In this first of three, Fawad Razaqzada describes his trade set-up strategy.
At the end of July, I began writing a piece that showed before and after charts of recent trades in gold and natural gas. As the article came together it painted a larger picture of trade set-ups, so I decided to expand the project into a broad look at trade set-ups including example from multiple markets. There are lots of lessons in this that I hope you can incorporate into your trading.
Because I expended this into multiple trade set-ups, we are presenting this as a three-part series over the next three days. There are many before and after charts. I also have included some examples of the trades that haven’t worked out. My intention is to provide you some ideas about how to look for trades, manage the risk while in a trade and how to exit.
July was a great month for traders and the start of August has been equally good. Foreign exchange, precious metals and other sectors have been trending, making it easier to trade. My style of trading is not particularly suited for range-bound market conditions.
Below are some before and after examples, along with the rationale behind each trade.
Example: Gold part 1 (July 23, 2020)
As some of you already know, I have been bullish gold for a long time. In fact, in 2019, I predicted that gold would hit $2,000 at some point in 2020.
This trade setup was one of several I issued on gold during July. It was based on a one-hour time frame, as the daily was up on several straight days. So, this can be seen as an example of chasing momentum. This is done by zooming in to lower time frames. When momentum is strong, you won’t get deep pullbacks Before & after charts below).
When this trade was issued, I wrote:
I wanted to wait for a deeper pullback but gold has had minor retracements instead, suggesting a very strong bullish trend. With prices very close to the all-time high of $1,920, it is likely to breakthrough it in the coming days. So, make sure you leave a portion of your trade open, assuming you get on board and price hits our first objective.
Source: TradingCandles.com and TradingView.com
Shortly after issuing the trade idea, the metal went a little bit deeper into the support zone before starting to push higher:
Source: TradingCandles.com and TradingView.com
Shortly afterwords…
Source: TradingCandles.com and TradingView.com
As planned, I provided the following update:
Gold update: time to move the stop on the remainder of this below the most recent one-hour low – after prices broke sharply higher again overnight. We will be pushing this higher and higher until prices reverse to close us out. The reason we have an open target is that no one knows how high gold will get before reversing back. So, we are just going to let gold go as high as it can, but at the same time be prepared to exit on any weakness, by keeping our stop at a reasonable distance from market (see chart).
Source: TradingCandles.com and TradingView.com
Unfortunately, the rally halted and prices retreated to take us out on the remainder of the position, but it still provided for a handsome profit (see chart below).
Source: TradingCandles.com and TradingView.com
Example: Gold part 2 (July 30, 2020)
Following the successful trade above, we issued a similar setup which also worked successfully. On the hourly, it looked like this (see chart below).
Source: TradingCandles.com and TradingView.com
The shaded region was support and resistance in the past. So, when it came back to retest it, we issued a long trade signal.
The idea was based off the daily chart, below. Gold had gone below the prior day’s low, took out the weaker hands, then rebounded. My thinking was that the earlier weakness was most likely a sell trap or run on stops of weaker longs. This is very typical of very strong trends, which in the case of gold was just that (see chart).
Source: TradingCandles.com and TradingView.com
I added that if I was correct, then a new high should be hit during Asian hours and gold would potentially get to $2,000 before the week was out…
Source: TradingCandles.com and TradingView.com
Well, gold did rise and reached a new high but stalled, prompting me to adjust the stop loss higher as part of our risk management strategy.
This is what I wrote in the group:
Gold hit a new high, but stalled ahead of our 2K target… so it is time to move the stop higher to remove the risk in case it goes lower again…
But it didn’t:
Obviously, it isn’t just gold trades that I look for, as you will see below.
Fawad Razaqzada, Senior Market Analyst at TradingCandles.com, is an experienced forex market analyst and economist. He posts market analysis on all sectors. Previously he served as a market analyst with FOREX.com and City Index. Fawad has created a couple of YouTube videos on gold and silver recently, which contain a lot of insights on precious metals and trading in general. You can watch them HERE, HERE and HERE.
