Live Trades – XAU/USD (Gold)

Filed under: Live Trades |

I had a very successful setup on the XAU/USD pair (gold) yesterday, which I would like to talk you through today. If you look at Figure 1, you will see the 4-hour chart for this pair. What you can see here is that the pair has been very bearish over the past few days. The 8-period EMA is crossed well below the 21-period EMA, and the chart is visibly moving down from left to right.

 

Figure 1.

I have marked in a level of support/resistance on this chart (marked with a horizontal green band). It is fairly obvious as to why I have marked in this level, as you can see the previous low. This resistance is now acting as support, with a change of polarity. Therefore, when price formed a very nice bearish pin bar, rejecting this area, and confirming that the trend may once again be ready to resume, I put an order in to go short at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a very good risk-reward target set of 3.5 times my risk. This was a logical target, as it took us down to the next logical level of resistance.

 

As you can see, our order was filled and price has since reached our target for a very nice 3.5% rise on the bank. We could have had even more, as price has since moved through the lows and formed a new low. This was a very good setup, as we were going with the trend, a price action signal occurred at a good level of support/resistance, and we were able to employ a very good risk-reward ratio of 1:3.5. This is everything that we can ask for in a trade setup, and even better, our target was met in a very short space of time.

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