The “Good Night” Gold Trade

11/18/2011 8:30 am EST

Focus: COMMODITIES

Hubert Senters

Founder, HubertSenters.com

Professional trader Hubert Senters explains the simple strategy he has been using to profit from trends in the gold market.

Trading gold has become a lot more popular these days with short-term traders, but there are a lot of different ways to do it. Our guest today is Hubert Senters of TradeTheMarkets.com to talk about the way he trades gold. 

So Hubert, you’ve come up with something that’s really worked well for you consistently.

Yes, it’s called the “Good Night” gold trade, and it’s working out really good right now. At some point in time it will obviously stop working, but it’s working out really good right now.

It’s a really easy trade, it’s simple to explain, but I get more questions on our service about this trade than any other because it is so simple. Here’s how it works. 

You’re going to take the 1:30 pm east coast COMEX close—not the close price, but the settlement on gold.  Once you have that information, which you can find on the CME Web site or your trading platform, then what you’re going to wait for is 11:30 at night, 11:30 pm east coast time. 

If gold is up more than three points but not at more than 20, you’re going to be long gold. You’re going to use a six-point stop loss, which is basically $600 per contract, and then you’re going to have decision points or targets out there at +20, +40, and +60.

Usually what I do is my target is just 60, or 60 points out there. Then I’m just deciding whether I’m going to keep it or cut it loose when it hits +20, +40, and +60.

Now did you stumble across or this or is there some backtesting you did as to the probabilities?

It was a total accident. We were teaching people how to trade the E-minis, and a lot of them were losing money trading the E-minis, while gold was just trending well. 

There are a couple different theories about trading. Do you want to be a rainmaker, like learn how to generate cash on demand, which is kind of hard, right? Or, do you want to figure out where it’s raining and go set up tarps and buckets? 

My theory is to figure out where it’s raining and go set up tarps and buckets. Right now, gold is trending really well in both directions. It goes up really good, and it goes down really good. 

So, all I’m doing is getting in front of the European session before it opens up. The reason the trade works so well is because I’m not messing with it; I’m in bed when it takes place. 

So, at 11:30 at night before I go to bed, if gold is up more than three, but not more than 15; if it’s up more than 15, I just go, “Well, sorry, it’s run too far. I’m just going to leave it alone.” 

I use a six-point stop loss and a 60-point target, and I’m in bed when it happens, so I can’t jump out of it too early. I either wake up and I have been stopped out, or I wake up and it’s running.

How often is it happening that it’s in that range that executes the trade?

If you take a snapshot of how many times I do this during the week, I would say I probably do it three times a week, on average. It only works about 30%-40% of the time.

It’s not one of these trade set-ups where you’re like, “Oh, it works 92% of the time,” but it doesn’t have to work more than 30% or 40% of the time because it only needs to either work one out of six times or one out of ten times, depending on what your target is. 

Have you tried it on the short side if it’s down between 3 and 20? 

Yeah, it works great both ways, upside or downside. So, at 11:30, if it’s down more than three and not down more than 15, you short it using a six-point stop loss and a 60-point target.

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