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Trading XAU/USD is also called spot gold trading which is commodity trading and not Forex but since the gold is being traded against the dollar, they work in very similar ways. There are a few different strategies that can be employed for trading of this type. Like any other Forex trading you need to have a strategy which minimizes losses and maximizes profits. This pair moves in much more drastic quantities than Forex pairs do. Spot gold trading is done by taking a long or short position in gold and the opposite position with the dollar.
Just like successful Forex traders, successful Gold traders have strategies that have been tested, back tested, and tweaked with time. You need a price at which you would like to buy spot gold or an ask and a price at which you would like to sell the gold, also called a bid. Gold is traded in ounces and is bought and sold in lots like any currency. Gold tends to move much more quickly than currency so gold can be bought and sold many times per day by the same trader.
Simple Balanced Strategy uses the EMA(Exponential Moving Average), RSI (Relative Strength Index) and Stochastic Oscillator values to determine the best way to make a move. The strategy recommends to buy when the 5 Period EMA rises above the 10 Period EMA, the RSI value is above 50 showing that gold is not in an overbought position, and the Stochastic lines is increasing but not above 80. Then a trader following this strategy would sell when things are in the opposite circumstances, the 5 period EMA is below the 10 period EMA, RSI is below 50 and Stochastic lines is above 20 but falling.
Day Trade Pullback Strategy suggests that a trader use 15 minute, 30 minute and hourly HeikinAshi charts to help you determine the best time during the course of a day to enter and exit the market. This strategy says that when the 10 period EMA is higher than the 30 period EMA and there is a reasonable gap between those two periods you should buy your lots of gold. Selling will be optimal when the opposite is true, the 10 period drops below the 30 period EMA and the gap between the periods is significant.
Moving Average Crossover Strategy is a great strategy for short term traders. Using this strategy, a short term trader would issue an order to buy when the short-term moving average crosses above the longer-term moving average and sell when the opposite is true. It is recommended that traders use a 10/60 moving average on the 1 hour chart in order to maximize profit in short term trading. This strategy points traders towards the middle of the trend.
Another way to look at this strategy is to by the gold when the 7 Period SMA is higher than the 14 period SMA and the 21 period SMA. And again, sell when the exact opposite is true. Longer term traders might want to follow the factors that affect the price of gold in order to form their own strategies.
