Gold Scalping Strategy, Tactics, and Examples Explained - MTrading (2024)

Gold scalping is a way of trading gold metal commodities in different ways. While the yellow metal is still one of the most traded and profitable instruments, investors can benefit from the daily-price high moving averages. Additionally, gold scalping trading system benefits involve increased asset volatility, which makes it possible for traders to generate significant profits in the short timeframe.

In this article we will discuss how the gold scalping strategy can be risky but still a good choice for those who anticipate higher gains if compared to those generated when buying or selling the precious metal physically.

Gold Scalping Trading System Explained

To establish gold scalping, you will need a typical Forex trading platform such as MT4. Here, gold is represented as the XAU symbol. We should also state that the gold price is generally linked to the USD. In other words. The pair you look for in the trading platform should be XAU/USD. In other words, here we have the asset using USD as the counter price.

To make sure you have the opportunity to use a gold scalping strategy, check if a chosen broker has the XAU/YSD asset in the list of instruments offered for trading. The system works quite simple:

1. A trader looks for a broker with low spreads on different types of commodities including the yellow metal.
2. A trader enters the market with either a short or long position depending on the gold technical analysis.
3. A trader waits for a few minutes to close the position.
4. If not, he or she waits until the asset price will reach the low-profit target.

Gold Scalping Strategy Types and Features

Scalpers can use several types of a chosen gold scalping strategy. Your choice will mainly depend on a set of technical indicators and analysis tools. What’s more, we should also take into account specified timeframes. In some cases, you will need to combine different instruments.

For instance, it is a common thing for gold scalpers to use a blend of momentum and trend indicators to identify potentially profitable market entry positions. This particular approach considers using trend indicators to identify how the gold price moves. At the same time, momentum indicators depict the best entry points.

Here is the list of indicators you will probably need when establishing an effective gold scalping trading system:

• MACD (trend indicator).
• SAR (trend indicator).
• ADX (trend indicator).
• Bollinger Bands (trend indicator).
• RSI, CCI, and other momentum indicators.

As we stated earlier, it can be a good idea to try the combination of trend indicators. However, when it comes to momentum indicators, it is not recommended to use more than one. Otherwise, there is a chance of generating false signals.

5-Minute Gold Scalping Strategy

It is one of the most popular strategies among gold scalpers. It got its name for the 5-minute timeframe, which means you are supposed to perform a trade within the next 5 minutes. However, it is not as simple as some may think, as it calls for the H1 period to perform the major trend analysis.

If you are new to this method, it will be simpler to start using a Simple Moving Average Indicator. To confirm signals, it will be a good idea to combine it with MACD, for example.

Gold Scalping Strategy Trading Tips

When using a 5-minute approach, you need to do the following:

1. Use SMA using the 20 and 10 periods applied to the weighted close.
2. For MACD, use standard configurations.
3. With SMA, analyse the trend using a plotted H1 timeframe.
4. Confirm a signal with MACD.

If the price is above the SMA, we can observe the uptrend. If it is below the MSA line, it means investors are seeking options to go short.

8 Crucial Tips to Get Started with Gold Trading

It does not matter if you apply a gold scalping technique or apply other trading methodologies, you need to consider several crucial things to get started:

1. Day-trading with the New York closing price in mind. Although the gold market is available 24/7, peak liquidity can be spotted during the New York trading hours. It means lower volatility and higher liquidity.
2. Target previous highs and lows. Do not make your technical analysis too complex, especially when it comes to gold. Simplify it by targeting mainly previous highs and lows. If you trade XAU/USD, for example, you are very like to trade in a range. So, the simplest way to determine buy/sell opportunities is to watch previous trading pair’s highs and lows.
3. Consider the geopolitical situation. Gold strongly correlates with the USD. The slightest economic or geopolitical news that concerns the currency price can strengthen the gold price as well, especially during market uncertainty.
4. Apply symmetrical triangles. It is a good pattern to enhance your gold technical analysis. It shows consolidation that might turn out to be a breakout.
5. Monitor demand for gold. It involves both commercial and industrial demand for yellow metal. Some industries may acquire more gold for production purposes. Consumers may start buying more jewelry. It all will affect the demand as well as the price.
6. Monitor central bank actions. If you see central banks buying gold in bigger volumes, you should follow their lead. Generally, it can be a sign of volatility in certain currencies.
7. Keep an eye on real estate rates. Gold is correlated with real estate rates. When the interest rate declines, the price goes up and vice versa. Historically, when the real estate rate drops below 1%, the price of gold rises.
8. Watch gold production volumes. Changes in gold production are a very important thing to monitor. Most beginners think that a metal production decline always means price drops. In reality, it works the opposite way. If gold production volume falls, the price will go up.

Of course, the above-mentioned factors are not the only ones to follow, especially when you trade XAU/USD. A good idea is to apply typical Forex rules that will also make sense in the context of this particular asset pair.