The price of Gold is influenced by a wide range of economic aspects. This is the reason why the XAUUSD pair is incredibly volatile. Many traders are attracted to Gold but trading this precious metal should be supported by some powerful strategy.
If this is what you are interested in, if you wish to enter the Gold trading world, this article is for you. I will present a simple and effective strategy that is perfect to trade Gold in the currency market.
Key Takeaways🔑
| →Trading Gold on the XAUUSD pair is volatile due to various economic aspects influencing its price. |
| →Trading strategies utilizing simple moving averages (SMA) can aid in identifying trading opportunities and trends. |
| →Trading Gold requires patience and attentiveness to economic news, particularly from the USA. |
Contents
A strategy for Gold trading on the Olymp Trade platform
The first thing you should do is to set the chart. Go to the “Fixed Time” tab and select “Commodities”. You will find Gold in the list.
Then, you have to set two Simple Moving Averages. The strategy is based just on them. Two Moving Averages with different periods. So go to the indicators feature and find the SMA. Set the period for 24. Click on the indicator icon again and select the SMA one more time. This one though should be set for a 120-day period.
The first SMA’s purpose is to identify trading opportunities. The second one is here to show tradable trends.
The price of Gold depends on many aspects. US Dollar price fluctuations are one factor, but geopolitical changes have no less impact. Despite high volatility and not having one major indicator to highlight the momentum of the trend, the strategy described here proved its efficiency. It was designed specifically for trading Gold and it successfully eliminates wrong signals.
How to use the strategy to trade Gold at Olymp Trade
The strategy can be used for the XAUUSD pair for the timeframes that are no shorter than 5 minutes. The length of the transaction depends on the timeframe you are using. However, it is recommended that you set the expiry time 10 times larger than the timeframe. If you trade on a 5-minute chart, your transaction should last 50 minutes. If you trade on a 1-hour chart, hold the position for 10 hours.
To open the UP position you should wait for the following signals:
- The SMA24 is moving above the SMA120 for a long time
- The price bar crosses above the SMA24
To open DOWN position the following rules apply:
- The SMA24 is moving below the SMA120 for some time
- The price bar crosses below the SMA24
For the signal to be valid, the candle that is crossed by the SMA has to close completely. Only then you receive a confirmation to enter the trade.
Make sure to open only one position at a time. Moreover, do not enter a Gold market when there is some important news to be announced that are connected to the economy in the USA. They could change the situation on the market dramatically.
Pros and Cons of Gold Trading Strategy📊
Pros😊:
- Effectiveness: The SMA strategy has proven its efficiency over time, specifically for Gold trading.
- Simplicity: The strategy is straightforward and easy to apply, making it accessible even for novice traders.
- Robust Signals: The SMA strategy eliminates wrong signals, enabling more accurate predictions and decisions.
Cons🙁:
- Asset Specific: This strategy is primarily applicable for Gold trading, limiting its versatility.
- Requires Patience: This approach requires waiting for the right signals and trends, which can test a trader’s patience.
- Sensitivity to News: The strategy’s effectiveness can be affected by economic news, especially from the USA, necessitating constant vigilance.
Gold Trading vs. Other Commodities 📉📈
| Factor | Gold Trading vs Other Commodities |
|---|---|
| Volatility | Higher in Gold Trading due to various economic aspects influencing its price. |
| Trading Strategy | Simple Moving Averages (SMA) strategy proves to be more efficient for Gold trading. |
| Impact of Economic News | Significant impact on Gold Trading, especially news from the USA. |
Advantages and disadvantages of the Gold strategy
The presented strategy is straightforward and really easy to apply. It proved its reliability over time and it gives accurately the signals. The traders using this strategy can capture plenty of signals in long trends. And all this without a need of spending long hours staring at the computer.
What may be considered as a disadvantage is that the strategy only works for Gold trading. And the other thing is it requires a lot of patience. But essentially trading is all about patience.
Summary
Gold is known for its volatility. The unforeseeable price fluctuations make it very difficult to trade. On the other hand, it is also a very appealing asset as the results may be spectacular.
Today’s strategy is simple. It is designed for Gold pairs and had shown effectiveness. If you follow the rules, you should not have any problems with entering the market at the correct time.
Make sure you practice using this strategy on the Olymp Trade demo account. It is free of charge and you trade with demo currency there. Without risking your own funds, you can try this new Gold strategy.
Best of luck!
Quick Q&A Section🔍
- Q: What factors influence the price of Gold?
A: Gold’s price is influenced by a variety of economic aspects, including fluctuations in the US Dollar price and geopolitical changes. - Q: What is the strategy for Gold trading on the Olymp Trade platform?
A: The strategy involves using two Simple Moving Averages (SMA24 and SMA120) to identify trading opportunities and trends. - Q: What are the timeframes for trading the XAUUSD pair using this strategy?
A: The strategy can be used for timeframes that are no shorter than 5 minutes. The expiry time should ideally be 10 times larger than the timeframe. - Q: What are the pros and cons of the Gold trading strategy?
A: Pros include its effectiveness, simplicity, and robust signals. Cons include its asset specificity, requirement for patience, and sensitivity to economic news. - Q: How should I practice using this Gold trading strategy?
A: You can practice using this strategy on the Olymp Trade demo account, which is free of charge and allows trading with demo currency.