s&p500 and gold Risk ON/OFF Price action trading

Traditionally S&P500 and Gold form Inverse Correlation.


Lets take a look at what the term as "RISK ON/OFF" sentiment means to us:

Risk ON : Positive Global Macros,more QE from Fed/Other central bankers and Outcome positive henceforth Stock Markets,Oil,Bonds Soar North

Risk OFF : Negative Global Macros/War tensions/Fed Rate Hike ==> Stock Markets,Oil,Bonds Drop South (We are currently in Risk OFF environment with Oil(Brent/Crude) both falling apart below 30$/barrel and continuing to grind down




One other important thing to keep in mind during Risk OFF environments like now is that "Safe Heaven Currencies" like USD,Japenese Yen(JPY),Gold are in demand.

EUR USD is the funding currency meaning when global stock markets drop off including German 30 a.k.a DAX30 index topples , "EURO" gets natural demand owing to its funding currency status.

As the topic states, lets get to some real trading with S&P500(US500) and Gold(XAUUSD) . Most brokers do offer both these instruments to trade 24 x 5 now we need to be picky about choosing the right broker to trade them with lower margin requirements,spreads, no commission charged and lower swaps.

I will illustrate a very simple and profitable way to trade these instruments using only price action in subsequent threads as proof of concept .

scoobi Any chance of a 'past' example while we wait for a 'live' one

Reading from our past history here are the excerpts :

The US national debt in 1989 was about $2.8 Trillion. Twenty Five years later, in 2014, that debt had increased by a factor of about 6.3 to $17.8 Trillion.
For many decades the US piled on more debt, increased the currency in circulation much more rapidly than the economy grew, and of course, caused consumer prices to increase substantially. Naturally the S&P 500 Index increased, as did the price of gold, since each dollar was worth less.
Consider the graph of the SUM of the S&P 500 Index and the price of gold.



Debt increased, prices increased, and the dollar purchased less. Now consider the RATIO, as shown in this graph of gold divided by the S&P 500.




The ratio at the gold peak in 1980 was about 8. You can see that the ratio was trending downward from 1980 (graph shows since 1989) to about 2001. Subsequent to the stock market crash of 2000, 9-11, and the massive increase in spending and debt, the ratio now trends upward.
We know that the official national debt is increasing about a $Trillion per year.

Graph 1 shows that as debt increases, so does the sum of the S&P and gold. Graph 2 shows that gold increased relative to the S&P from about 2001 to 2011, and then fell. Gold is now deeply oversold compared to the S&P and ready to rally, unless you believe that the US national debt will start decreasing (not likely) or that the S&P will continue skyward for the foreseeable future (not likely).

Will gold reverse tomorrow, next week, next month, or next year? Good luck with that question! My guess is very soon, but the high-frequency-traders, central bankers, and politicians seem to be more influential than physical supply and demand.

Hi Scoobidoobi, I am in, and ready to learn.

dweb

Appreciate it dweb!, added a Trade explorer for exclusively trading sp500 and gold instruments .

Let me explain the trade setup:

account size : 5000usd

pairs : us500 (s&p500), xau usd and xau aud

target : 0.5% scalp per every basket set of orders closed

Trade strategy is to Initially open neutral (or) synthetic null position on all 3 pairs after which based on price action and pip distance it would trade in the direction of market till the target basket profit 0.5% scalp is booked off

Trade objective : Will trade this strategy on the above trade explorer for a month automatically with my EA's, profit potential about 50% or more in equity monthly estimated/sensed based on my research study.

Next month will be taking first 5 beta live testers with the same. Any comments/feedback/pros/cons welcome,..

thanks Scoobi

I like the theory behind this. Looks good, will be following.

us500 and gold caught in a range due to US Holiday today, we can expect some fireworks in Asian session when China GDP numbers are out which will attract traction in making decent moves in us500/gold that would lead to the trade explorer performing better as market gets much needed liquidity and momentum after St. Martin Luther King US Holiday

Gotta Love the broker with nice trading conditions as you can see lower spreads , lower margins , on GER30(DAX),US500(S&P) 1Lot (actual 0.1 lot) =1pip=1$

This trading system is working as intended out here, any other better brokers too for trading these instruments..??

Date:: 1/20/16
Session : Asian Trading Hours
Mode Detected : RISK OFF
Global Stock Markets Health : RED (negative )
Gold Health : Attracting bids above 1090 slowly (stronger $ index > 99 keeping gold in check)


As the trading system we use on stock indexes vs Gold is based on price action, as highlighted you can see its attracting short trades on US500/GER30(DAX) and long trades on Gold to enable us make some basket profits using the same as below...

I had mentioned in the trading strategy earlier on taking a neutral (or) synthetic null position initially then follow the price action using the pip distance...

Very good example on DAX (GER30) open trades explains the same :

Could be wrong but going by your Open trades it looks like you system is pure hedging. Works OK for ranging markets but not for trending.

it works for both mate s&p is trending now breaking last fridays low 1856. It booked few more nearing 20% in last 3-4days

Thanks for the support folks we are doing pretty good wit RiskOnOFF Strategy -> Right broker with good trading conditions doing the needful. We will be going live soon & I would only take live beta users from pepperstone not others as many requested.

Massive drop in EURO past ECB Conference and raise in DAX(GER30) which is inversely correlated with Euro (lower the Euro higher the DAX and vice versa)

Live account started off - Trade explorer added

pretty nice volatility in sp500,ger30 . Added oil too to take adv. of volatility atm

Great going folks! thanks to the first beta investor in trade explorer who is getting performance to match as our forward test earlier..

In addition to the trading system major contributor for the results is the broker where cfds,oil and gold trading consumes lower margin and no commission/swap over it.

https://www.myfxbook.com/members/sup...rading/1498416

What a carnage in xxxjpy pairs after BOJ Announcement to go with negative interest rates and in UJ from 118.50->121.41 and then diving down to 119.94 as I type its at 120.29