Example
01/05/2007: Gold Down 2.45%, U.S. Dollar Index Up 0.22%. Difference = 2.22%
It looks like gold has overdone it compared to the U.S. Dollar Index movement, so we expect gold to drop tomorrow to close the gap.

Results:

01/05/2007
Gold Down 2.45%, U.S. Dollar Up 0.22%,
Expectation: Gold Up Tomorrow
What Happened = Gold Up 0.55% (Profit)
Running Profit = 0.55%

01/12/2007
Gold Up 2.39%, U.S. Dollar Down 0.30%,
Expectation: Gold Down Tomorrow
What Happened = Gold Down 0.32% (Profit)
Running Profit = 0.87%

01/23/2007
Gold Up 2.29%, U.S. Dollar Down 0.11%,
Expectation: Gold Down Tomorrow
What Happened = Gold Up 0.20% (Loss)
Running Profit = 0.67%

02/21/2007
Gold Up 3.04%, U.S. Dollar Down 0.07%,
Expectation: Gold Down Tomorrow
What Happened= Gold Down 0.13% (Profit)
Running Profit = 0.80%

02/27/2007
Gold Down 3.65%, U.S. Dollar Down 0.50%,
Expectation: Gold Up Tommorrow
What Happened = Gold Up 1.11% (Profit)
Running Profit = 1.91%

03/02/2007
Gold Down 3.31%, U.S. Dollar Up 0.03%,
Expectation: Gold Up Tomorrow
What Happened = Gold Down 1.05% (Loss)
Running Profit = 0.86%

08/16/2007
Gold Down 2.30%, U.S. Dollar Down 0.12%,
Expectation: Gold Up Tomorrow
What Happened = Gold Up 0.80% (Profit)
Running Profit = 1.66%

09/06/2007
Gold Up 2%, U.S. Dollar barely moved,
Expectation: Gold Down Tomorrow
What Happened = Gold Up 0.67% (Loss)
Running Profit = 0.99%

11/15/2007
Gold Down 2.78%, U.S. Dollar Up 0.69%,
Expectation: Gold Up Tomorrow
What Happened = Gold Down 0.30% (Loss)
Running Profit = 0.69%

11/20/2007
Gold Up 2.87%, U.S. Dollar Down 0.38%,
Expectation: Gold Down Tomorrow
What Happened = Gold Down 0.44% (Profit)
Running Profit = 1.13%

We were right on 6 out of 10 trades, taking home 1.13% profit for the year. While this certainly isn’t a big amount, the fact that we only had our capital tied up for 10 days counts. Another thing to look at could be whether a stop could be used to reduce our loss on days we’re wrong.