Easy Big-Picture Gold Trading Strategy to Adopt

Recently, I’ve been asked over and over again what my thoughts on gold are: is it going to rise, or is it going to crash? If so, how high, or how low?

Every time, my answer remains the same; look at what the chart is projecting.

Many traders today rarely visit the monthly chart. We look at intraday and daily charts for reference but only the monthly chart can paint the big picture for us.

Here’s how to draw the simple lines depicted in the chart above. Many people don’t know how to plot such a chart because you haven’t been taught yet.

First, you start from the lowest low on your screen and trace your line up to the most recent consolidation level. Then, you do the same with the upper level, tracing your line from the highest point to the most recent upswing. You can use red lines for convenience.

Finally, draw another set of lines connecting the highest points of the most recent consolidation and repeat the same for the lower points. Use blue lines to distinguish from the other set of lines.

What you will find is the formation of a wedge with a slight downward tilt.

This chart will help you to sight emerging breakout patterns easily. The main challenge now is correctly predicting where the next breakout will occur, which is usually very unpredictable.

The gold market can be very erratic with extreme surges or drops occurring regularly. Based on the illustrated trading strategy, the presence of a rare event could immediately send gold to $2,418, $2,700, $3,000, or higher. Here’s how we arrived at the $2,418 mark as the next possible high point for gold; take your recent highest point and subtract it by the recent lowest point and then add again by the recent high of the trading range, i.e ($1,789 – $1,160) + $1,789 = $2,418.

Many gold traders might miss big trading opportunities like this as they are not seeing the big picture but are, instead, focusing on the ephemeral. Trading on shorter time frames makes you trade according to what you think while this strategy allows you to trade with what you see.

In the long run, trading with what you see seems like a more rational approach.

Note: Learn2.trade is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results