Trading Gold using ADX and ATR for 10 points of profit this morning. The ATR strategy highlights low risk entries at the ATR, while the ADX strategy identifies potential retracements. Using a combination of a 45 minute with a 3 minute chart allows traders to confirm entries on the lower timeframe.
Trading Gold Using ADX and ATR for 10 Points
For example, at the beginning of the European session, Gold was moving down towards the ATR and selling volume was increasing. A lower high (or bounce) had already taken place so the expectation was that Gold would continue down on the 45 minute chart. The 3 minute confirmed this because there were no buyers at the ATR, which was red. A low risk entry was generated at 1207.8 during early morning trading but other entries around the same area continued to be generated until 4:30 am New York time. Price did move down as anticipated and an exit was generated at 1202.2.
Then selling divergence appeared on the 45 minute chart indicating an ADX peak would follow. An ADX peak indicates that price will retrace back to the ATR on the 45 minute chart. This morning the ATR was over 5 points away or 50 ticks on Gold. Going down to the 3 minute chart, we look for an ATR entry to the long side. This means the ATR has to be blue and price needs to come close to the ATR and form an area of support. In this example, the divergence on the 45 minute had more importance than the 3 minute chart.
By highlighting the entries, the strategies enable the trader to focus on the small details that make a difference (like trading into a higher timeframe or volume divergence). Plus, the strategies can generated email and text alerts so traders know exactly when to be at the computer and when the markets are moving.