Knowing when NOT to trade is also important | XAUUSD
Today we will take a look at XAUUSD. I really like this asset to trade because of the consistent trends it provides, which are great for swing traders.
When you are executing a swing strategy, the main thing is avoiding choppy conditions and increasing the odds of developing setups on situations where you may observe clean trends from point A to point B.
In this situation, I want to show how I'm currently thinking XAUUSD. Since MAY 2021, the price has been moving sideways on an average price of 1800, going up and down. This is the type of situation where I don't want to develop swing setups because I'm not observing trending behavior. That's why NOT trading is protecting my capital from low-quality setups. The better you become at waiting for perfect scenarios, the higher the odds to engage on high-quality trades that provide a clear edge after several executions.
As you can see, I have defined the current area between the support and the resistance as "Bad zones for swing setups." And I have defined the support and the resistance zone as "good levels for setups" Why?
Because as I explained before, in the current area, we are not observing clear trends for us to develop swing setups. That's why we need to wait for the price to make contact with key levels (support and resistance). It is from these key levels that 2 things may happen: the price will break it or bounce. As we are working on a weekly timeframe, these situations will not occur in a few hours, it will take days until the resolution of the direction. That's why if you do your homework, you can get ready to react in the best way once the price reaches these zones where we will tend to observe some reactions and the beginning of a new movement.
My current plan is this:
IF the price reaches the support zone at 1680, I want to start thinking in bullish setups towards 1900 or bearish setups towards 1450
IF the price reaches the resistance zone at 1900, I want to start thinking in bullish setups towards 2070 or bearish setups towards 1680
I hope this post is helpful to better understand the difference between good and bad zones to develop setups. Remember becoming patient can be a POWERFULL edge on the market. Most of the people are not. Thanks for reading and feel free to share your view in the comments!
When you are executing a swing strategy, the main thing is avoiding choppy conditions and increasing the odds of developing setups on situations where you may observe clean trends from point A to point B.
In this situation, I want to show how I'm currently thinking XAUUSD. Since MAY 2021, the price has been moving sideways on an average price of 1800, going up and down. This is the type of situation where I don't want to develop swing setups because I'm not observing trending behavior. That's why NOT trading is protecting my capital from low-quality setups. The better you become at waiting for perfect scenarios, the higher the odds to engage on high-quality trades that provide a clear edge after several executions.
As you can see, I have defined the current area between the support and the resistance as "Bad zones for swing setups." And I have defined the support and the resistance zone as "good levels for setups" Why?
Because as I explained before, in the current area, we are not observing clear trends for us to develop swing setups. That's why we need to wait for the price to make contact with key levels (support and resistance). It is from these key levels that 2 things may happen: the price will break it or bounce. As we are working on a weekly timeframe, these situations will not occur in a few hours, it will take days until the resolution of the direction. That's why if you do your homework, you can get ready to react in the best way once the price reaches these zones where we will tend to observe some reactions and the beginning of a new movement.
My current plan is this:
IF the price reaches the support zone at 1680, I want to start thinking in bullish setups towards 1900 or bearish setups towards 1450
IF the price reaches the resistance zone at 1900, I want to start thinking in bullish setups towards 2070 or bearish setups towards 1680
I hope this post is helpful to better understand the difference between good and bad zones to develop setups. Remember becoming patient can be a POWERFULL edge on the market. Most of the people are not. Thanks for reading and feel free to share your view in the comments!