Short Trade Idea for Micro Gold Futures (MGC) – January 16, 2025
Trade Setup:
This short trade idea on Micro Gold Futures (MGC), curently trading at apx $2740 anticipates a reversal in the range of $2,748-$2,760, a key psychological resistance area, with a total of 30 contracts distributed across three scaling sell orders. The trade features a high reward-to-risk ratio of 6.20 and focuses on precise execution and profit-taking levels.
Short Trade Plan Details:
| Sell Order | Price | Number of Contracts | Percent of Budget | Weighted Entry Price | Stop Loss |
|---|---|---|---|---|---|
| 1 | $2,748.60 | 5 | 16.67% | $2,748.60 | No stop |
| 2 | $2,753.30 | 10 | 33.33% | $2,751.73 | No stop |
| 3 | $2,760.70 | 15 | 50.00% | $2,756.22 | $2,763.11 |
Trade Highlights:
- Weighted Average Entry Price: $2,756.22
- Stop Loss (Full Position): $2,763.11 (+0.3%)
- Take Profit: $2,713.50 (-1.6%)
- Reward-to-Risk Ratio: 6.20
The total position size is apx. $8,2680, assuming all three sell orders are filled. Adjust the position size and contract quantities based on your personal risk tolerance.
Profit or Loss Calculation:
| Scenario | Price Move (USD) | Per Contract (USD) | Total Position (USD) |
|---|---|---|---|
| Stop Loss ($2,763.11) | +$6.89 | -$68.91 | -$2,067.16 |
| Take Profit ($2,713.50) | -$42.72 | +$427.21 | +$12,816.41 |
Rationale for the Trade:
Resistance Levels Near $2,750:
- $2,754.20 aligns with the value area high of November 7th and represents a strong resistance level.
- Profit-taking by long traders from previous rallies (December 19th, December 31st, and January 15th lows) is expected near this level, increasing selling pressure.
Psychological Round Numbers:
- Gold prices often reverse near psychological milestones like $2,750, where market activity spikes.
Reward-to-Risk Opportunity:
- The tight stop at $2,763.11 limits potential losses, while the downside target at $2,713.50 offers substantial profit potential.
- Further downside targets beyond $2,713.50 include $2,668 and $2,650 for traders leaving a runner position.
Execution and Considerations:
- Scaling In: Enter the short position gradually using the three sell orders to achieve the weighted average entry price of $2,756.22.
- Exit Strategy: Take profit on 80% of the position (24 contracts) at $2,713.50, leaving 6 contracts as a swing short for potential further downside.
- Market Monitoring: Watch for price action and rejection signals near key resistance levels like $2,754.20 and today’s VWAP at $2,729.70.
Final Thoughts on My Gold Trade Idea:
This short trade idea on Micro Gold Futures targets a reversal from $2,750 while providing a high reward-to-risk setup. With scaling entries, precise stops, and realistic profit targets, the trade is structured for disciplined risk management and potential strong returns.
Disclaimer: This trade idea is for educational purposes only. Not all orders might be filled. Trade at your own risk, adjust position sizes to your discretion, and ensure proper risk management. Visit ForexLive.com for additional views.
