XAU/USD is a volatile pair because Gold prices are affected by many different economic factors. In the previous articles, we have presented plenty of technical trading strategies, mostly applied to deal with currency pairs. Today, we would like to introduce to you a trend-following system which is suitable only for trading on the Gold – currencies, called “Gold Forex”.
Like most trend-seeking techniques, this system uses the world’s most popular lagging indicator: Moving Average. Two Simple Moving Average lines (SMAs) are combined in this strategy, one of which is set with the period of 24 days and is responsible for identifying trading signals, while the other is established with the setting of 120 days, highlighting tradable trending conditions. This system doesn’t have a leading indicator to confirm the trend momentum, but it still works well since the developer invented this for Gold trading purpose only.
Profiting from the Gold – crosses is not an easy work because Gold prices’ movement is based on not only the US Dollar fluctuation but also geopolitical developments. However, once you are adept at using this strategy, it will become your Gold digger, and you can domesticate any “Gold/currencies” horse.
During the period from March 2016 to March 2017, this technical strategy has shown an impressive testing result with +2900 pips generated. On average, there are 13 positions entered per month. Its win-rate has been confirmed around 84%.
How to profit from Gold using the “Gold Forex”
This system works best on the 1-hour chart and is applied mainly to the XAU/USD pair. After adding the built-in SMAs in MetaTrader 4, you can start seeking for potential entries.
A bullish trading opportunity is determined when:
The 24-period SMA remains above the longer-term one.
Prices cross above the 24-period SMA.
Conversely, a bearish signal is identified when:
The 24-period SMA stays below the 120-period SMA.
Prices cross below the 24-period SMA.
The entering rules below must be satisfied when using this system to trade:
Only one position should be entered at a time.
The cross-through candlestick must be fully closed before a signal is confirmed tradable.
The stop-loss is set of 50 points, while the take-profit is established of 200 points. After prices trade into the positive area about 40 points, the stop-loss level should be changed into lossless.
Don’t enter the market when significant economic announcements related to the US economy are about to be reported because they can cause unexpected developments of the XAU/USD.
Pros and cons of the system
Engendering highly accurate trading signals by strict checking requirements.
Enabling traders to catch long trends.
Not necessitating traders to keep eyes on the trading platform.
Requiring a high level of patience.
Applied only to the Gold – currencies exchange.
Gold – crosses are the most difficult pairs to trade because of the unpredictable fluctuation in Gold prices. Nevertheless, this “Gold Forex” strategy has shown itself to be a very effective Gold miner with an impressive testing result in addition to lots of large advantages. We believe that using it along with price action knowledge will help you “dig” long-term and steady returns from the Gold – currencies. Of course, don’t forget to apply risk controlling and psychology managing methods as they are indispensable tools in your trading career.