- November 6, 2020
- Posted by: virtualxstore
- Category: trading
Based on empirical evidence, we can observe that the election moving in favor of Biden is good for the price of gold . We have seen that as Biden moves closer to a victory, the price of gold has moved linearly up as well. The future value of conclusions often get included straight away into the price, so don’t expect a huge spike after the final results are live. Instead, the real is happening at this moment.
This also leads to common mistakes by traders. For example, if a future decision would be expected to lead to an increase in price, people start already buying the asset when the probability of that decision happening gets higher. Now, when the actual decision makes the price can even decrease as the only thing that truly happens is calibrating the height of the earlier expectations with the actual moment of the decision. The price only moves based on the difference between the recalculated probabilities and the actual price, and not based on the final decision itself.
Let’s now look at the most important horizontal zones for Gold and why I added them to the chart.
This is a place where we can find really solid support. The level around 1850 is a relatively low price area where the price movements have bottomed earlier on. It is not likely that the price will move anywhere below it soon, and as such this horizontal level can be used for a stop loss on any long trade.
This zone is important mostly for determining if the price trend continues. The price is very , but after a sudden spike up there is often a retracement. This horizontal zone can be used to see whether there is some support to continue a second bull trend.
Horizontal I + II
The first and second horizontal resistance levels could be a great level to be used for placing a take profit. Both of these have proven to show resistance earlier on and the price might face resistance here again. Especially zone II is very interesting here as it is near the psychological level of the $2,000 mark for gold . I suggest placing any take profit for a long position at least slightly under $2,000 to maximize your chances on taking profit.
Level three can also be used for a target setting. I expect that after breaking through each of the subsequent horizontal levels, the price will consolidate for a while between the levels. Especially for scalp traders, the moves between zones I, II and III can be great to get a few trades in on smaller time frames such as the 5m, 15m and the 1h.
All-time highs are a massive area of resistance. It is often very difficult for prices to break through areas like that. I would suggest exiting any long positions at this point as it is very difficult to estimate sane levels of take profit and stop loss above areas where the price has ever been before. If you decide to hold above it, think of using a strategy such as trailing stop loss to give some help of leaving the trade.
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This post does not provide financial advice. It is for educational purposes only!