Technical Analysis Course #3: predicting Gold moves with price bars and trading range

Hello, fellow traders and welcome to the lesson #3 of the Technical Analysis course.

Today, we’ll cover in detail:

• the anatomy of a price bar and dissect the OHLC - your key to understanding market DNA;

• what it means when the open is up or down;

• how the closing price will help you spot potential trends before they happen;

• the trading range combinations that reveal the trend strength and signal when to exit

• how to use ATR indicator to spot a trend change or confirm price movement.

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As always, I’ll be using the XAU/USD chart and the TradingView platform to illustrate all the concepts.

What is a Price Bar?

A price bar is like a snapshot of trading activity (buying and selling) for a specific time period. It could represent a minute, an hour, a day, or even longer.

Each price bar tells us four key pieces of information:

1. The opening price

2. The highest price reached during the period. In other words, the most a buyer was willing to pay for something (XAU/USD in our case) during the day.

3. The lowest price reached during the period, i.e. the lowest price sellers accepted for XAU/USD on a given day.

4. The closing price.

These four components are often referred to as OHLC (Open, High, Low, Close).

Why are Price Bars Important?

Each price bar shows the outcome of the battle between buyers (bulls) and sellers (bears).

If the price opens low and closes high, the buyers - bulls won. In TradingView, the price bar will be colored green.

If it opens high and closes low, the sellers - bears came out on top. The price bar will be colored red.

When we look at a series of price bars, we're seeing a visual representation of all the buying and selling that occurred during that time.

A snapshot of XAU/USD where every price bar represents 2 hours of trading activity.

The Opening Price: 2 Scenarios

The opening price is the first trade of the day (or whatever time period your chart shows). It's important because it reflects traders' reactions to overnight news and events that might affect Gold prices.

When the open is up:

• Positive sentiment at the start of trading.

• Traders might have seen favorable news for Gold overnight.

• There could be increased buying pressure from the outset.

When the open is down:

• Negative sentiment as trading begins.

• There might have been unfavorable news for Gold.

• We might see more selling pressure early in the session.

The Closing Price Is Key To Spotting Trends

The closing price is the final price at which a trade is made before the market closes for the day. It is often considered the most important part of a price bar:

1. It summarizes the day's sentiment: The closing price shows where traders were willing to leave their positions overnight.

2. It's used for calculations: Many technical indicators use the closing price in their formulas.

3. It affects psychology: Traders often make decisions based on whether a market closed up or down.

4. It's used for valuation: Brokers typically use the closing price to value portfolios at the end of each trading day.

An up day is when the close on a given day is higher than the day before. It might signals that a bullish trend is gaining momentum.

A series of up days, when each close is higher than the previous.

On the other hand, when we see a series of lower closes, or down days, it often indicates a downtrend and traders are willing to sell at increasingly lower prices.

A series of down days.

Understanding Trading Range And Pinpointing Reversals