eCBOT Gold
Goldenberg, Hehmeyer & Co.
Contract Specifications
Mini Gold
Contract Size

33.2 fine troy oz.
Deliverable Grades

33.2 fine troy ounces of gold, no less
than 0.995 fine contained in no more
than one bar. Variations in the quantity
of the delivery unit shall not be in
excess of 10% of 33.2 fine troy
ounces.
Tick Size

10 cent/fine troy ounce (or $3.32 per
contract).
Price Quote

Dollars and cents/fine troy ounce.

$10 a box
Contract Months

Jan, Feb, Mar, Apr, May, Jun, Jul, Aug,
Sep, Oct, Nov, Dec
Last Trading Day

The business day immediately
preceding the last two business days
of the contract month.
Last Delivery Day

The last business day of the delivery
month.
Contract Specifications (cont.)
Ticker Symbols

YG
Daily Price Limit

NA
Margins




As of 06/26/06
Maintenance

$830
Initial Margin Mark up %

135%
Initial Margin

$1,121
Trading Hours
6:16pm – 4:00pm CDT
Gold is a Trader’s Product

Gold is a trader's product as
opposed to a hedgers product.
To define what a trader's product
is, simply divide the average
daily volume by the monthly
open interest. The quotient is a
turn over ratio.
Mini Gold
Big Gold
1.2
1
0.8


The turn over ratio defines a
trader's product from a hedger's
product. Gold’s turn over ratio
was 0.395 in May, which means
it's turning over its open interest
3 time a day.
That's a trader's product!
0.6
0.4
0.2
0
Jan
Feb
Mar
Apr
May
Volume
Average Daily Volume
41,008
45,000
40,000
35,000
30,000
23,159
25,000
20,000
Mini Gold
10,000
14,581
13,469
12,836
6,419
5,161
5,070
Jan
Feb
Mar
15,000
16,090
8,771
5,000
0
Apr
May
Big Gold
Open Interest
Open Interest
25,000
19,941
18,196
20,000
15,000
13,826
13,604
12,133
Mini Gold
Big Gold
10,000
4,938
4,601
Jan
Feb
5,000
5,416
6,359
3,870
0
Mar
Apr
May
Trading



When trading any new contract, that begins to
gain interest, fundamental’s are pretty much out
the window intra-day
eCBOT mini-gold rarely trades fundamentals.
That will change someday, but for now, I’m using
technical indicators to guide me through the
trading day.
The following slides are some of the technical
indicators I use during the trading day.
4 Questions
I always answer 4 questions, entering a trade:
 Why am I getting in? (signal)
 Where am I getting in? (entry)
 Where’s my profit target?
 Where’s my stop loss?
The 30 min chart (cont.)



I will use candlesticks as a trend identification tool. For
example, if the candle signal is bullish, I feel confident
when I get long.
I also use an RSI for overbought oversold signals. I wait
for the RSI to reach 75/25, then, turn higher/lower on the
close of the bar. When that happens, I buy/sell at the
open of the next bar, using the ATR off of a 5 min chart
as my stop (more on the ATR later).
Answer Question #1


Why am I getting into the market?
The candlestick pattern is bearish and the RSI closed over 75
then closed below 75. Both are bearish signals.
The 30 min chart is my entry chart
The 30 min chart (cont.)

Answer Question #2


Where am I getting in?
The next bar on the open (592.60)
The 30 min chart (cont.)
The 30 min chart (cont.)

Answer Question #3





Where’s my profit target?
Wish I could tell you something fancy but it’s a nobrainer.
Every trader will get out where they can tolerate
getting out.
I felt good about the trade because S&Ps were
struggling as was the EURUSD.
So, I was looking for a $1 profit. Maybe more if I
could tolerate it.
The 30 min chart (cont.)



What do I mean “I felt good about the trade
because S&Ps were struggling and so was
the EURUSD”?
Correlation is the best indicator a trader can
find. We are always looking for correlation
between commodities, indexes, currencies
etc.
Gold is following the emini S&Ps and
EURUSD.
eCBOT emini Gold vs. emini S&Ps
eCBOT emini Gold vs. EURUSD
And…Gold vs. Silver
The 30 min chart (cont.)

Answer Question #4




Where’s my stop?
I use the Average True Range (ATR) from a 5 min
chart. I set the ATR to 10.
The ATR is a volatility indicator that’s common in
most charting packages. If ATR isn’t available I’ll
use a plain volatility indicator, also set at 10.
The ATR was at .90 at the time of the trade
(cont).
The 30 min chart (cont.)


This means that the average true range over
the last 10 trading bars (35 min) was 90
cents.
My entry price was 592.60.


Entry Price + ATR = Stop loss price
592.60 - .90 = 593.50
The 30 min chart (cont.)
Put it all together
 So what really happened with the trade?




Sold at 592.50 (but kept my stop at 592.60)
Bought at 591.70 (couldn’t tolerate it!)
Profit = .80
.80*$10 = $80
The 30 min chart; another trade



Do I take all the RSI signals?
No.
The following page shows why.
The 30 min chart (cont.)
I didn’t take this trade. By the time we closed the RSI higher, after it had moved below the oversold line of 25, we
had rallied $3 off the lows. Therefore, I concluded the trade was over.
Chart Patterns in Gold
Pennant Bullish signal . Let’s look at what happened on the next slide.
Chart Patterns in Gold (cont.)
The trade was to enter on the next bar’s open. However, we all know that sometimes it doesn’t work that nicely.
Chart Patterns in Gold (cont.)






Maybe you entered 2 bars prior to the break-out bar rather than the
10:15 bar.
Your stop still would have kept you in the game. At the time the ATR
on the 5 min was 1.20ish
So, if you entered on the 9:45 bar at the open you’d have bought
579.10 worst case.
Your stop was 579.00 – 1.20 = 577.80
The low of that bar was 587.10.
Sure, you’d of sweated, but that’s trading.