Gold moves more in a day than most currency pairs move in a week. That volatility is why traders love it — and why it punishes loose risk management. This strategy is designed around gold’s daily rhythm.
What drives gold
Before any setup, know what moves the market:
- Real yields. Gold pays no interest, so when inflation-adjusted bond yields rise, gold tends to fall, and vice versa.
- The US dollar. Gold is priced in dollars; a stronger dollar usually weighs on it.
- Central-bank demand. Official-sector buying has been a major source of demand in recent years.
- Risk sentiment. Geopolitical shocks often trigger safe-haven buying.
- US data. CPI, non-farm payrolls and Federal Reserve decisions cause the largest intraday moves.
The London breakout and pullback
1. Mark the Asian range. From the start of the Asian session to just before London opens, mark the high and low.
2. Wait for a clean break. After London opens, wait for a 15-minute candle to close outside the range.
3. Enter on the pullback, not the break. Place a limit order at the broken range edge. Gold frequently retests the breakout level before continuing.
4. Stop loss. Beyond the middle of the Asian range, or 1× the 15-minute ATR beyond the entry — whichever is wider.
5. Targets. First target at 1× the Asian range height projected from the breakout; second target at the previous day’s high or low.
6. Time stop. If neither target nor stop is hit by the end of the New York morning, close the trade.
A worked example
Gold’s Asian range runs from $2,388.00 to $2,396.00 — an $8 range. At 3:45 a.m. New York time a 15-minute candle closes at $2,399.20, above the range high.
- Entry: a limit buy at the broken range high, $2,396.00, fills on the retest twenty minutes later.
- Stop: the range midpoint is $2,392.00 ($4 away); the 15-minute ATR is $5.10, so the wider stop wins: $2,390.90.
- Risk: $5.10 per ounce. On a $10,000 account risking 1% ($100), that is about 0.19 lots (19 ounces), since 0.19 × 100 × $5.10 ≈ $97.
- Target 1: one range height above the breakout, $2,404.00 — $8 away, about 1.6R. Take half off and move the stop to breakeven.
- Target 2: the previous day’s high at $2,412.50, or flat by noon.
Gold futures: GC and MGC
| Contract | Ounces | Value of a $1 move | Tick |
|---|---|---|---|
| GC (gold) | 100 | $100 | $0.10 = $10 |
| MGC (micro gold) | 10 | $10 | $0.10 = $1 |
The $5.10 stop above costs $510 per GC contract or $51 per MGC. With $100 of risk, one GC is far too large; one MGC fits ($51), while two would slightly exceed the limit ($102). The futures calculator does this for any stop.
Filters
- Skip the setup if the Asian range is unusually wide — the move may already have happened.
- Skip days with CPI, payrolls or an FOMC decision until after the release.
- Trade only in the direction of the 4-hour trend for higher-quality signals.
Sizing gold correctly
Gold stops are wide in pips, so lot sizes must be smaller than on EUR/USD for the same risk. A $10,000 account risking 1% ($100) with a $5.00 stop — 50 pips at $0.10 each — trades 0.20 lots. Run every trade through the position size calculator with XAU/USD selected, or use the futures calculator for GC and MGC.
Common mistakes
| Mistake | Fix |
|---|---|
| Using a forex-sized lot on gold | Size from the stop in dollars; gold stops are several times wider. |
| Trading into CPI, payrolls or FOMC | Wait until after the release and the first 15-minute candle. |
| Chasing the breakout candle | Use the limit order at the broken edge; gold usually retests. |
| Ignoring the dollar | A strong US dollar day often caps gold rallies — check DXY before buying. |
Volatility check. Gold’s ATR can double around major data releases. Recalculate your size whenever volatility changes — never reuse yesterday’s lot size by default.
Frequently asked questions
What is the best time to trade gold?
Gold is most active during the London session and the London–New York overlap, roughly 8:00 a.m. to noon New York time, when liquidity and volatility peak.
How much is one pip on gold?
It depends on your broker's definition. Many treat a $0.10 move as one pip, worth $10 per standard lot of 100 ounces. Others use $0.01. Check your broker's contract specification.
Is gold good for prop firm challenges?
Gold can work, but its large daily range means wide stops and small position sizes. Size every trade from the stop in dollars, avoid holding through CPI, payrolls or FOMC, and check whether your firm restricts news trading on metals.
Should I trade XAU/USD or gold futures?
XAU/USD (spot gold CFDs) offers flexible lot sizes and near-24-hour trading through forex brokers. Gold futures (GC and the micro MGC) trade on the CME with centralized pricing and real volume. The strategy is the same; sizing and costs differ.
What moves the price of gold?
Real interest rates, the US dollar, central-bank buying, inflation expectations and geopolitical risk are the main drivers.