Award-winning investment & charting software for private investors


About Alan Ellman Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing.

In shorter term you can see the other side also and hence it is more of speculation. I would then ask my Gold analyst as well to say that Gold is going to go higher and higher so that every one also jumps upon the frenzy to buy Gold. Here's a guide to the characteristics to look for when buying your first shares. There is nothing to convince here, its just some graphs where you need to take your learnigns yourself!

Defining the Indicators

About Alan Ellman Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing.

First, the trend is bullish as defined by the cloud. Second, the stock pulls back with a move below the Base Line. Third, the stock turns back up with a move above the Conversion Line. There are also three criteria for a bearish signal. First, the trading bias is bearish when prices are below the highest line of the cloud. This means price is either below the cloud or has yet to break above cloud resistance.

Second, price moves above the Base Line to signal a bounce within a bigger downtrend. Third, a bearish signal triggers when prices reverse and move below the Conversion Line. Even though the stock declined from January until August , the trading bias shifted three times from January to June blue box.

Signals 1 and 2 resulted in whipsaws because the SNDK did not hold the cloud. The trading bias can change often for volatile stocks because the cloud is based on lagging indicators. A relatively strong trend is required to sustain a trading bias. Prices remain above the lower cloud line during a strong uptrend and below the upper cloud line during a strong downtrend. The trading bias shifted to bearish in early June and remained bearish as a strong decline unfolded.

There were two sell signals during this period. Signal 3 resulted in a whipsaw, but Signal 4 preceded a sharp decline. After a sharp reversal in August, the trading bias turned bullish with the upside breakout in September and remained bullish as the advance extended.

The first pullback produced a buy signal 5 with a dip below the Base Line red and subsequent move above the Conversion Line blue. Chartists can use volume to confirm signals, especially buy signals.

A buy signal with expanding volume would carry more weight than a buy signal on low volume. Expanding volume shows strong interest and this increases the chances of a sustainable advance. Chartists also need to consider a strategy for stops, which can be based on indicators or key levels on the actual price chart.

The low just before a buy signal would be logical for an initial stop-loss after a buy signal. The high just before a sell signal would be logical for an initial stop-loss after a sell signal.

Once the trade is underway and prices move in a favorable direction, chartists should consider a trailing stop to lock in profits. Some traders set stops two ATRs below current prices for long positions and two ATRs above current prices on short positions. This Ichimoku Cloud system provides chartists with a means to identify a trading bias, identify corrections and time turning points.

The cloud sets the overall tone and provides a longer perspective on the price trend. The Conversion Line blue is a relatively short-term indicator designed to catch turns early. Catching the turn early will improve the risk-reward ratio for trades. Keep in mind that this article is designed as a starting point for trading system development.

HOw many strong souls are there which can see their MF go from to and stay put?? Gold has had one way … UP!!! Not a single down year in last 15 years. Since I have spend 2 years doing MBA with excel sheets where i fancily project cash flows of companies whose names I did not know 2 months back for next 10 years hence I will keep doing that. When looking at a straight up gold growth in RUPEE terms you said -Well why do not you look dollar terms returns and you know they are bad , it goes up and down.

Guess what its a meagre 8. So much so for spectacular growth of Indian equities. Gold is money and it has been same for thousands of years. As you can see govt cannot print gold as Indian govt has done over last 30 years. What does that mean?? It means that Indian govt has printed so much of currency that its losing its value greatly.

So how to protect yourself from that loss in value?? Have gold physical gold. Better discuss it on our forum: The question is more of discussion type and it needs more than one person inputs , hence I suggested forum. Hi Manish, I think this article would very well complement with your gold price movements articles https: I have tried to explain the reason behind the gold price movements and the possible way forward. My inspiration was one of the seminars held by a leading Investment bank where Head of Gold Trading of the biggest Investment Bank expressed his bullish views on Gold.

Gold took 51 years to move from to Year to Year where as Sensex took 31 years Year to Year to move from to It doesnt mean gold have given half the return given by Sensex. The compounding effect can be much more. I had a query.

Is it a good idea to go for Existing Gold Loan and buy more Gold for a 2 years span and sell it after 2 years to repay the loan amount? Before looking at an investment in gold one should definitely look at this article by Warren Buffet https: Also one of the major co-relation of Gold is with currency which many of us might miss. Gold may be a small part of the portfolio but dont consider it to be something which will provide consistent returns. The case will be very very different if the Rupee was gaining against dollar high probability over the next 25 year.

