One of the proven strategies to safely buy gold in uptrend is to look for THESE chart patterns.
In this article, I will teach 4 best bullish price action patterns for Gold trading. You will learn how to find these patterns and trade them.
All the patterns that we will discuss work perfectly on a daily, 4h, 1h time frames.
Flag
The first strong bullish formation, that we will discuss, is a bullish flag pattern.
It is based on 2 important elements:
a bullish impulse leg and a bearish correctional movement afterward.
The highs and lows of a correctional movement should respect 2 falling trend lines: one being a vertical resistance and one being a vertical support.
These 2 trend lines will compose a falling parallel channel.
Your strong bullish signal will be a breakout of the resistance of the flag - a candle close above that.
The trading strategy of this pattern is very straightforward.
After a violation of the resistance of the flag is confirmed, buy the market immediately or on a retest.
Place stop loss order below the lowest low of the pattern, initial target - its high, with a potential bullish continuation to a new high.
Look at a bull flag on Gold on a 4H time frame. A bullish breakout of its upper boundary was a perfect signal to buy XAUUSD.
Wedge
The variation of a bullish flag pattern is a falling wedge pattern.
In a wedge pattern, a correctional movement occurs within a contracting channel based on 2 converging trend lines.
The same strategy is applied for buying wedge after a breakout.
Above, you can see a falling wedge on Gold chart on a daily that was formed after a completion of a sharp bullish wave. Bullish violation of the resistance line of the pattern was a strong call to open long position.
Trading hundreds of bullish flags and falling wedges, I noticed that the wedge patter has a little bit higher accuracy.
Triangle
The next chart pattern for buying Gold is called Ascending Triangle.
After completing a bullish impulse and setting a higher high, the market should start consolidating.
A consolidation should have a specific shape: the price should start respecting a horizontal resistance based on the last high and drop from that, setting equal highs and a consequent higher lows after every bearish movement.
A reliable bullish signal will be a breakout - a candle close above a horizontal resistance line based on the equal highs.
Buy Gold immediately after a violation, or set a buy limit order on a retest of a broken resistance.
Safe stop loss will be at least below the last higher low.
If you are taking the trade on 1H time frame, set it below the first higher low.
Take profit will be the next potentially strong resistance.
With the absence of historic resistances, your goal can be the next psychological level based on round numbers.
That's a perfect example of the ascending triangle pattern that formed on Gold on a daily time frame. After a breakout of its resistance, a bullish rally initiated.
Usually, the pattern is considered to be completed when the price sets at least 3 higher lows and 3 higher highs.
Cup and Handle
If only 2 equals highs and 2 higher lows are set, such a pattern will be called Cup and Handle.
Below is a nice cup & handle pattern on Gold on a 4H. Violation of its resistance triggered a significant trend-following movement.
Channel
The last pattern for buying Gold is horizontal parallel channel.
It should form after a completion of a bullish wave and represent a consolidation and indecision.
The price should set equal highs and consequent equal lows, respecting horizontal support and resistance.
A strong bullish signal to buy Gold will be a breakout of a horizontal resistance of the channel and a candle close above.
The principles of its trading strategy are very similar.
Open long position on Gold immediately after a candle close above the resistance or on its retest.
Stop loss should be placed below the support of the channel.
Take profit will be the next historic or (if there is no) psychological level.
Check this horizontal channel that was spotted on a daily time frame on Gold chart. After quite an extended consolidation within, the price violated its upper boundary and went up.
All these chart patterns have a unique shape and structure and are very easy to recognize. Apply them for trend-trading Gold on any time frame and good luck in your journey.
