Gold prices—along with other precious metals—are perhaps the most trusted in the trading world. With the price of gold steadily increasing decade after decade, many long-term investors have seen their wealth grow, but is that still a reality, and what should online XAU traders be looking for in 2019?
Certain trading styles have been very effective for savvy XAU traders over the last five years. Learning to use a consistently well-performing strategy from yesteryear might not guarantee you huge profits, but it will help you plan and optimize your buy and sell times. Read on to learn:
- How gold prices trend
- When to trade gold
- When to buy and when to sell
By the time you’ve finished reading this article, you’ll have a clear picture of how to forecast gold price shifts. You’ll have a powerful method for finding entry points for your gold trades and you’ll be able to feel the ebb and flow of supply and demand. Basically, you’ll have a clear strategy for both short-term and long-term XAU trading.
Open an Exness account now and start analyzing gold prices
Are gold prices more predictable than currency pairs?
What’s the golden rule of trading? Buy low, sell high. This means somehow recognizing when a price is about to “bounce”. There are tons of indicators out there that can be used to forecast drastic shifts in direction, but imagine trading an asset so reliable that indicators are simply not needed.
If you open a price chart right now and look at gold prices over the last five years, you’ll see a rocky mountain range with high peaks and deep valleys. This type of terrain is known as trader’s heaven, and it yields the highest risk/reward ratios. One goal of a gold trader is to find a pattern in the so-called chaos, and there are a few tips here worthy of note.
For example, gold has a tendency to fall in price at the end of Q3 and then rise as the new year approaches. Taking an even closer look at gold on a one month chart, you’ll see another pattern. As Monday rolls around, the price takes a short drop then starts an almost clockwork rise until midweek. Then comes a rapid fall, and a sharp rise that stabilizes for the weekend close. Is it really that clear-cut? Here are two forecasting methods that are not complicated. One is for short-term trading. The other is more suitable for a long-term trader.
Method 1: Targeting short-term gold prices
If you don’t have access to a trading account yet, Exness has a very easy signup process. You can find a step by step video guide at the bottom of this article to make it even easier. The whole registration process only takes about five minutes. Now, you are ready to put the method to the test for yourself.
Step 1: Open the web terminal and look at the list of currency pairs on the left. You’ll need to add gold to your "Market Watch". To do this, simply right click over any pair, and select “Symbols” from the new window. The “Forex_mini” folder holds XAU currency pairs at the bottom. For this test, select XAUUSDm then click “Show”. It’s now on your currency pairs list.
Step 2: Grab and drag XAUUSDm from the Market Watch list and drop it in the currency chart window. Now you can see an up-to-the-minute price history of gold against USD.
Step 3: Start checking the gold prices with your own eyes. Pay close attention to the highest peaks and lowest valleys.
Step 4: Record the dates of the highs and lows, and importantly, take note of the day of the week for each extreme. Go back a month or two, always taking note of the day of the week.
Note: at this point, you’ve probably already noticed some repetitive price action on certain days of the week. This is for traders targeting short-term trades. Let’s have a quick look at the long-term method now.
Method 2: Targeting long-term gold prices
You’ve already got the demo account active, and XAU is in your Market Watch list, so this is just two very simple steps.
Step 1: At the top center of the terminal toolbar, change the time period to MN (month) and look at the price movements over the last five years.
Step 2: This time, take note of the highs and lows and the corresponding months or seasons.
Compare both the long-term and short-term patterns. Repetitive price action occurs at certain times of the week, but there’s also a pattern during certain months in the year. These patterns are action points worthy of strong consideration, and you can test the reliability of these “observations” without risking a penny.
What day is it today? What time of the year? Just keep in mind that price action can deviate from "the pattern" from time to time. Like everything in life, there’s no guarantee.
Trading XAU at the next level
Now you have an opening and closing strategy for short-term orders. The predictability of the central banks is now on your radar, and the world's markets are at your fingertips. Bear in mind that shorter time periods carry greater volatility. Being overconfident can spell disaster, so don’t be in a hurry to ramp up your trading volumes prematurely.
We’ve confirmed that gold has been experiencing a biannual price swing for almost a decade. A quick check on the monthly chart will consistently show a high point in the summer and a low dip as Q3 comes to an end, followed by rises as the holiday season kicks in. Then there’s Monday's price bounce. So what happens when you combine the two strategies? Here’s an example:
According to historic trends, a trader might want to buy gold on Monday, since there is so often a brief drop followed by a steady rise. In Q4, the price of gold has typically been seen to rise over the last few years. Therefore, a buy strategy would be within the parameters of both long-term and short-term forecasting methods when executed on a Monday in November. Alternatively, if the long-term trend is downward, a buy order would be counter to the strategy. Buy low, sell high… remember?
Following such a trading strategy would have served an XAU trader very well over the last five years. Sadly, a reliable history of gold prices doesn’t mean the same will happen in 2019, so don’t trade blindly. Come to your own conclusions. Look for patterns, but most of all, look for an evolution of the patterns. Perhaps the drop-rebound of Monday will change in the coming years. Recognizing this change would likely put you ahead of the trading crowd and create very attractive opportunities worthy of action.
Joining the world of finance and trading from home can be exciting, a pursuit worthy of devoting your free time to. Trading can promote pride, self-worth, and optimism, but these positive attributes are always overshadowed by the risk of loss. Start low and slow: it’s a marathon, not a sprint.
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This article is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience, or current financial situation.
This article is not prepared in accordance with legal requirements promoting independent investment research, and Exness is not subject to any prohibition on dealing before the release of the article. Readers should consider the possibility that they may incur losses. Therefore, Exness is not liable for any losses incurred due to the use of its articles. Please note that past performance of an asset is not a reliable indicator of future results.