Article Summary: Gold has been trading in a well-defined range for over 16 months. As price approaches support traders will look for potential buy entries.

Gold, (XAGUSD) has been one of the markets strongest trends for the better part of a decade. However, since the end of 2011 the price of gold has been trading sideways in a modest range, neither pressing new highs nor breaking to fresh lows. Instead of being deterred by a sideways market, traders can switch to a range trading plan and begin looking for market opportunities.

The range on Gold can be seen below on a daily chart, and has been defined by clear levels of support and resistance. Resistance has been created near 1,800 by connecting a series of highs from November, 2011 through November 2012. Likewise, support has been identified below by connecting the current lows on the price chart residing near 1,550. Once these prices are found, traders can begin looking for opportunities for trading.

Learn Forex - Gold Support & Resistance

Trading_the_Range_in_Gold_body_Picture_2.png, Trading the Range in Gold
(Created using FXCM's Marketscope 2.0 charts)

Trading the Range

Range trading can be one of the easiest but most effect methods for approaching the market. Once a range has been identified traders will look to either buy support or sell resistance levels for as long as the range continues. There are many ways to plan to enter into the market, but the most straight forward method is through the use of entry orders. Entries in a range require orders to buy at price support or sell current resistance levels.

The primary benefit of using an entry order in this scenario is that it allows us to set an order away from present market price that will execute when the price we select becomes actively traded in the market. This is beneficial to trader that can't always be monitoring price charts. Regardless if you are in front of your trading platform or not your order is ready for execution! All that is needed to complete this trading idea is a stop and take profit point.

Learn Forex - Gold Range

Trading_the_Range_in_Gold_body_Picture_1.png, Trading the Range in Gold
(Created using FXCM's Marketscope 2.0 charts)

Stop and limit placement doesn't have to be tricky when trading in a range bound market. Stop losses when either should be placed below support, or above resistance. This will allow us to exit a position in the event of a breakout. In the example above, if price breaks out to lower lows, our range has been nullified and it is in our best interest to close our open positions. Limits can be extrapolated by looking for a full or partial extension of the range to either support or resistance levels depending on your buy/sell preference.

---Written by Walker England, Trading Instructor

To contact Walker, Follow me on Twitter at @WEnglandFX.

To be added to Walker's e-mail distribution list,CLICK HEREand enter in your email information

Would you like a customized curriculum to walk you through Trading Education?

Take ourTrader IQquiz and receive a full lesson plan with numerous free resources t

o expand your information arsenal.

Take the Trader IQ Quiz Now!

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center