Leading Indicators
Choose a MA to Trade with XAUUSD Trading Strategies
A trader can choose a moving average based on the chart time frame that he is trading; the trader might choose to use this MA indicator on the minute charts, hourly charts, daily charts or even weekly charts.
The gold trader can also choose to average the closing xauusd trading price, opening xauusd trading price or median xauusd trading price.
Moving average indicator is a oftenly used indicator to measure strength of gold trends. The data is precise & its output as a moving line can be customized to a gold trader's preferences.
Using the gold trading moving average is one of the basic ways to generate gold buy and sell trading signals which are used to trade in direction of the trend, since the MA indicator is a lagging indicator & a gold trend following indicator - this means that it will tend to give late gold entry signals as opposed to leading indicators. However, as a lagging indicator it gives more accurate gold signals and is less prone to whipsaws compared to leading xauusd technical trading indicators.
Gold Traders select the moving average period to use depending on the type of gold trading they do: short term gold trading, medium term xauusd trading and long term xauusd trading.
- Short-term gold trading: 10 - 50 MA Period
- Medium-term gold trading: 50 - 100 MA Period
- Long-term gold trading: 100 - 200 MA Period
The xauusd trading price period in this case can be measured in minute charts, hourly charts, daily charts or even weekly charts. For our example we will use 1 hour chart time frame period.
Short term gold trading moving averages are sensitive to xauusd trading price action and can spot gold trends signals faster than the long term moving averages. Shorter term gold trading moving averages are also more prone to whipsaws compared to long term moving averages and a trader should choose a xauusd trading price period that will generate a gold signal early but not give too many gold trading whipsaws.
Long term gold trading moving averages help avoid gold trading whipsaws, but are slower in spotting new gold trends and trend reversals.
Because long term moving averages calculate the average using more xauusd trading price data, it does not reverse as fast as a short term gold trading moving average and it is slow to catch the changes in the xauusd trend. However, the longer term gold trading moving average is better when the gold trend stays in force for a longer time but may also give late xauusd trade signals.
The work of a trader is to find a moving average period which will spot gold trends as early as possible while at the same time avoiding fake-out signals (gold trading whipsaws).
