GOLD: Swing Trade Analysis with Volume Profile

24 cze 2020

Today, I would like to do a swing trading analysis using just Volume Profile and Price Action.

What got my attention this time was Gold. Its price has been rising and it hasn’t been this high for 7-8 years!

As the price is moving upwards there are zones where the Volume Profile shows heavy volumes. Those are most likely areas, where buyers were adding to their long positions. They are around 1755.00 and 1726.00.

Two factors which drive the price up from volume-based supports
Those heavy volume zones should work as Supports. Why? Because the buyers who were building up their positions in those zones won’t want the price to drop below those zones. That would mean their positions would be in red numbers!

So, when the price reaches those volume zones, then the buyers will want to defend those zones. They will start aggressive buying in order to drive the price upwards again.

There is also a second factor at play. When there is a pullback, then the sellers behind this pullback will want to quit their short trades before they reach the heavy volume zones. Holding to those positions could mean a potential fight with the buyers! They wouldn’t want that!

Sellers getting rid of short positions means they will need to buy (to get rid of shorts). This is the second factor which could help drive the price upwards from those two heavy volume zones.

So, the two factors to drive the price upwards from volume-based supports are:

First factor: buyers defending long positions.

Second factor: sellers getting rid of their short positions.

Both factors help the price turn upwards at the volume based support zones like these.

Trade execution
What do we do now? Now we simply wait. When there is a pullback and the price makes it back to those zones, then they should work as supports. Then it could be a nice opportunity for a swing long trade from both of those supports.

Gold specifics
Gold is a bit specific trading instrument because it often works as a safe heaven instrument. This means that when there is some global uncertainty (economical crisis, coronavirus, war, disaster,…) then its price usually rises. On the other hand when it is over its price drops.

So, if there is some really important global news then you should watch Gold and trade it carefully. Especially when it is moving around its all-time highs like now.

I hope you guys liked today’s analysis. Let me know what you think in the comments!

-Dale