Trade Example – XAU/USD (Gold)

Filed under: Learn Forex Trading |

I talked a little bit today about a simple forex breakout strategy, and I would like to show you how this lesson could be applied on the live charts; and it just so happens that a perfect example has just set up on the XAU/USD pair (the pair for gold and the United States dollar).

 

Figure 1.

Figure 1.

If you look at Figure 1, you will see the long-term weekly chart on the XAU/USD pair, which goes back for around two years. What you can see here is that there is a very strong level of support on this pair, which has held for the past two years. If this level was to be broken and there is a decisive close below it, then we can expect a good deal of bearish momentum.

 

Figure 2.

Figure 2.

Now, take a look at Figure 2. This is the daily chart on the same XAU/USD pair. What you can see is that price once again hovered around this level, and looked like it might be respected once again after a bullish engulfing pattern formed. However, since then, there has been a massive bearish candle, and more importantly, this candle closed well below the aforementioned level of support. This means that this level has finally been broken, and there is now a lot of bearish momentum. An order could have been put in here just below the low of this big bearish candle, with a stop loss placed just above the high of the bearish candle (which is also at the strong area of support/resistance). As you can see, this bearish move has now continued, and had we taken this trade, we would already be seeing some good profits. Well, that’s it for today, and I’ll be back with more tomorrow. Until then, have a great day trading…

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