Range trap: don't force the trade — what breaks this range first | XAUUSD Oct 29

Hi, I'm Daniel, an active prop trader. Today gold is in a trading range. Since last time, it played out per our scenario, reacting at the range top, then rallying 31 dollars into the New York open.

In pip terms, that's a 319 pip rally. Now candles overlap more and the market has lost direction, so rather than force a trade, we'll watch for a failed breakout or the previous day's daily high and low. This is a phase where we want a clear breakout of those levels, followed by a pullback after the breakout.

Will this trading range just keep going, or will price break out of a key level and set a new direction? That's the key point I focused on in today's analysis. Alright, let's dive right into the daily chart.

Yesterday, gold closed the session with a bearish doji candlestick on the daily timeframe, showing indecision. This candle can also be read as a breakout pullback retesting the doji on candle 47, which price had just broken out of to the upside, but As of now, today's daily candle has made both a lower high and a lower low, and price hasn't broken above the high of candle 49 and accelerated with stronger momentum, so at this point the price action lets us take the view that the upside momentum has stalled out.

Also, since yesterday's daily candle closed as a doji, we can expect price to form a trading range quite easily throughout the entire trading day today. So for our bias, we should keep in mind that price tends to run easily in whichever direction it breaks out of this candle's high or low. Now, if price breaks out to the downside of this candle, look back at the original trend direction.

It flipped into a downtrend, then broke down below a sideways range, and then broke down below another sideways range. Since price tends to extend easily in the trend's direction, we can expect the chances of a strong, momentum-driven move lower to keep increasing from here. On the other hand, if price breaks out to the upside of this doji candle, that move goes against the trend direction, and as it gets closer to the high of this recent downward spike, selling pressure tends to build up.

Therefore, even if you have a bullish bias, short-term trading is likely to become difficult, and that's something to keep in mind. Next, let's look at the 1-hour timeframe. The day before, we ran a community-only live stream right around here, where a small doji candle formed at this red line.

Here on YouTube, I'll focus on the key points and walk you through exactly which technical analysis scenario I explained at that point in time. Let's start with the overall bias. As of yesterday, the Tokyo session that day was showing a clear, strong momentum-driven downtrend day.

This is the move right here. Here, if we treat this candle, bar 2, as a bearish spike, and the move after it as a descending channel, then we have what's called a bearish spike and channel structure, so Basically, as long as this channel's downswing continues, our bias stays bearish. On the other hand, the current candle, well, not the candle exactly, price was testing the upper limit of this trading range that held through the 27th and 28th, and given that situation at the time, I explained that if price broke out here and then pulled back, we'd consider setting up a long, so a reversal from that pullback meant going long.

Also, with a spike and channel, price often tends to retest where the channel started. For example, we could factor in a rally that retests the Tokyo session starting point, and if that happened, I explained that we'd treat this level on the chart as a key turning point while keeping a bullish outlook. Also, if we focus on the internal downswing, even within this channel trend, candle 6 had a really large bearish body, so it could be seen as what's often called a selling climax candle, and I think we also studied that a rebound was highly likely there.

I also walked through several individual price movements one by one, and as for which key points I based those explanations on, Since I'd taken a day off, this one ran a bit longer than usual, I guess. So from this point, I was walking you through how gold's price action played out from the 28th onward, right here. Alright, let's kick things off from the 27th, shall we?

First, a bullish reversal candle forms right here, but the follow-through fails. Then, on the second test here, a bearish reversal candle forms, and that sets up a clear downward swing. However, even within this downward swing, the price action had no clear direction, and in the end it basically played out as what we'd call a trading range, Here in the London session, on candle 2, price retested the low at the bottom of this range once again, hit a reversal, and then formed a big upward swing, with a doji candle inside it.

And as for where the upward swing ended, no bearish candle formed at all during that swing, until candle 5 printed the very first bearish candle, From here a sideways trading range began, and after price tested the highs at the Tokyo session open, a downward swing formed. And looking at the shape of that downward swing, it had developed into a clear bearish spike and channel pattern. So what happened next?

If we follow the move, price rebounded just as the theory suggests, and as our scenario predicted, rallying $31, or 319 pips, all the way up to the opening high of the New York session, in a move that tested the starting point of the channel. I think it played out largely in line with our scenario. So today, in the members-only Trading Lab stream, I'm breaking it down into these three points.

On the 1H, price action overlaps, with no clear direction. Second, don't force entries. This is a phase to wait for price to clearly break the recent range or the previous day's high or low.

Third, confirm how price reacts at that level first, and only then judge the next direction. As for today, the Tokyo session also ultimately showed price action we can read as a trading range, and the London session too, after the Tokyo session, saw growing overlap between individual candles, and in the second hour after the open, a doji candle formed, and price then settled into a sideways range. Also, the daily chart lacks a clear sense of direction.

Price action suggests the bullish swing has ended for now, so today lacks clear direction, so a trading range is likely to form throughout the whole day. On days like this, the key is waiting for a clean, complete breakout, and watching for failed breakout moves near the upper and lower edges of the range, I think we'll need a strategy of sticking strictly to range trading for now. First of all, I want to focus closely on which direction this recent doji candle breaks out. And that wraps up today's gold analysis.