Multiple Time Frame Analysis in Gold Trading

Multiple time frames analysis equals using 2 chart time frames to trade xauusd trading - a shorter one used for trading and a longer one to check the Gold trend.

Since it is always good to follow the trend, in Multiple Time Frame Analysis, the longer time frame gives us the direction of the long term trend.

If the long term market direction supports the direction of the smaller chart time frame then the probability of being profitable is greatly increased. This is because even if you make a mistake the long term gold trend will eventually save you. Also if you trade with the direction of the xauusd market, then mostly you will be on the winning side, this is what this analysis is all about.

Remember there is a popular saying by many Gold and stock market investors that says; "The gold trend is your friend" - never go against the xauusd market.

There are four different types of Gold traders - all these use different charts to trade as explained below.

Examples of how each type of trader uses multiple time frames analysis strategy:

Scalpers in Gold Trading

This group holds on to their trades for only a few minutes. The scalper never holds on to a trade for more than ten minutes. With the objective of making a small amount of pips, 5 - 20 pips.

A Scalper using 1 min chart wants to go long, checks 5 min chart, which looks like the one below, since 5 min show gold trend is going up, then decides from this analysis it's okay to buy.

Day Gold Traders

This group holds on to their trades for a few hours but not more than a day. With the objective of making quite a number of pips, 30 - 100 pips.

Day trader trading 15 min chart wants to go long, checks 1H chart, which looks like the one below, since 1 hour shows market gold trend is going up, then decides from this analysis it's okay to buy

Swing Gold Traders

This group holds on to their trades for a few days to a week. With the objective of making a large number of pips, 100 - 400 pips.

Swing trader using 1H chart wants to go short, checks 4H chart, which looks like the xauusd trading example illustrated and explained below, since 4 hour shows the gold trend is going down, then decides from this analysis it's okay to sell.

Position Gold Traders

These are the investors that hold on to their trades for weeks or months. With the objective of making a large number of pips, 300 - 1000 pips.

Position trader using the daily chart wants to go short, checks weekly chart, weekly looks like the one below, since weekly shows the gold trend is going down, then decides from this analysis it's okay to sell.

How to Define A Trend

Using a gold trading system has 3 indicators - Moving Average Crossover System, RSI and MACD and uses simple rules to define the trend. The rules are:

Upward trend

Both MAs Moving Up

RSI above 50

MACD Above Centerline

Downward Trend

Both MAs Moving Down

RSI below 50

MACD Below Centerline

For More explanation about this system read: How to Generate Gold Trading Signals with a Gold Trading System.