Trading strategy: The Friday Gold Rush

Description

This strategy, used by fund manager Andre Stagge, stands out due to its simplicity: buy gold every Thursday evening and keep the position 24 hours. On Friday evening the position is sold. As an alternative it is also possible to close the position Monday morning. The results are fairly similar in both cases. The strategy does not use a profit target or a stop loss.

The strategy in detail

The strategy is simple and needs no further explanation. The question is why this strategy works?

Gold serves two purposes. Gold is processed in the jewellery industry. Firms in this industry do not stock a lot of raw material. They tend to buy their raw material –gold- on Friday for delivery during the weekend or Monday morning. Their production units have sufficient gold to work during the week, thereby avoiding expensive weekend work. Gold also serves as a “safe haven” for many investors. It is an ‘insurance’ against a crash or other difficult to calculate risks during the weekend. These investors also buy gold to keep over the weekend. Both these factors contribute to the fact that on Fridays many parties buy gold. Buying gold on Friday is therefore statistically interesting.

Also interesting is the comparison between applying the Friday Gold Rush strategy and just buying and holding gold. The Friday Gold Rush strategy clearly outperforms the buy and hold strategy, particularly in the weak gold market since 2012.

When to open a position?

A position is bought at the market price some time Thursday evening.

When to close a position?

The position is closed at the market price some time Friday evening.

Conclusion

The key points of the Friday Gold Rush strategy are:

• Easy to understand, easy to implement.
• High liquidity, particularly in the gold futures.
• Good performance since the year 2000.
• Good performance in a bearish gold market (2012-?).
• Break-even performance in a sideways market (1990-2000).
• No stop loss. Easily solved. Put in an emergency stop loss.*
• Entry and exit time are not defined.**
• The strategy appears also very reliable for other commodities.

* In the strategy an emergency stop of 50 points has been added. Users can change the distance of the stop.
** For automated trading the open and close times have both been set to 22h00 in the strategy. Users can change these hours.
As usual both these changes can be done in the DesignerDialog.

Practical implementation

Using the NanoTrader Full follow these steps:

• Select the financial instrument you wish to trade and open the chart.
  

• Select the template study "WHS Friday Gold Rush" in the "WHS Strategies" folder.

• If necessary, adapt the settings as described above.

• If you want to trade semi-automatically, activate TradeGuard+AutoOrder in the chart. If you want to trade automatically, activate AutoOrder in the chart.