At some point of our trading, I guess everyone will experience unpredictable price movements. Times, when we really expect the XAUUSD price to go down, but it goes up. Also after great news for the USD, the Gold price spikes to the moon - just like it happened last Friday 4th April after the NFP news.
Some gurus call it manipulation. I would call it a game, where all participants can influence the outcome to some extend. There is no "correct" price.
But: There is a equilibrium price!
You might ask now, "what the heck is the equilibrium price?"
Let's have a look at a similar and very old money game in another domain:
Imagine that is you. 😁 And there is no way for you to NOT to sell newspaper. Your kids and your wife rely on you, the money and the food you provide from selling the newspaper. So it is a serious stuff.
One day, you invent the
Newspaper-pump-strategy
You find 10 friends, borrow some money from the bank for 2 hours.
Then, you lend this money to your friends.
Now, the pump begins: It's 7:30 AM in the morning. You and your friends are ready and await the flood of people rushing to work. Like they do every day.
When the street gets crowded, your friends scream and shout and everyone wants to buy your newspaper. They even give you REAL MONEY and everyone pays a few cents more just to get the newspaper. Because you shout "GUYS; NOT SO FAST. I DON'T HAVE SO MANY PAPERS LEFT. EVERYONE GETS ONLY ONE!" 😎
Now, every of the normal people rushes at your newspaper stand and buys the newspaper. You sell them all. And you sell them at a higher price.
What now? Yes. Your actor friends come all back, give you the newspaper back and you return the borrowed money to the bank. You split the profits with your friends. 💵
Done! Your kids and your wife love you! 🏝️
What happens with the newspaper price? Yeah - it goes back down.
Are there similar situations on the market? OH YES!
How can we recognize the market pumps?
Good question. Let us think little bit about the simplified newspaper case. How does it look like? There are two very, very important characteristics:
The newspaper price usually rises only at ONE stand. Other newspaper sellers are not affected. On global markets, this is however difficult to spot. Because we, as retail traders use data streams fused by many liquidity providers before they are "published". So if someone is able to see that, these are the market makers with expensive live data connections to several exchanges.
It is only ONE type of newspaper, which is pumped. Other newspapers sell at regular price. Of course, it might be that all other newspaper editors just missed the hot news, but this is very unlikely.
Discover Market Pumps
Let's simply compare the rate of change of the Gold price and the USD index price.
I built a cool TradingView indicator. Here is how it looks like:
The chart shows XAUUSD on 5M time frame with the "Fake Pump Indicator" on the bottom. When it spikes above the red line, that means that the Gold price moved "TOO FAST" upwards and is expected to return.
So we place a SHORT with the target of $1 (given the Gold price at $2297).
If you use the same indicator on higher time frames, than it rather indicates the start of bull run!
Installing Fake Pump Indicator in TradingView
You simply can click on "Indicators" and search for "fake pump indicator". The indicator above will jump right at you. 😎
If that didn't work for you for any reason, just let me know. I will help you out.
Shooting at the Pumps
Imagine, every time there is a potential reverting pump, you can click a button and forget the rest. Sometimes the price does not revert immediately. But your magic button cares about it and drives your trade to profit. Even if your entry was crappy.
That button is called THE EXECUTOR BUTTON. It is an extension of the BFG9000 EA.
The Executor-Triggers work very well most of the time. And I found it works best when combined with the Fake-Pump-Indicator. Will you love this combo just like I do? 🙂
