Read the News, but Follow the Charts

Following the markets this week, I felt that volatility has largely died down. Instead of seeing big swings, several pairs were moderately trading in ranges. This is perhaps in anticipation of the non-farm payroll numbers due tomorrow morning.
In my previous post, I talked about holding onto the gold trade. I ended up exiting that trade and reversing my position. In addition to taking on another gold trade, I made a few other trades as well on the other major pairs. They ended up flat (with slight gains and losses), which is why I observed that volatility was largely dying down.

Now let's put the spotlight back on gold. Here's the chart.

Gold 1-Hour

Trade Details:
  • Sell @ 1614.50
  • Stop Loss @ 1645.55
  • Close @ 1589.18
Trade Analysis:
  1. For my previous gold trade, I closed my long position after seeing price range for a few days. If you look at my price chart, gold ranged from March 24th to the 31st. Naturally, I don't have data from the 31st to work with. However, the top and bottom that formed on March 26th was an indication that XAUUSD was consolidating.

    This is where fundamentals come in. While I originally read this on Bloomberg (as I recently got a digital access subscription), you will most likely see a paywall. This MarketWatch article will paint a similar picture. There's a shortage of gold and yet price is being held resisted. This didn't make much sense to be. I'm no news trader or macro expert so there's only one thing I can really do. Keep an eye on the news, but ultimately follow the price.
  2. Seeing the longer wick, I entered a short position betting on the downside of gold. Gold did sell off, but I soon closed it once I detected a lack of selling pressure.
Trade Review:

  1. Regardless of the profit I made, I consider this a good trade. I entered a short position based on all the information I gathered and analysis I performed. I trusted my instincts by monitoring price instead of being influenced by the news. While there is a shortage of physical gold, I saw the weakness in price and acted accordingly.
  2. Position sizing wise, I took a 0.5% risk on this trade. It was entirely possible that the downtick in price could've been illiquidity. My intention was to scale into this trade if further selling pressure was detected.
  3. I acted calm after seeing the explosive move down shortly after price retraced to the breakout level. However, this explosive move wasn't as strong as I anticipated so I held off on accumulating position.
I don't have much to talk about for my other trades - USDJPY, AUDUSD, and NZDUSD. I took trades off key intraday levels, but they never played out. Unfortunately, there simply wasn't any momentum to capitalize on.

Nevertheless, the past two weeks have been quite a learning experience. I've made more taking fewer trades last week than taking more trades this week. I've said this before and it still holds true. I'm not much of a scalper and I do struggle trading the lower timeframes. It's much more profitable for me to look at the market structure on longer timeframes and capture the explosive moves rather than locking in smaller moves all day long.