Trade Gold Trading

OBV and RSI and MA Cross Over Gold Trading Best Strategy

This learn tutorial will show an example of a Best Strategy that swing traders can use to come up with a profitable Trading Best Trading Strategy. Depending on the popular stocks strategy, where stocks investors traders use volumes to try & predict price direction, based on the concept "Volumes precede price", in market, there's no central clearning house where volumes are aggregated, so in we use a technical indicator which will estimate the volumes. This indicator is referred to as On Balance Volume.

This indicator is then combined with RSI and MA Cross Over Best Strategy to form a Trading Best Trading Strategy. The Technical Indicator settings are:

  1. 5 and 7 Linear Weighted Moving Average, Linear Weighted Moving Averages
  2. RSI 14
  3. OBV

Timeframe: H4 chart

Entry Signal

Buy

  • Both MA pointing up
  • RSI above 50
  • OBV is in an upward trend line or it has broken downward trend line

Sell

  • Both Moving Average pointing down
  • RSI below 50
  • OBV is in a downwards trend line or it has Broken upwards Trendline

Exit Trading Signal

OBV gold trend line is broken

RSI gives an opposite signal - 50 center-mark crossover

You can learn more about writing a Best Trading Strategy rules Writing Best Trading Method Rules and Generating Signals

You also can Study about other Trading Strategies: Strategies Listing

Example of How to generate Signals with This Best Trade Strategy

Before looking at examples below, using the 138 pips & 177 pips profit example, you need to learn concept of volumes precedes price & On Balance Volume technical indicator.

On Balance Volume trading indicator uses volumes to measure money flowing into gold or money flowing out of gold.

OBV indicator most popularly used for stocks analysis. The concept behind OBV is that Volume precedes price always and when it comes to analyzing the direction of a financial instrument whether a stock or a instrument nothing is more crucial to this analysis as understanding the volumes that are flowing in and out of gold. These volumes can be in terms of money, in Gold Trading because charts moves in ticks information, the more flow of money in gold the more the ticks data, therefore volumes in Gold Trading will measure number of tick data participating in xauusd.

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 gold. And because volume precedes price then this can be used as a good indicator to explain the general investor sentiment.

For a Trading Best Trade Strategy a one requires indicators are calculated differently. For example, our Best Trading Method is based on

RSI - momentum technical indicator

MA - direction based trading indicator

OBV - volume based indicator

A Best Trading Method like this give a good overall picture of the market movement by taking into account 3 different calculation methods as opposed to using 3 oscillators that give signals based on the same calculation technique.

The OBV On Balance Volume will measure the tick volume of a instrument, for every candlestick. If you use the 1 Hour time frame, then the volumes will measure the total volume for the 1 H. If you use daily charts then the volume will measure the total volumes for the instrument for the whole day.

Examples of How Do You Generate Signals with This Strategy?

However, the volumes indicator does not show the direction of the volumes, only differentiating by colors for the different candles, Green for Bullish Candles and Red for Bearish Candle Sticks.

This is where the On Balance Volume comes in and adds a direction to the volumes & shows the overall direction that the volumes are flowing, whether into or out of gold.

Examples of How Do I Generate Signals with This Strategy?

Volume Precedes Price

Volumes precedes price, this makes volumes a leading indicator. Knowing how to interpret this helps one make better decisions when it comes to predicting where the market move direction is going to be heading to next.

When the volume rises it illustrates that money is beginning to flow in to a gold. Because volumes will precede the price, the next thing is that the value of gold will then go up. When the OBV is going up it shows there are more buyers buying gold than sellers selling it.

When the volume falls it shows that money is starting to flow out of gold. Because volumes will precede the price, the next thing is that the value of gold will then go down. When the OBV On Balance Volume is going down it shows that more volume is going short than long.

Subsequently when a down ward trend line of the OBV On Balance Volume is broken it shows that sellers are starting to take profit order and close their trade orders.

Likewise when the upwards trend-line of the OBV is broken it shows that the buyers are starting to close their long positions and take their profits.

Because the On Balance Volume will add direction to the volume & form a general direction, one can compare the two, the price direction & the OBV 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 market or when to open an order.

On Balance Volume is a leading indicator and a trader using this indicator can avoid entering a market when it's too late. This Indicator is also a good indicator to illustrate when to take a profit early enough before the market takes away all your profit.

XAUUSD Indicator Formation

The OBV is the cumulative addition and subtraction of volume based on price direction.

Upwards direction - adds volume/ indicator moves upwards

Downward direction - subtracts volume/ trading indicator moves upward

Sideways market/Range market - trading indicator moves Sideways

Because price moves in a zigzag manner, the OBV trading indicator will also form in a zigzag manner

XAUUSD Price Trend Lines

Most Traders will use these to generate buy & sell signals.

For our Best Trading Strategy we shall use the OBV indicator to confirm these buy sell signals from price trend-lines.

We shall draw a Trendline on both the price & Indicator. If both generate the same signal we buy/sell based on the direction.

This strategy will be used to determine two things.

Continuation of ruling trend direction

Reversal of ruling market direction

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