Multiple Timeframe Analysis in Gold Trading

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

Since it is always good to follow the trend, in Multiple Timeframe Analysis, the longer timeframe 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 trend will eventually save you. Also if you trade with direction of market, then mostly you'll be on the winning side, this is what this type of analysis is all about.

Remember there a popular saying by many Gold and stock market investors that says: "The trend is your best friend" - never go contrary the trading market.

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

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

Scalpers in Gold Trading

This group holds onto their trades for only a few minutes. Scalper never holds on to a trade for more than ten minutes. With the aim of making small amounts of pips as a profit, 5 - 20 pips.

A Scalper using 1 min chart wants to buy long, checks 5 minute trading chart, which look like one below, since 5 minute explain trend is moving up, then decides from the analysis it's okay to buy.

Day Traders

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

Day trader 15 minutes chart wants to buy long, checks 1 H chart, which look like one below, since 1 hour highlights market trend is moving up, then decides from the analysis it's okay to buy

Swing Traders

This group of traders holds onto their trades for few days to a week. With the objective of making a big number of pips profit, 100 to 400 pips.

Swing trader using the 1 Hour chart wants to short sell, checks 4 Hour chart, which looks like the trading examples illustrated and described below, since 4 hour highlights the trend is moving down, then decides from the analysis it's okay to sell.

Position Traders

These are the traders that hold on to their trades for weeks or months. With main objective of making a big amount of pips profit, 300 to 1000 pips.

Position trader using daily chart wants to short sell, checks week chart, weekly looks like one below, since weekly highlights the trend is moving down, then decides from the analysis it's okay to sell.

How to Define A Gold Trend

Using a trading system has Three indicators - MA Cross Over System, RSI & MACD and uses simple guide-lines to define the trend. Rules are:

Upward trend

Both MAs Moving Up

RSI Indicator above 50 Mark

MACD Above Centerline

Down-ward Trend

Both MAs Moving Down

RSI Indicator below 50 Mark

MACD Below Center-Line

For More explanation about this system strategy read: How to Generate Trade Signals with a Strategy.