Gold Scalping Strategy with Custom Indicator
WARNING: Important: Before using this strategy in a live trading account, you must practice it on a demo account for at least 100 trades. This ensures you understand the strategy, validate its effectiveness, and manage the high risks associated with gold trading and 1000x leverage. Only trade live after consistent success in demo trading.
Overview
This scalping strategy is designed for trading Gold (XAU/USD) using a custom indicator with two lines: a thick red line and a blue line (both with a period of 60, default settings). The strategy aims to capture small price movements in a volatile market with disciplined entry, exit, and risk management rules, optimized for a 1-minute chart.
Indicator Setup
- Indicator: Custom indicator with two lines:
- Thick Red Line: Period 60 (default, do not change).
- Blue Line: Period 60 (default, do not change).
- Chart Timeframe: 1-minute.
- Red Shaded Zone: The area between the thick red line and blue line is the no-trade zone. Trades should only be taken after a breakout from this zone.
Entry Rules
Setup:
- Identify when the market price is trading between the thick red line and blue line (the shaded zone).
- Do Not Trade: No trades should be taken when the price is inside this shaded zone.
- Wait for a solid breakout candle that breaks out of this zone (either above the thick red line or below the blue line).
Breakout Candle Size:
Avoid Trade: If the breakout candle is larger than 2 points (20 pips, i.e., high minus low of the candle), do not take the trade, as the stop-loss would be too large.
Buy Signal:
A bullish breakout candle closes above the thick red line and is 2 points or smaller.
Place a buy order at the close of the breakout candle.
Stop-Loss: Set at the low of the breakout candle
Sell Signal:
A bearish breakout candle closes below the blue line and is 2 points or smaller.
Place a sell order at the close of the breakout candle.
Stop-Loss: Set at the high of the breakout candle
Additional Conditions:
Ensure the breakout candle is solid (not a small or indecisive candle) but not larger than 2 points.
Avoid trading during high-wick formations (long upper/lower shadows). Wait 30-60 minutes for the market to stabilize before entering a trade.
Exit Rules
- Profit Target:
- Target a profit of 3 points (30 pips) per trade.
- Stop-Loss:
- Set stop-loss at 1.5 points (15 pips) based on the breakout candle’s low (for buy) or high (for sell).
- Break-Even Rule:
- If the trade reaches 1:1 risk-to-reward (1.5 points in profit), move the stop-loss to the entry price (break-even).
- Exit on Opposite Candle:
- If the trade reaches 1:2 risk-to-reward (3 points in profit) and an opposite candle forms that is larger than 50% of the previous candle, exit the trade immediately.
Risk Management
- Risk per Trade: 3% of account size per trade.
- Leverage: Use 1000x leverage for scalping (Note: High leverage carries significant risk; use with caution).
- Position Sizing:
- For an account size of ₹10,000 or $100, use a lot size of 0.02.
- Adjust lot size proportionally for different account sizes (e.g., 0.01 lot per ₹5,000 or $50).
- Stop-Loss: Fixed at 1.5 points (15 pips).
- Profit Target: Fixed at 3 points (30 pips).
- Reward-to-Risk Ratio: 2:1 (3 points profit vs. 1.5 points risk).
Trading Sessions
- Preferred Sessions:
- Sydney Session: 5:30 AM to 9:00 AM IST (focus on early volatility in gold).
- New York Session: 5:30 PM to 10:30 PM IST (high liquidity hours).
- Avoid:
- Trading during major news events (e.g., Non-Farm Payrolls, FOMC, or central bank announcements).
- Trading immediately after high-wick formations; wait 30-60 minutes for the market to cool down.
Additional Rules
- No-Trade Zone Rule:
- Do not take any trades when the price is inside the Red shaded zone (between the thick red line and blue line). Wait for a clear breakout.
- Breakout Candle Size Rule:
- If the breakout candle is larger than 2 points (20 pips), avoid taking the trade to prevent a large stop-loss.
- Maximum Stop-Loss Rule:
- Maximum 3 stop-losses per day: If you hit 3 stop-losses in a single trading day, stop trading for the rest of that day to limit losses.
- Post-Loss Rule:
- If a stop-loss is hit, do not trade for the next 30 minutes.
- Post-Profit Rule:
- If a target is hit, do not trade for the next 30 minutes.
- High-Wick Rule:
- If the market forms high wicks (long upper/lower shadows), wait for 30-60 minutes for the market to stabilize before taking new trades.
- Perfect Entry:
- Only take trades when all conditions (breakout candle, indicator line positioning, candle size, and market stability) align perfectly.
Notes
- Backtesting: As stated in the warning, backtest this strategy on a demo account for at least 100 trades to validate its effectiveness. Use Exness’s demo account with 1000x leverage to practice risk-free—sign up via Exness 1000$ Free Practice.
- Daily Stop-Loss Limit: Monitor your trades daily and stop trading after hitting 3 stop-losses in a single day to protect your capital.
- Market Volatility: Gold is highly volatile; monitor ATR (Average True Range) to assess market conditions.
- Discipline: Strictly follow the rules, especially the no-trade zone rule, breakout candle size rule, maximum stop-loss rule, and the 30-minute no-trade rule after a win or loss.
- Trading Log: Use the provided Excel log format to track trades and analyze performance.
Example Trade
Date/Time: 2025-05-20, 05:56 PM IST
Setup: Price trading between Indicator Zone. A bullish breakout candle (1 points in size) closes at 3239.86.
Entry: Buy at 3239.86, SL at 3238.89 (low of breakout candle), TP at 3249.(Trailing After 3 Point Move)
Exit: Market hits 3239 (Don’t chase big moves—secure 3 pips, then trail your stop. Let profits run while protecting your gains.).
Result: +90 pips, 9:1 reward-to-risk, ₹1700 profit (with 0.02 lot on ₹10,000 account)
