Query Corner

Which timeframe should be used to trade gold for short term? Which charts should I see if I am trading intraday?

Rajat Sharma

Gold is one of the most preferred contracts for trading in the Multi Commodity Exchange (MCX). Deciding the time frame as short-term or medium-term completely depends on the individual’s perspective. From a trading perspective we assume here one to two weeks’ time as short term. To trade gold in the short term, you can consider the daily candlestick chart. The 200-day simple moving average is a very good indicator to use, along with the daily candle chart for getting trade signals based on cross-overs.

In case of intraday trading, you can use one-hour candle chart. The 21-hour and 100-hour simple moving averages are good indicators that can be used in conjunction with the one-hour chart.

The movement in rupee and the US dollar are the two major factors that influence the MCX-gold contract movement. Rupee may have a major impact on the MCX contract in the morning session (10 am to 5 pm). In the evening sessions, the US dollar and the global spot price movements dictate the direction for the MCX-gold futures contract. A series of important economic data release from the US makes the evening session more active and volatile than the morning sessions. The US non-farm payroll and unemployment data which comes on the first Friday of every month, the US Federal Reserve meeting, etc., are some of the key events that may cause volatility in the global gold price movement which, in turn, will influence the MCX contract movement.

So, from a trader’s point of view, the evening sessions could be ideal for taking trade positions. That said, wild swings in rupee and volatile move in the afternoon due to the impact of European markets may keep the morning sessions also lively many times. To sum up, during the morning session keep a track on the rupee movement and the European markets. In the evening sessions, track the global gold price and the US dollar movement in addition to having a track of the important data releases for the day from the US.

For tracking the global gold prices, use the 4-hour and daily candle chart for short-term trading. For intraday trades, use the one-hour candle chart. Whatever time frame you trade, make sure to put your stop-loss in place. Placing and adhering to a stop-loss will help you limit your losses and also develop a good trading discipline. At the same time, you can even consider trailing your stop-loss as the market moves in your favour.

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