The 5 Effective Gold Indicators That Gold Traders Should Know
Many gold traders will use different methods of gold trading. One of these methods of gold trading is the use of gold indicators. Gold trading indicators are technical gold trading tools that are placed on gold charts and help to determine the gold price chart movement.
Among the most commonly used technical indicators are:
Moving Averages Gold Trading Technical Indicator RSI MACD Bollinger Bands Technical Indicator Stochastic Oscillator Technical Indicator
These gold indicators are used by traders to identify gold trends, analyze gold trends and also analyze gold trend momentum.
To trade with these indicators gold traders will come up with a few gold rules that will ascertain that this is when to open a gold trade based on the specified gold trading rules. These gold rules form what is known as a gold trading strategy.
This gold strategy which is a set of gold trading rules will be used by traders when trading the xauusd market. To come up with a gold trading strategy that is indicator based gold trader will first need to know about these indicators used in the gold trading market.
The five commonly used technical indicators are explained below:
Moving Averages Technical Indicator
Moving average gold indicator is used to identify gold trading opportunities by determining the overall trend direction of the market. Gold moving average is drawn as a line that shows the average of gold prices on the gold trading chart.
When the gold market is heading in an upwards gold trend the moving average gold indicator will also be heading upwards.
When the gold market is heading in a downward trend the moving average gold indicator will also be heading downwards.
Gold traders will use two moving averages a shorter gold period moving average and a longer gold period moving average - gold trading signals will be generated when both of these moving averages are moving in the same direction.
An exit gold trading signal is generated when moving averages begin to move in opposite direction.
Gold Trading with Moving Average Technical Indicator
RSI Technical Indicator
RSI indicator is used to determine if gold prices are generally closing higher than where they opened or if gold prices are closing lower than where they opened.
RSI indicator values above 50 signals that gold prices are closing higher than where they opened RSI indicator values below 50 signals that gold prices are closing lower than where they opened
When gold trading using the RSI indicator gold buy and gold sell signals are generated when the RSI moves above or below the 50 center line mark - RSI indicator values above 50 is a buy signal while RSI technical indicator values below 50 is a sell signal.
The RSI indicator is drawn with values of between 0 and 100. RSI 50 is the center line mark used to generate gold trading signals when the RSI indicator moves above or below this centerline mark.
RSI technical indicator levels below 30 are used to show over-sold levels RSI technical indicator levels above 30 are used to show over-bought levels
Gold Trading with RSI Technical Indicator
MACD Technical Indicator
MACD indicator is used to analyze the momentum of gold trends.
The MACD indicator is used to generate gold trading signals when MACD moves above or below the zero center line mark.
MACD indicator above Zero center-line is interpreted as a buy signal. MACD indicator below Zero centerline is interpreted as a sell signal.
MACD indicator is comprised of two lines - MACD line and MACD Signal Line - MACD line is drawn as a red line while MACD Signal line is drawn as a blue line.
Gold Trading with MACD Technical Indicator
Bollinger Band Indicator
Bollinger bands gold indicator uses a 20 period moving average as the middle Bollinger band and then calculate the gold price movement magnitude from these moving average line using standard deviation.
When gold price volatility is high the Bollinger bands will widen When gold price volatility is low the Bollinger bands will narrow
When Bollinger bands widen the gold price trend is likely to continue moving in the same direction whereas when Bollinger band narrow the gold price is likely to breakout and move in the direction of the gold price breakout.
Gold Trading with Bollinger Bands Technical Indicator
Stochastic Oscillator Indicator
Stochastic oscillator gold indicator is used to determine overbought and oversold levels. Stochastic oscillator values below 20 are interpreted as oversold levels and gold stochastic oscillator values above 80 are considered as overbought.
Stochastic oscillator gold indicator is made up of two line %K and %D lines which oscillate between values of 0 and 100. Gold Trading with Stochastic Oscillator Technical Indicator
