Gold has always been considered a measure of wealth and store of value throughout human history. Today gold is still considered as a safe haven by wealthy investors. Whenever there is a financial crisis in the global markets, wealthy investors start buying gold. XAUUSD gold/dollar is available for trading on MT4 platform. Gold trends beautifully. When it trends, it can trend for many days. This is precisely what we did. We had $1000 in our account. Take a look at the following XAUUSD H4 chart.
In the above screenshot you can see a strong downtrend on gold. We made the first short entry just above the first red arrow on the close of the bearish H4 candle. Our entry was $1176.86 and the stop loss was $1182.99. Since we had $1000 in our account we opened the trade with 0.1 lot. $1 movement in the gold market equals $10 if you are trading with 0.1 lot. The risk for this position is $60. (Remember $6 is equal to $60 for us). In percentage terms it equals 6%.
The second entry was made just above the second red arrow at $1160.68 and we moved the stop loss to $1163. So the first position is now breakeven while the risk for the second position is $30. We open the third position just above the third red arrow at $1148.67 and move the stop loss to $1151. You can see that the downtrend is very strong and the price is well below the red line which is EMA21. The downtrend continues for 14 days and we close these 3 positions at $1083.
So the first position makes a profit of $930. The second position makes a profit of $770 and the third position made a profit of $650. The total profit was $2,350. So the return made during these 14 days was 235%. We could have opened more positions but we didn’t.
As you can see the risk for the first position was a bit high. It was 6%. But then we were sure of the downtrend. Normally the upper limit for risk is 5% for us. We don’t try to risk more than 5% at any point of time. Most of the time the risk is only 2-3%. But then if you don’t take risk you don’t make gain. If you are not comfortable with this high level of risk you could have opened the first position with 0.05 lot. In that case each $1 movement would give you a profit of $5. You will reduce your profit but at the same time you would be lowering the risk to just 3% or $30.