XAUUSD Trading Generate XAUUSD Signals with a XAUUSD Strategy
How to Generate Signals with a XAUUSD Strategy
This xauusd tutorial will show an example of a Best XAUUSD Strategy that swing traders can use to come up with a profitable XAUUSD Trading Best XAUUSD Strategy. Based on the popular stocks strategy, where stock investors use volumes to predict gold price direction, based on the concept "Volumes always precede gold price", in XAUUSD Trading market, there is no central clearing house where volumes are aggregated, so in we use an indicator that will estimate the volumes. This xauusd indicator is known as On Balance Volume.
This xauusd indicator is then combined with RSI and Moving Average Crossover Best XAUUSD Strategy to form a XAUUSD Trading Best XAUUSD Strategy. The Indicator settings are:
- 5 & 7 LWMA, Linear Weighted Moving Averages
- RSI 14
- OBV gold trading technical indicator
Timeframe: 4 Hour Chart
Entry Signal
Buy
- Both Moving Average pointing up
- RSI above 50
- OBV xauusd indicator is in an upwards xauusd trend line or it has broken downward xauusd trend line
Sell
- Both Moving Average pointing down
- RSI below 50
- OBV xauusd indicator is in a downward trend line or it has Broken upward Trend line
Exit Trading Signal
OBV xauusd indicator trend line is broken
RSI gives an opposite signal - 50 centermark cross over
You can read more about writing a Best XAUUSD Strategy rules Writing Best XAUUSD Strategy Rules and Generating XAUUSD Trading Signals
You can also Read about other XAUUSD Trading Strategies: Strategies List
Example of Trading Gold generate Signals with This Best XAUUSD Strategy
Before looking at example below, using the 138 pips and 177 pips profit examples, you need to learn the concept of volumes precedes gold price & On Balance Volume technical indicator.
The On Balance Volume trading indicator uses volumes to measure money flowing into xauusd or money flowing out of xauusd.
OBV xauusd indicator most popularly used for stocks analysis. The concept behind On Balance Volume is that Volume precedes gold price always and when it comes to analyzing the direction of a financial instrument whether or a trading instrument nothing is more crucial to this gold trading analysis as understanding the volumes that are flowing in and out of xauusd. These volumes can be in terms of money, in XAUUSD Trading because charts moves in ticks data, the more flow of money in xauusd the more the ticks data, therefore volumes in XAUUSD Trading will measure number of tick data participating in gold trading.
On Balance Volume acts as a leading indicator giving a one an idea of how much buying pressure or selling pressure is moving into a xauusd. And because volumes precedes gold price then this can be used as a good technical indicator to show the general investor sentiment.
For a XAUUSD Trading Best XAUUSD Strategy a one requires indicators are calculated differently. For examples our Best XAUUSD Strategy is based on
RSI - momentum indicator
MA - direction based indicator
OBV xauusd indicator - volume based technical indicator
A Best XAUUSD Strategy like this give a good overall picture of the xauusd market movement by taking into account 3 different calculation techniques as opposed to using Three oscillators that give signals based on the same calculation method.
The OBV xauusd indicator will measure the tick volume of a xauusd trading instrument, for every candlestick. If you use the 1 hour chart timeframe, then the volumes will measure the total volume for the 1 hour. If you use day charts then the volume will measure the total volumes for xauusd for the whole day.
However, the volumes indicator doesn't show the direction of the volumes, only differentiating by colors for the different candlesticks, Green for Bullish XAUUSD Candles and Red for Bearish XAUUSD Candlesticks.
This is where the On Balance Volume comes in & adds a direction to the volumes and shows the overall direction that the volumes are flowing, whether into or out of xauusd.
Volume Precedes XAUUSD Price
Volumes always precede gold price, this makes volumes a leading technical indicator. Knowing how to interpret this helps a trader make better decisions when it comes to predicting where the xauusd market direction is going to be moving to next.
When the volume rises it shows that money is starting to flow into a xauusd. Because volumes will precede the gold price, the next thing is that the value of xauusd will then go up. When the OBV xauusd indicator is going up it shows there are more buyers buying xauusd than the sellers selling it.
When the volume falls it shows that money is starting to flow out of xauusd. Because volumes will precede the gold price, the next thing is that the value of xauusd will then go down. When the OBV xauusd indicator is going down it shows more trading volume is going short than long.
Subsequently when a downward xauusd trend line of the OBV xauusd indicator is broken it shows that sellers are starting to take profit and close their gold trading orders.
