How to Use Support & Resistance to Trade Gold

In the course trades above, we saw support and resistance zones hold firm. They stayed strong and unbroken.

But sometimes, support and resistance levels might not be strong enough to stop the price from moving in a particular direction. When the price goes beyond these support and resistance levels, we consider these technical levels broken. That's why we always use a stop loss order when trading these levels, just in case they fail.

When these levels are breached, the levels transition from one to another, demonstrating the shift.

• When a support level is broken it becomes a resistance

• When a resistance level is broken it becomes a support

Using charts, the example revealed below shows an illustration of what happens when these technical levels break:

Support level is broken it becomes a resistance

In the example below, support was successfully tested twice but failed on the third attempt. Sellers (bears) pushed the price below this support level.

However, the price reversed course and ascended again: this time, it failed to breach the level of this specific line. The price was then swiftly driven downward by sellers. This reversal occurred because the line that previously served as support had now transformed into a resistance barrier.

In when a support is taken out, the stop loss orders placed below that level are also taken out, thus reducing/decreasing the momentum which the buyers had. This give sellers an opportunity to short sell gold & place their stops just above this level which now turns into a resistance level.

Resistance level is broken it becomes a support

In the example illustrated and explained below using the chart, the resistance zone that had been tested 2 times could not hold the third time, the bulls were able to push the price upward past this level.

When price tried to go downwards again it could not move lower than this level. The price was there after quickly pushed further upwards by the buyers. This was because the line that was a resistance had now turned into a support. This is what happens in gold trading, when a resistance zone is breached and broken it turn in to a support level.

Traders who had closed their short sell trades will now open long trades and place and set their stop loss orders just below this level.

Major & Minor Resistance Areas

Charts show major or minor support and resistance levels.

Major Resistance/Support levels

In Major Resistance/Support levels price will stay at this level for a period of time, either price will consolidate at this particular point or form a rectangle pattern when price reaches this point. This level will be tested several times before it is either broken or it holds and price doesn't get to go past this resistance support area.

The above example are good examples of major Resistance & Support Zones.

Minor Resistance/Support levels

The price will move quickly to form these points in minor resistance and support locations in the short term before moving past these resistance and support areas.

XAUUSD Going Up: The way these small areas of challenge and help are set up will make a string of spots that generally go up.

Up-wards Gold Trend Series of Support and Resistance

The XAUUSD Gold Trend is Downward: This little resistance and support points pattern will create a succession of zones with an overall downward trend.

Downwards Gold Trend Series of Support and Resistance

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