[101 Trading Ideas] Gold and Fear #gold #101tradingideas

This strategy is another example of using 101 Trading Ideas to find alpha – this strategy is based on an idea triggered by ‘Trade Fear’. This is the third gold strategy (of four) in the book. Strategy ideas that have been automated are listed here.

101 Trading Ideas:

#23 Trade Fear

Triggered Idea:

What is the relationship between gold and fear?

From Triggered Idea to Trading Strategy:

This strategy uses the 30-year bond as a proxy for fear. If the 30-year bond has been moving in a longer timeframe and gold diverges from that movement, gold should reverse and match the overall risk-on–risk-off environment signaled by the 30-year bond.

Anchoring the 30-year bond to last week was a way to make the lookback more dynamic.

Long Rules:

the close of gold is lower than the close of gold yesterday, and

the close of bonds are higher than the close of bonds last Friday,

then buy gold

Short Rules:

Opposite long rules


After 3 daysGold Illustration 3

Results (2007-p)

trades: 703

w/l: 58%,  410/703

avg trade: 2.50 pts

z: 2.86

profitable 9 of 10 years

Notes and Next Steps:

Test the same dynamic lookback in gold that was used in the 30-year bond. The trading rule would look like this: close of gold > last Friday’s close.

Test the exit strategy with a first or second profitable close.

Test the magnitude of the moves for both gold and the 30-year bond to determine how they affect the exit strategy.

A rough draft, alpha hunt idea. Not a complete strategy.

There is risk in trading. Most strategies degrade when moving from in-sample backtests to out-of-sample live markets. Be careful.

101 Trading Ideas:

This strategy idea was triggered by 101 Trading Ideas, A Magical List for Fast-Paced Alpha Hunting. It turns out that ideas are like the old-fashioned game of telephone – when the List says one thing, you hear a more personal, interesting trading idea. As you scan the List while thinking of the markets, when you pause, when you find yourself thinking “What if…” that is your idea! Try it, test it, find your alpha. It’s as easy as Scan, Pause, Idea, Scan, Pause, Idea. Using the List in 101 Trading Ideas, will help you create trading ideas, too!

More info on the book here. The book is available on Amazon in print and for Kindle.

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