The Daily Trade – Day 40

Filed under: Learn Forex Trading |

Trade Number 40 – XAU/USD 1-Hour Chart

Today, we will be looking at the XAU/USD pair, which is the chart for gold. Trading gold and silver is very much like trading forex, as they are also twenty-four hour markets.

 

If we begin, as always, by looking at the daily chart for gold, you will see that it has been in a very powerful up trend for some time. In fact, it seems like you can’t go far wrong just by buying gold and holding, if you can find a good entry. It has been going up for years! Anyway, let’s stick to our trading plan. With this pair, we should be going with the trend and buying on pullbacks.

 

Figure 1.

You will see from Figure 1. that a high was reached which formed a top around mid-August, which I had drawn in as a support/resistance level. Price broke through this level but I had kept it drawn in and was looking for any price action signals at this zone.

Figure 2.

 

If you now look at Figure 2., you will see that when price pulled back to this level, a nice bullish engulfing pattern emerged on the one hour chart, which signaled that price might be about to resume its move up. At this point, we should be getting in on a long trade with a stop loss just a few pips below the low of the move, and a target of at least two times our risk. If your risk-reward is more than 1:2, then I would suggest moving to breakeven once it has reached 1:2.

Figure 3.

 

In Figure 3., it is clear that this was indeed a turning point, and a target of two times our risk would have easily been reached, for a nice 2% rise on our bank. Please remember that about 50% of my trades do in fact fail, and I do not document those much here. Well, that’s it again for today – so I’ll see you tomorrow!

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