HOW TO TRADE XAUUSD:
A CHEAT SHEET
By Ewen Collier
Welcome to "How to Trade XAUUSD: a Cheat Sheet." If you require support,
assistance, or guidance, you can reach me in the WxCafé Discord lounge. You
can click the hyperlink or find the invitation in my Instagram bio. Otherwise,
enjoy!
Why Trade XAUUSD?
Before we explore how to trade XAUUSD (gold), it's crucial that we first learn why
we should trade it.
If you are unaware, the gold market has expanded in recent years, providing
opportunities for individuals who previously may not have considered trading
gold.
Previously, you would have had to purchase physical gold bullion, coins, or other
forms of the precious metal to own it. Even though you can still do that now,
there are many other ways to trade gold online such as through a brokerage.
Gold has a greater daily trading volume than most currency pairs, except for
majors like EURUSD, USDJPY, and GBPUSD. Because of its massive daily trading
volume, the fees for trading gold in the markets are relatively low, making it a
very attractive asset to trade.
Here are several reasons why XAUUSD is one of my favorite assets to trade.
Safe-Haven Asset:
Gold is often considered a safe-haven asset, meaning its value tends to rise
during times of economic uncertainty or market volatility.
This makes XAUUSD a good choice for traders looking to hedge against inflation
or geopolitical risks. Additionally, it means there is continuous demand.
Diversification:
Including gold in a trading portfolio can help diversify risk. As gold tends to have
a low correlation with other asset classes such as stocks and bonds, trading
XAUUSD can provide a way to spread risk and potentially enhance overall
portfolio performance.
Liquidity:
XAUUSD is one of the most liquid currency pairs in the forex market, offering
many opportunities for traders to capitalize on market movements. High
liquidity ensures that traders can execute trades with minimal slippage and
tight spreads.
Volatility:
Gold markets are known for their volatility, which presents opportunities for
traders to profit. As traders, we make money trading when the market has
volume and moves up or down and not when the market doesn't move at all
(consolidation).
Whether trading short-term intraday moves or longer-term trends, XAUUSD
offers the potential for significant gains due to its volatility.
Technical Analysis:
XAUUSD often adheres well to technical analysis principles, making it suitable
for traders who enjoy relying on chart patterns, indicators, and other technical
tools to make trading decisions. Gold's clean price action on higher timeframes
allows for clearer technical signals.
Global Demand:
Gold is a globally recognized store of value and is in demand across various
industries, including jewelry, electronics, and central bank reserves. This global
demand helps support the price of gold and provides a stable foundation for
trading XAUUSD.
All of these factors outlined above make gold a very good choice for traders.
How to Trade XAUUSD?
Trading XAUUSD requires a comprehensive approach that considers various
factors that influence its price movements.
Here are the key points you need to know about my strategy to successfully
trade XAUUSD.
Utilize Correlations:
Monitor the Dollar Index (DXY) as it often has an inverse correlation with
XAUUSD. A stronger DXY typically indicates a bearish sentiment for gold.
Additionally, monitor XAGUSD (silver) prices, as gold and silver tend to follow
similar trends, with silver often leading movements in gold.
Trade During New York/London Session Overlap:
The forex market is open 24 hours a day during the weekdays, allowing you to
trade all day and all night.
But, just because you can trade at any time doesn’t mean that you should. The
highest trading volume occurs during the overlap of the London and New York
sessions (more than 50% of trading volume). This is when I trade gold each day.
Market Direction Analysis:
Begin your trading process by determining the market bias for the day. Use the
15-minute chart to identify and analyze whether the market is bullish or bearish
based on the creation of higher highs and lows or lower highs and lows. Then,
determine whether you’ll be looking for long or short positions.
Monitor Key Levels:
Identify significant support and resistance levels, including swing highs and lows,
and observe how the price interacts with these levels.
Identify Strong Reversals:
Look for strong moves above or below key levels, indicating possible reversals in
the market direction.
Use Order Blocks:
Seek out order blocks in discounted areas following strong market moves as
potential entry signals.
Consider taking your entry at the order block, setting your stop-loss below the
order block (higher risk) or below the swing point that created the setup (lower
risk).
Perfect Position Sizing and Risk Management:
This point is the most important! Due to gold's volatility and large price swings,
it's crucial to nail down your position size and risk-reward ratio.
Lower your lot size, ensure your stop-loss and take-profit levels are welldefined, and maintain a disciplined approach to risk management. Risk 0.25% to
1% for long-term survival as an XAUUSD trader.
Continuous Learning:
Stay informed about market developments, journal, learn from your trades, and
adapt your trading strategy as needed to improve your skills over time.
Remember, trading is a skill that takes a lifetime to master.
Overall, trading XAUUSD can offer diversification, liquidity, volatility, and huge
profit opportunities, making it an attractive asset for both intraday traders and
position investors.
However, like any trading asset or pair, you must develop your own strategy,
establish a trading plan (my plan), manage your emotions (my guide), manage
risk effectively, conduct thorough analysis, be disciplined and consistent, as well
as stay informed in the financial markets to even stand a chance of success.
This guide comes from years of personal experience. If this can help one person
improve their trading, then I’m happy!
BONUS
Me and my team live stream our gold, forex, and indices trades every day during
the New York session for our community members to follow along to learn and
earn with us.
If you would like to join us, check out the WxCafé website and join our Discord
for live trading sessions, educational masterclasses, and much more.
As always, feel free to send me a message if you need any help!
Thank you,
Ewen Collier (Founder & CEO of WxCafé)