Technical Analysis Basis - Technical Analysis in Gold Trading

Technical analysis is based on 3 factors common when trading the XAUUSD price charts. These 3 common factors when it comes to the Gold trading market are:

Prices Move in Trends
Price Action Discounts Everything
History Tends to Repeat Itself When it Comes to Price Moves

Prices Move in Trends

XAUUSD price movements follow trends - a trend is an overall price direction either upwards or downward. When it comes to Gold the prices of XAUUSD follows trends & this means that once a price trend in a certain direction is formed then prices keep heading in that particular direction for a period of time and the future movement of price is likely to be in the same direction as that of the XAUUSD trend than for it to be against it. Most of the Gold trade strategies are based around this concept.

Therefore technical analysis in XAUUSD will be the study of how to determine this price trend in order to know which direction the prices of Gold are likely to move next and hence help the trader to know which side of the trade to take.

Price Action Discounts Everything

When it comes to technical analysis, the only factorthing considered in this trading analysis is the price movement or what is commonly known as price action. Technical analysis study assumes that at any one time, the price of Gold reflects everything that has or could affect the movement of the XAUUSD prices. This trading analysis therefore only studies the price action - which is the product of Supply & Demand of XAUUSD.

History Tends to Repeat Itself When it Comes to Price Moves

History tends to repeat itself mainly in the patterns of the market price action. This repetitive nature of the price patterns is attributed to investor psychology. This is because the traders who participate in the trading of Gold tend to provide a consistent reaction to the market for most of the times. Technical analysis study uses these price patterns that are commonly referred to as chart patterns to analyze the movement of Gold prices. Although the chart patterns represent historical data, these analysis patterns are still relevant because they show patterns which often repeat themselves.

Understanding technical analysis when trading Gold prices can be a helpful method that traders can use in determining when the market is trending and when it isn't trending. When the prices of XAUUSD are moving in one particular direction then as a xauusd trader you want to be on this trade - but if the market isn't trending then as a gold trader you do not want to be trading in this market because all you'll do is lose money because you will be caught by many whipsaws & as investors this is not what we want.

Unfortunately, most of the traders try to fight the market trends & sell or buy in the direction that's the opposite of these market trends - in an effort to pick a market top or market bottom, only to see the market move further in the direction of the continuing trend.

Another common mistake which traders often make when they are caught up in the wrong market trend direction is to add onto losing positions in the hope that once the market trend reverses they will make money faster by averaging down their trading losses.. This is however not a good trading strategy especially in a strongly trending market - it's something that the experienced traders never do, because they know that once prices begin heading in a certain direction they continue heading in that direction for quite some time. "The trend is Your Friend" is a popular saying among traders, never go against the trend.

This study of technical analysis aims at alerting traders and traders of high probability trading set-ups that traders can use to determine when to open trades. Profits in trading the online Gold market comes from using proven methods to find the market trend direction and taking trades in the same direction. However, there are no certainties in the market & traders must practice until they create high probability trading setups that they can use to trade the online XAUUSD market profitably. One way of doing this is by opening a practice demo trade account and practice strategies on this practice trade account until traders learn how to generate profits using the high probability setups that they will have create after learning more about the various different technical analysis concepts used in trading XAUUSD.

About Technical Analysis

With so many investors and traders using the same trading analysis tools, the technical analysis becomes a self fulfilling prophecy. This is because if so many traders use the same level as a buying point, the XAUUSD price then moves upward as everyone makes similar moves at the same time.The next question is how long these moves will last and hence traders must come up with methods understanding xauusd chart moves so that they can know how to determine when to open and when to close their trades.

When it comes to analyzing this Gold prices, the Gold charts are used together with technical indicators to look for patterns which have occurred in the past under certain conditions & when these chart patterns are identified again under similar conditions then traders can use these set-ups to determine whether to open buy or sell trade transactions - and traders will be making trading decisions with increased probabilities of success because these setups have happened before, & made price to move in a certain direction - and traders can trade based on the same setup as before.

Learning How to Trade Gold Prices Successfully with Technical Analysis

To learn how to XAUUSD successfully using technical analysis it's important to understand the three strategies illustrated below:

Gold prices will always follow a price trend which can be identified by looking at the price patterns of XAUUSD prices. In financial trading Gold as well as other financial instruments the only proven method to consistently make profits in the online trading markets is by following a trend. "The trend is Your Friend" is a popular saying among investors and traders because following trends when trading patterns is the most consistent method of making profits when trading XAUUSD & other trading instruments, as a xauusd trader, never go against the market trend.
The market forces of supply and demand for Gold will drive the prices of XAUUSD up or down depending on the current factors. The demand for Gold might go up when the world economy is doing good & people have more money to spend on luxury items. Technical analysis study will seek to measure these demand supply based on the current chart patterns of Gold prices and with the help of the various technical indicators. The supply & demand of XAUUSD will be reflected in the price action - therefore by simply looking at the price movements traders can predict what direction the market price of Gold is likely to move towards. Traders also can use an additional technical indicator like the MA, the RSI or support and resistance levels technical indicators to help them determine the next likely direction of the Gold price charts.
The market not only shows the history of the past prices, but will also follow the trend that was in place until its direction reverses. Traders can use technical indicators such as the moving averages, Bollinger bands or trend lines trading analysis tools and indicators to help them determine current trend direction.

On the other hand, when there is no direction, when there is no trend and the market starts to move in a sideways manner - the market is said to be consolidating. When the market starts to consolidate, traders should wait until the market stops consolidating as during this time there will be no trend to trade & prices will keep oscillating in one place without moving in any particular direction.

Once the consolidation stops prices will begin heading in one or the other direction & new trends will be formed and traders can start placing trades in the direction of the newly formed trend.

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