Trade Example – XAU/USD (Gold)

Filed under: Learn Forex Trading |

I’d like to show you a trade example on the XAU/USD pair today (the pair for gold). Gold and silver tend to make similar chart patterns, and this is similar to the setup that I discussed yesterday on the pair for silver. However, there is one notable difference in the setup, and I would like to talk you through this setup right now.

Screen shot 2013-07-10 at 08.55.27

Figure 1.

If you take a look at Figure 1, you will see the daily chart for the XAU/USD pair. This is the only chart that we will need to look at for this setup. What you can see is that, just like the pair for silver, this pair is in a very powerful downtrend at the moment with a lot of bearish momentum present. The 8-day exponential moving average is crossed below the 21-day exponential moving average, and the chart moves down from left to right. There is no doubting that the market sentiment is bearish, so we want to get in on some of this bearish action, and enter the market when it confirms that this bearish momentum is set to continue.

 

If you look in the middle of this chart, you will see a line of support/resistance that I have drawn in. This first marked a resistance zone on the chart, as price initially failed to break through this level; and then once price did break through it, a nice bearish pin bar formed and the level became a support level. This would have been a good time to put an order in to go short at a 50% retracement of the bearish pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a target set of at least two times the risk. Had this order been placed, then such a target would have been met for a nice rise on the bank.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>