Ichimoku Trading system is little popular among my readers for low risk trading. Its a strategic tool rather than a forecasting tool. After a long time Gold had closed above the cloud on weekly charts. And Ichimoku is mainly used for High Probability trading. Gold Historical Weekly Charts had turned to buy mode this week. And my ichimoku charts double confirms it. Thats good to hear..

And what is the time frame for this buy call? It is short term like few weeks or longer. Your comparison for last 86 years though nice but doesnt looks decisive to me because this feeling of safety regarding gold has risen tremendously since last years and is still increasing.

Also Long term trend analysis is useful only if factors affecting same are constant, while in case of Gold we have seem paradigm changes in factors affecting gold. I agree to your points.. The article never concluded anything. Really appreciate your great efforts towards coming out with such wonderful graphs and data. But after seeing above data….. Special Thanks to Manish… Wats your views on the same…..?????? Hi Manish, I think you have provided a very valuable insight upon the movement of gold prices in past decades.

I think the primary reason behind the consistent movement in the gold prices has been a very limited stock of GOLD commodity on planet earth. To give it a perspective, the total global production for Iron in alone has been around 2,,, tonne around times more than gold.

The wealthier we all are becoming these days, the more will be the demand for Gold and hence it would push up the prices. Adding fuel to the fire is high liquidity in the hands of Investment Banks all across the world.

Probably if I have free unlimited source of money, I shall continously buy Gold in large quantity blaming uncertainity around the globe — this would push up the gold prices. I would then ask my Gold analyst as well to say that Gold is going to go higher and higher so that every one also jumps upon the frenzy to buy Gold.

AND when the time is right, I shall slowly start exiting Gold and make a killing — this would be slump of Gold for a couple of years atleast. Hence, though bullish on gold from a long term perspective, I tend to be a bit cautious as well considering what is happening in the global markets. I am not a great follower of gold and I believe in taking the profits out.. Take your own decisions. Gold is the safest bet and can be purchased at current level k for 22k gold.

Manish there is a very interesting point to note over here which I think not many people including you have noticed. GOLD in was and in was 26, roughly 26 times. Yea i didnt look at that point , but its very known fact that over long term gold would have delivered just inflation linked return where as equity has given far better return.

A considerable amount of research and data collection would have gone into computing the above figures and graphs. Personally, I have never been interested in gold. After looking at the figures you have provided, my guess is that gold prices will drop during and It is only a guess.

Thanks for your appreciation.. Great article as usual Manish …. Napoleon III, Emperor of France, is reputed to have given a banquet where the most honoured guests were given aluminium utensils, while the others made do with gold. I fear if that happens to Gold, where will all the investors specially nations fall to? Gold is a rare metal that glitters, value is based on rarity mostly, not much on purification.

Aluminium is not rare. Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also. Hi Manish, Thanks for your good info. Since I am regularly purchasing 1 gm gold in physical mode on each month. There are no lapses. Can I conti this for another 10 years? I have kept record of my all purchase. I dont want Gold in paper form. I understand that Gold retains its purchasing power over a long period of time. This means that real, inflation adjusted, returns from Gold would be close to zero over a long period of time.

Your data looks like it is confirming this theory. This also means that Gold should not be viewed as investment something which gives good real return over a long period of time but should be viewed as insurance something which protects its purchasing power over a long period of time. Think of a country like Zimbabwe where inflaion was beyond control or a country like Pakistan where inflation is very high double digits since long time or a country like Libya which is in chaos and there is no sanctity of local currency.

In times like this, Gold shines. If you think India can never be like Zimbabwe, I wish you good luck. Please remember, this Rs.

This will only lead to spiral of money printing and high inflation over the years. Basically what I mean to say is this — in all financial planning, normally all focus is on domestic assets denominated in rupee.

No one thinks of scenario of what if currency goes for a toss like Zimbabwe or Soviet union? I do not think financial planning is complete without safeguarding purchasing power of your networth against rackless political schemes. Yea i agree to your points , where did I say that India can not go Zimbabwe way? I agree to what you say..

As I said, I consider Gold as an insurance for networth against unforseen kind of events, Black Swans so to speak. In another words, Gold is similar to networth as life insurance is to death. These events, be it huper-inflation or India — Pakistan war or rapid rupee depreciation etc will always have very low probabilities in near future, just like my death is.

How companies apparently with good prospect are NOT really good and you stay away from them — https: Here is some data for last 15 years on returns of gold , equity from morgan stanley https: But that is not just about a 0.

