Trade Example – XAU/USD (Gold)

Filed under: Learn Forex Trading |

There are not many great setups emerging in the forex markets at present, and the markets remain a little too volatile to comfortably trade. However, there is an interesting looking setup that has formed on the XAU/USD pair (the pair for gold), and although in my opinion, this setup is a little too weak to take, it is still an interesting setup to discuss.

 

Figure 1.

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the XAU/USD pair. What you can see here is that price has been quite bearish recently, with the 8-day exponential moving average crossed below the 21-day exponential moving average. In fact, this pair has been extremely bearish for some time now. I have also drawn in a short-term level of support/resistance on this chart (marked with a horizontal red line). As you can see, when the market was moving down, this area first acted as a resistance area, then, once it broke through, it became a support area, and price continued to move down for a short time, before recently moving back up a little. Price once again broke through this area, and then the support/resistance zone then acted as a support area once again, with a nice little pin bar bouncing perfectly off of this level.

 

Now, personally, I do not want to go against this long-term bearish momentum, as it would feel a little like swimming against the tide. However, if you did want to take a more high risk trade setup, then you could put an order in to go long at a 50% retracement of the pin bar, with a stop loss placed just a few pips below the low of the pin bar. Although the risk is high, the reward too could also be very high if the market starts to move up from this point. It will be interesting to see what happens to this one over the coming days.

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