Likewise when the upwards trend line of the OBV xauusd indicator is broken it shows that the buyers are starting to close their buy gold trades and take their profits.
Because the On Balance Volume will add direction to the volume and form a general direction, a trader can compare the two, the gold price direction and the OBV xauusd indicator direction. The direction of these two should correspond but when there is a disconnect between these two then one should pay attention to know when to exit the xauusd market or when to open an order.
On Balance Volume is a leading indicator & a trader using this indicator can avoid entering a xauusd market when it is too late. This Indicator is also a good indicator to show when to take a profit early enough before the xauusd market takes away all your profit.
Gold Indicator Formation
The OBV xauusd indicator is the cumulative addition and subtraction of volume based on gold price direction.
Upwards direction - adds volume/ technical indicator moves up
Downwards direction - subtracts volume/ technical indicator moves upwards
Sideways market/Range market - technical indicator moves Sideways
Because gold price moves in a zigzag manner, the OBV xauusd indicator will also form in a zigzag manner
XAUUSD Price Trend lines
Most Traders will use these to generate buy & sell gold trade signals.
For our Best XAUUSD Strategy we shall use the OBV xauusd indicator to confirm these buy sell signals from gold price trend lines.
We shall draw a XAUUSD trend line on both the gold price and Indicator. If both give the same signal we buy or sell depending on the direction.
This xauusd strategy will be used to determine two things.
Continuation of the current market direction
Reversal of the current market direction
Example of this Strategy
1. Downward Bearish Market
In the above chart the first half of this xauusd trading instrument is bearish. This can be shown by the gold price trend line that shows a downward direction. This xauusd price downwards trend line is also confirmed by the downward trend line on the indicator - as long as these two move in the same direction then the direction of the xauusd instrument remains decisively downward.
Because volumes precede gold price, a trader can hold on to his sell gold trades because the xauusd market direction will not reverse, before OBV xauusd indicator gives a warning.
2. XAUUSD Trend Change
Halfway through this chart there was a xauusd market reversal marked by the vertical line. This reversal xauusd signal was generated when there was a trendline break as illustrated on the gold trading chart.
From the gold chart you can see that the OBV xauusd indicator gave the reversal xauusd signal just before the gold price trend line was broken generating a reversal xauusd signal. If you had opened a sell this is where you would have closed all your trades.
3. Upward Bullish Market
Trading a xauusd market reversal can be sometimes tricky, but the reversal xauusd signal generated above was generated at the optimum time and gold price continued to move up after this reversal xauusd signal was generated.
For this you would have just bought the xauusd trading instrument when the two trend lines were broken to the up side giving a buy signal. This buy was also a good signal in that the On Balance Volume had already formed an upward xauusd trend line by the time the downward xauusd trend line was broken.
The new OBV xauusd indicator upwards xauusd trend line confirmed the direction of the market as a buy and more xauusd traders will open buy xauusd orders and as long as it holds, as it did in the above example then the gold price will continue moving upwards.
After this xauusd signal was given you can see that later the gold price formed a decisive upward xauusd trend line that matched the OBV xauusd indicator upwards xauusd trend line. As long as the two kept moving upwards then the xauusd market was firmly upwards.
XAUUSD Whipsaws
4. At the end of this upward direction, OBV xauusd indicator gave a xauusd trading whipsaw as if to break the upward trendline. However, even if you had opened a short trade because of this new signal that had formed as shown above you would have quickly closed your sell xauusd orders before they reversed because the OBV xauusd indicator soon broke this downward trend line as shown above and therefore the sell xauusd trade that was forming is now not valid.
One thing that one must learn to avoid as with any other xauusd strategy is that whipsaws might be generated. The best way to avoid this is to exit as soon as the OBV xauusd indicator trend line is broken especially when you're trading the reversal gold trade signals.
For the above example once you exit the short trade, after the new OBV xauusd indicator downward xauusd trend line was broken it shows there were still more buyers in this xauusd trading instrument and it is better to exit any reversal trades that you might have opened, this is because the gold price might as will move further upwards as shown by the xauusd indicator moving upwards.
Because the OBV xauusd indicator still went up even after touching and breaching it a little, the OBV xauusd indicator upwards xauusd trend line still held therefore the upward bullish direction is still intact according to our gold analysis & any further trades here are still buy.
XAUUSD Trading Generate XAUUSD Signals with a XAUUSD Strategy
