Quiet Gold ATR = Buy? (GLD, SLV, USD) 12.4.2012

ATR is simply the average range of a product over a specified period. We chose 21 periods, or trading days, for 21 is a decently long period that smoothes out random volatility, but still captures trends, and is a Fibonacci number. Bottom line however, the ATR denominator is discretionary.

The data below buys gold futures when the ATR closes below $20 for a few consecutive periods and closes the trade when it crosses $20 to the upside. Of the observations outlined below, the average return was 10.6% trading this indicator. When gold is not experiencing volatility, either way, the story fades into the media darkness. This is because not that many people are trading it or watching it, thus lower ratings if media outlets run a story about it…for who wants to ear about a financial product that is not moving in today’s fast action, short term, and hot money trading financial world…nobody. More range indicates more participants and therefore more opinions of fair value…hence the increase in average true range.

 

01

 

00

 

“Buying gold is just buying a put against the idiocy of the political cycle. It’s that simple!” – Kyle Bass

Feel free to e-mail any comments, feedback, suggestions, or general inquiries to…

Author

mark@keeneonthemarket.com