Trade Example – Gold

Filed under: Learn Forex Trading |

I have a nice little trade example for you today on the XAU/USD pair, which for those of you that don’t know, represents the exchange rate been gold bullion and the United States dollar.

 

Figure 1.

To begin with, take a look at Figure 1. This is the 4-hour chart for the XAU/USD pair. What we can see here is that price had been moving up quite nicely before the 8-period EMA crossed below the 21-period EMA, signalling that the market sentiment was changing. We started to see some volatility and some big black bearish candles. When the 8-period EMA and the 21-period EMA started to diverge and an inside bar setup formed (highlighted in yellow), this would have been a good time to put a short order in at a break of the low of the mother candle of the inside bar, with a stop loss placed just a few pips above the high of the mother candle, and a target of at least two times our risk.

 

As you can see from the chart, our order would have been filled as price did break the low of the mother candle. Our stop loss was never in danger and we would have easily reached our profit for a very nice 2% rise on our bank. Inside bar setups are very good places to get in on a trend because they are moments in the market where participants are taking a breather. Price thus gets squeezed and coils, ready to break out and continue the trend.

 

Well, that’s all that I have for you this week. I hope you have enjoyed the price action trade examples this week – and I’ll be back next week with more. Until then, have a great weekend; and let’s hope the weather improves. This is the kind of ‘dark cloud cover’ that we do not want! (trader’s joke – sorry)

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