Gold trading has always been the most popular choice for the long term trader. It tends to exhibit long trending move in the market allowing the trader to make huge pips out trading the gold. The most widely used moving average in gold trading is the 100 and 200-day simple moving average. Forex traders should consider these markets as viable as long as trading systems can be replicated to prove positive results over the long-term.
When the 100-day moving average crosses below the 200-day moving average traders look for selling opportunity on the contrary ,when the 100-day moving average cross above the 200 day moving average traders look for buying opportunity. Professional gold traders use the two important moving average crossover and price action confirmation signal to trade the gold for long-term. Let us see how the professional trade gold with two moving average crossover:
Figure: Pro moving average trading strategy for gold
The 100 and 200-day moving average acts as the dynamic support and resistance level for the gold price. In this system, traders wait patiently for the bullish or bearish moving average crossover to ride the trend reversal from the beginning. In the above figure the 100-day moving average crosses below the 200-day moving average which is a clear indication of sell signal and bearish trend reversal.
Professional traders wait patiently for the price action confirmation signal in the dynamic resistance once the bearish crossover takes place. In the above figure, a nice bearish engulfing pattern is spotted right at the dynamic resistance level which allows the trader to enter short. The professional trader uses tight stop loss when trading the moving average crossover in gold. In general, they set their stop loss just above the bearish candlestick confirmation pattern. Though the system is very profitable it’s imperative that traders use proper money management in order to avoid huge capital loss.