Trade Example – XAU/USD (Gold)

Filed under: Learn Forex Trading |

Hello everybody. I have a forex price action trade example for you today on the XAU/USD pair, which for those of you that don’t know is the exchange rate between gold and the United States dollar.

 

Figure 1.

To begin with, let’s take a look at Figure 1. This is the daily chart for the XAU/USD pair. In a daily chart, each candlestick represents twenty-four hours worth of price action data. This is the only chart that we will need for this particular trade example.

 

The long-term trend on this chart is down, although there has been a significant retracement, which has caused the 8-day EMA and the 21-day EMA to meet. However, I would still favour any bearish price action signals on this chart at present.

 

The candle that we are most interested in here is the pin bar that I have highlighted in yellow. This tells us that the market moved up, reversed, and moved all the way back down; all in the space of twenty-four hours. It also rejected a very nice area of support/resistance, which I have marked on the chart with a thin red horizontal line. All of this tells us that the market may be about to resume its bearish momentum.

 

We could have put an order in at the close of the candle in question at a 50% retracement of the pin bar, with a stop loss a few pips above the high of the move and a target of two times our risk. As you can see, this trade would have been successful for a very nice 2% rise on our trading capital. Well, that’s all that I have for you this week, and I will be back next week with more forex trading articles. Until then, have a great weekend.

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