how it works to be a day trader, the benefits of it, and guess what? There’s no better place than right here at Warrior Trading to start taking advantage of it, learning about gold and other markets like energies, grains, and other precious metals as well.
Well, there you have it. You now know a little bit more about gold futures and the opportunity it provides. I invite you to come out over to WarriorTrading.com. Think about joining our chat room and start the learning here today. So long everybody in until then, trade well.
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