This XAU/USD trade is a good example of multiple time-frame analysis as I have outlined in my
forex tutorial videos. This trade was actually one of the most profitable ones I have had in the last 30 days. I noticed that a bullish engulfing candle had formed on the 1-hour chart and I put a buy order just above the high of that bar. The risk on this trade was about 350 points (35 pips). When I looked at the trading action over the last few days, I saw that the $1204.00 level was where the market staged a pretty big reversal, and I thought that a take-profit order would be well placed somewhere underneath that area. I actually put my take-profit at 1202.60, but I exited manually the next day at $1201 (1330 points - 133 pips), when I opened up my platform in the morning to check the markets. I usually aim for a 1:2 risk-reward ratio, but this one gave me a 1:4, which was great! If you also notice, the market staged a pretty big reversal as it approached the prior resistance level at $1204. This is why I always place my orders with respect to existing support/resistance zones, otherwise I run the risk of a profitable trade, turning into a break-even/loser trade.
Although my decision to enter this trade was based on that 1-hour bullish engulfing candle, I also checked the daily charts prior to entering this trade. The daily charts were showing two very large bullish engulfing bars over the past 3 days - and to me - this seemed like the market was primed for a break higher. Checking the higher time-frames before entering a trade can really help in making a confident decision. If I did not check the daily chart - I am not sure I would have been as confident in taking this particular trade.
