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XAUUSD is one of the largest financial market in the world. Traders invest in the market popularly known as XAUUSD for speculation purposes. Traders are attracted to because of the following reasons:
Leverage - xauusd leverage means that traders can make more money in xauusd by investing little of their own capital. This is because traders can borrow money to trade with from their broker using leverage.
Liquidity - The fact that xauusd is one of the largest financial market in the world means that there are very many traders trading the market at any time of the day or night during the market week. The fact that there are many traders investing in this market make the market a very liquid market meaning trader can open and close trade in a matter of seconds.
Low Transaction Cost - Because in xauusd there are many traders trading at any one given time means that trade costs are lower because of this big volume of trade transactions taking place in trading market. The only transaction cost paid by the trader is the spreads; no other cost is paid by the traders. The spread is also only when a trader opens a trade: therefore if a trader does not trade then they don't pay any cost.
This learn tutorial presents the various education courses that technical traders or traders who want to learn technical analysis can learn from. After traders have learnt the basics of xauusd it is then time to learn more about technical analysis topics that they can use to trade with.
The technical analysis lessons can guide beginners on how to study the various technical analysis concepts.
Basics of Technical Analysis
Candlestick Charts
For technical traders the basic technical analysis tool that they use is the chart. There are three types of charts: line charts, bar charts & candlestick charts. The type of chart most commonly used by traders is the candlestick chart. This is because the candle chart has a visually appealing format that clearly represents the movement of prices, by displaying different colors for different movements; that blue color when prices close higher than they opened or red color that represents when prices close lower than they open. In addition these candle-sticks show the distance between the open and close price and this forms the body of the candlestick. This body of the candlestick is looks similar to the wax part of a real candle. The highest point of the price will be drawn with what is referred to as a shadow, the shadow is a thin poking line that is drawn above the candlestick & it looks similar to the wick of a real candle. There is also another shadow drawn below the candlesticks and this one represents the lowest point of the price.
The information drawn by the candlesticks is known as OHCL - which represents Opening price, High, Low & Closing price.
Japanese candlesticks were created in Japan by a traditional rice trader who used to trade futures, his name was Homma Munehisa, he later moved to trading the Tokyo market that was in the 18th Century & he made a fortune trading the Tokyo market using these candles: He is said to have made over 100 consecutive winning trades.
In addition to showing the graphical representations of price traders also use candle patterns to gauge and determine the strength of the price movement. Traders also study these candle patterns so as to learn how to interpret and trade signals from the various candle patterns. Traders wanting to about the various candlesticks patterns can learn from our section under the technical analysis lessons, the various candle patterns used to trade are:
1.Long and short Candlesticks
2.Spinning Tops and Doji Candlesticks
3.Hammer Candlestick Pattern & Hanging Man Candle Pattern
4.Inverted Hammer Candlestick Pattern and Shooting Star Candlestick Pattern
5.Piercing Line Candlestick Pattern and Dark Cloud Cover Candle Pattern
6.Morning Star Candles, Evening Star Candlesticks & Engulfing Candles Patterns
Support & Resistance Levels
Some traders also refer to these levels as support and resistance lines. Concepts of support & resistance levels refers to price zones where it's difficult for the price break through & move beyond these levels.
At these levels traders are likely to perceive the price of the as being cheap or as being expensive.
Support
Support prevents the price of an asset from getting pushed downwards. Support areas are therefore regarded as the floor because these price levels stop the market from moving prices down ward past a certain point.
Resistance
Resistance prevents the price of an asset from getting pushed upwards. Resistance levels are hence regarded as a ceiling because these price levels stop the market from moving prices upward.
Therefore, these levels may be used by trader to determine where to open trades at the points where there is a high risk: reward ratio. For example a trader might open a buy trade at a support level & place a stop loss a few pips below that level. The trader buys at this point because they perceive the price to be cheap. A trader might open a sell trade at a resistance level & place a stop loss a few pips above the resistance level. The trader sells at this point because they perceive that at that point the price is very expensive and therefore there will be less people willing to buy that xauusd instrument because the price is very expensive and therefore the price is likely to start moving down soon rather than continue to move upwards.
Trend-Lines
Trend lines are used to determine the general direction of the market.
Sometimes support & resistances are formed diagonally in a similar way like a stair case. This forms a trend, a trend is a sustained movement in one direction either up-wards or downward.
A xauusd trend-line depicts these points of support and resistance for the price.
Trend line is an aspect of technical analysis that uses line studies to try & predict where price will move next.
A xauusd trend line is a straight diagonal line that connects two or more price points and then extends into the future to act as line of support or resistance.
Trend Lines are based upon the idea that markets move in trends. Trend-Lines are used to show three things.
- The general direction of price movement up or down.
- The strength of prevailing price movement and
- Where future support and resistance of the current price movement are likely to be located at.
If a trend-line forms in a certain direction then price usually move in that direction for a period of time until a time when the trend line breaks-out.
Upward trend-line - If price is moving up then a line is formed that is also moving up. This line is called an upward trend line.
Down-ward trend-line - If price is moving down then a line is formed that also moves down. This line is called a downward trend line.
MAs Indicator
Moving averages are also used in xauusd to determine the general direction of the market. MAs is a trend following technical indicators which is used to show the direction of the market.
Most common trading method of determine direction of the trend is by using two moving averages to form the moving average cross-over system. The MA cross-over system is explained in our strategies section. The MA cross-over system is made up of two moving averages one with a lower period & the other with a higher period, for example one may use the 5 period MA & the 7 period MA, when the price is heading up the two MAs will also be moving up & when the prices are moving down the two MAs will also be moving down. Traders can also identify when a trend changes its direction because the two moving averages will cross over each other once there is a change in the direction of the price movement. This crossover signal is used by traders to determine when to open a new trade after the cross-over signal has been generated & the two MA start to move in the same direction. This crossover signal is also used to determine when to close a trade & take profit after there's a crossover in opposite direction.
Bollinger Bands Technical Indicator
Bollinger Bands is a very popular indicator, it is also a trend following indicator and it is used to show the general trend of the trading market. Bollinger band is made up of three lines, these are:
·Middle band - this is a moving average of 20 price periods
·Upper Band -shows upper limit of price
·Lower Band - shows lower limit of price
Middle band will show the general direction of the trend whether up or down.
The upper band is where a trader will open a sell trade if the market trend is down or close their buy trade & take profit at this level if the market is trending upwards.
The lower band is where a trader will open a buy trade if the market trend is up or close their sell trade and take profit at this level if the market is trending downwards.
XAUUSD Fib Retracement Areas
Fibonacci retracement levels are popularly used to determine the levels where price retracements are likely to go up to. Traders use these retracement levels to determine where to open trades after a price pullback.
Fibo retracement levels are covered in the learn guides section of this website under the technical analysis topics. Trader can learn how to use the Fibonacci retracement levels, which levels are commonly used to open trades and how to draw these retracement levels using Fibonacci retracement indicator.
All these technical analysis methods are also covered on the strategies section of this learn course website and trader can learn more about these concepts & get example of these concepts are used in trading from this strategies section that has numerous screenshots illustrations of these technical tools and how they are drawn on charts along with explanation of they are used to generate signals.
