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Technical Analysis for Gold Trading: Key Indicators and Techniques


Gold, like currencies, may be traded instantly on the spot market because it is a commodity. Because it is not issued or regulated by any central bank, it has long been considered a reliable store of value. Gold is not affected in any noticeable way by the fiat currency policies of any nation. That’s why many call it a “safe-haven” asset.

Currency pairs, such as the Swiss franc (CHF) vs the Japanese yen (JPY), can be traded against one another on the Foreign Exchange market. Gold trade, however, precludes such an arrangement because Gold is priced in US Dollars. Consequently, when conducting gold technical analysis, it is essential to factor in the fluctuating value of the US dollar.

Top tips for the technical analysis of gold

1.      Look at the long-term trend

A rising tide lifts all boats. As a first step, always look at the long-term trend of gold trading. A trader in gold would be wise to keep an eye on the overall trend of Gold across many long-term time frames, regardless of the trading style they employ or whether or not they also use fundamental research in their trading approach.

For swing traders, the combination of the weekly, daily, and four-hour timescales may serve as a good rule of thumb for using several timeframes. Contrast this with intraday traders, who should focus on shorter time frames (H4, H1, and 15 minutes).

2.      Identify any trend changes

The second piece of advice is to watch the commodity’s trend on a weekly timeline to see if it is making any medium-term corrections back in the opposite direction when gold trading.

3.      Find important price levels

It’s crucial to identify the levels of resistance and support on shorter time frames. The resistance level must be plotted so that any potential price reaction on an upward move can be anticipated.

4.      Note the intermediary trend

Once the weekly period’s resistance and support lines have been drawn, the daily timeframe may be used to examine the intermediate trend. If price drops below the uptrend line, the bullish trend would be severely disrupted.

5.      Focus on reversal signals

Similar to the foreign exchange market, gold traders can use a variety of technical analysis tools to spot potential reversal signals.

Divergence signals from momentum indicators like the moving average convergence/divergence (MACD) and oscillators like the relative strength index (RSI) and the stochastic oscillator might be useful.

Patterns such as the engulfing candle, the evening star, the hanging man, the pin bar, the hammer, and the inverted hammer are all examples of candlestick reversal patterns.

6.      Keep an eye on your stop loss

After settling on your entry and exit locations, you should always double check to see if you have set a protective stop loss. Many traders make simple mistakes like forgetting to set a stop loss, so to avoid doing the same thing twice, set up an automated system to verify both your stop loss and your entry/exit positions.

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Olumide Adesina

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