The Daily Trade – Day 92

Filed under: Learn Forex Trading |

Trade Number 92 – XAU/USD (gold) 1-Hour Chart

There was a nice trade setup on the XAU/USD chart last week, which is not strictly a forex currency pair as it is gold, but it is still available to trade with most forex brokers.

 

Figure 1,

If you take a look at the daily chart first (Figure 1), you will see that price had been approaching a really significant area of support and resistance, which had been tested on numerous occasions over the past three months or so. Price did eventually break through the resistance area, and this area then subsequently became support in a change of polarity and was tested again. Now that price has come back down to this level, we must watch out for any price action signals on the daily, 4-hour, and 1-hour charts.

 

Figure 2.

If you now look at Figure 2, which is the 1-hour chart for gold, you will see that price formed a nice bullish engulfing pattern right at the zone in question. This came after a strong intraday move down, so this gives validity to the signal – so that is two boxes ticked. The daily chart also shows that the 21-day EMA is above the 126-day EMA, so we are in a long-term uptrend. Furthermore, we are at a 61.8% Fibonacci retracement area, so that is four boxes ticked and that is good enough for me. The more confluence we have, the more chance we have of the trade going our way. We could go long here with a stop loss a few pips below the low of the move and a target of two times our risk.

Figure 3.

 

Figure 3 shows that you would have had great success with this trade, and you could have gained at least three times your risk in the end. That’s it for today – more tomorrow.

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