Gold Volatility has been Some intelligent soul will say well you should have bought then. Oh yes had investing been so easy that people would have picked up sensex at in then most would have become warren buffet or on way to become him. How many actually buy low and sell high?? Gold on the other hand almost always keeps going up slowly n surely. MBA guys will say volatility as a measure or risk which is crap. Risk is permanent loss of capital over a extended time period of time.

Gold has never done that. Equities do it so frequently that I better not go into that. And if someone is soo controlled that no matter what happens he will only invest in SENSEX and not use his brain n easy earned money to start picking up stocks then of course he will make money more than gold. And most purchases in bull market by normal people occur on these very stocks.

But this is never case with gold. I bet less tha. The point I am trying to drill down is this — so many guys are ready to fool you read corporates , brokers to give them the money because thats where their incentives lie. They wont get their bonus if they dont make you buy sell securities.

Look at how MF sales have nose dived because commission has been reduced. Simple they were selling coz they will get commissions. If they sell you gold they wont. Hence every single guy worth his MBA and excel sheet mentality will say here is next 10 yrs of cash flow of xyz company with value this and buy stock. How many of guys writing posts here bought more in early than sell??? Most people do NOT understand that gold is a way to protect yourself from Govt printing of money.

If you look at the above returns you see a 0. For all those guys who are jumping because some one said equities give fantastic inflation adjusted returns have a look at this — https: If you are good enough to enter in and exit in please send your resume to buffett. He is looking for investment managers. You say gold as a insurance???

How many of you guys slept soundly in September -August ??? Unitech halved in less than 2 weeks. Did you held on to the 2nd largest real estate player??? Put all your money in picking up those stocks …n best of luck. There is nothing to convince here, its just some graphs where you need to take your learnigns yourself!

Without inflation data at hand, it looks like Gold has indeed kept pace with inflation in these 86 years. What a mind-boggling article! It reminds me of the quotes: Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital. I like the individual case. A man may have six meals one day and none the next, making an average of three meals per day, but that is not a good way to live.

Brandeis I am confused as to a which base year should we take? Happy with gold in physical form. So how much you get it dependent on timing.. Do you suggest investing in gold 1gm per month as i have been doing it since I purchase hard gold. Planning to carry on for a long term investing this way. No harm in investing in gold , it will keep your money diversified..

The volatility in gold prices also one of the things you will have to live with. It would have been better if analysis have done based on dollar terms than indian rupees. In ,after sharp spike,Gold prices in international markets were nearly halved afterwords which do not reflctet here. One query,prices shown in first table are average for that year or picked for a particular date? Sorry if you have already mentioned it and I do not catch it. Thanks for giving the detailed graphic explanation.

We can see from the grapf that sinces till date the prices are rised steadily up to but afterwords increased considerably. Why this has happened is it due to depriciation of Rupee or otherwise. It depends on so many things.. My conclusion is that gold never give you long term return on your investment more than inflation rate. Manish, why dont you comper the return of gold against inflation so that it will give us clear picture of our investment in gold. I have no idea where to find the inflation data for very long term..

Any idea where can we find it? Indeed the article was great. For the inflation data, you can have a look at https: Have a look at this link, https: Very nice information you have shared.

In shorter term you can see the other side also and hence it is more of speculation. The problem is that seeing the short term performance, investor starts considering it for long term holding. The asset is good when you buy it for the real consumption but should not be looked as an investment product for higher returns.

Agree with your points.. Over a long term one should not expect a lot of REAL return from gold as investments. Yes you done well. Thanks for the articles. Yea but those kind of jumps keep happening , and you cant really take them as basis for decision like selling..

I appreciate your efforts in doing a thorough analysis of the gold prices over the decades. I need your expert advise whether is this the right time to buy gold??

I cant advice on that.. Dear Manish, This is amazing!! So much of gold movement data is a wonderful treasure for a person who is really interested in investing gold. Once again thank you for all your information. Dear Manish, I very happy to get these article for gold. So, you can give any advice for it. My conclusion is this: But the current mindset is to always sell equity first and keep the gold for generations — till you are great grandparents.

In other words, try to cultivate some love for your well performing funds, just like gold. Hi Manish, A very nice article as usual. You seem to have done a lot of homework for this. I think, the charts only suggest one thing, there is still some steam left in Gold at the current levels. I am bullish on gold. It depends on the commentator and in what context its written , If you are looking at it purely from return point of view, truely speaking no one can predict it. Subscribe for emails updates and get instant access to a free ebook.

Jagoinvestor is one of the most trusted personal finance websites which writes on various topics like financial planning, mutual funds, insurance and banking.