Trend trading Gold this morning using two timeframes resulted in a profit of 4.8 points or forty-eight ticks.  The higher timeframe was a forty-five minute chart and the lower timeframe used for entry was a three minute chart.

Trend Trading Gold – Setup

The forty-five minute chart clearly showed an uptrend.  The Trend ATR showed blue price bars and ATR.  The ADX had previously made a magenta peak and price came within just a couple of points of the ATR and then price began climbing again.  The only potential trade setup on the lower timeframe would be a long position.

Trend Trading Gold Higher Timeframe

The three minute chart showed that price had flipped the ATR and we would anticipate a retest of the ATR stop.  Price retested and an entry was generated.  After price moved in the direction of the trade, the aggressive stop kicked in following price up. Click to expand the chart.

Trend Trading Gold Lower Timeframe

Trading the three minute chart resulted in four entries into this uptrend. The entries and exits were:

  • Entry @ 1092.2, Exit @ 1093.7
  • Enry @ 1093.3, Exit @ 1093.8
  • Entry @ 1093.7, Exit @ 1095.9
  • Entry @ 1095.5, Exit @ 1096.1

The total risk on any one trade was ten ticks for an overall risk of forty ticks.  The profit was 48 ticks (4.8 points). The risk to reward for today was 1 to 1.2.

Even though the trend was up and the only trades were in the direction of the higher timeframe, price did not move straight up. Instead, it moved up, meandered a little, moved up, and then meandered again.  This is why the risk to reward was only 1 to 1.2.  While it is evident after the fact that it was “meandering” up, on the live edge, it could have reversed and taken away profits.  This is why we use the aggressive stop to lock in profits as they are accumulated.

Sometimes price simple shoots up, in which case, we can increase the risk to reward.  In this case, price was meandering so we simply locked in whatever the market was willing to give us.  That’s how it works when we are trend trading Gold or any other instrument – as traders we have to take what the market is offering and not be demanding.