Inside Our Live Trading Room: Textbook Gold Trade Using SMT + Fair Value Gap

This is the Gold daily chart, and I know I post this every day, but I just want everybody to realize that we are in a really tight range here. Okay, coming to the 4-hour chart—we had some manipulation below these lows, and we had deliverance from a fair value gap right here, which we then inverted. Yesterday, this 4-hour fair value gap was hit late in the session. Then we dipped back into this 4-hour fair value gap. So now we can kind of look for a move into these levels up here. That would be the sensible place to go.

Looking overnight in this level, going down to the 15-minute chart, we have SMT with Silver right here at the tag of the 4-hour fair value gap. Let’s go back and look at that again. We inverted this 4-hour fair value gap and created a new fair value gap. That’s a very, very powerful pattern. We just saw this—what were we looking at?—the EUR/USD. What do I mean? We have a displacement lower, we take out liquidity, and then we invert that fair value gap, creating another fair value gap. Now we can trade internal to external. Obviously, the first move is right here, and then we’re looking for higher prices.

If you come into the SMT right at the beginning of the London session, we have an inverse manipulation below that takes out session lows, SMT with Silver, and a really nice inverted fair value gap. And this is a 15-minute chart—you don’t have to go down to the 3- and 5-minute charts. This is where it’s the cleanest. Plus, we’re coming from a 4-hour fair value gap. Remember, we’re also coming from a 1-hour fair value gap. So when you’re coming from both a 4-hour and a 1-hour fair value gap, try and take the trade on a higher time frame. At least check the 15-minute. You can check the 5-minute, but just understand and watch the price action as it happens. If you’re looking at the 15-minute chart, you’re going to be like, “Wow, that’s clean.”

What do I mean by that? Let’s say price is right here. You’re coming into your 4-hour fair value gap and you have SMT with Silver. You’re looking at this gap, and this is what I do—I’ll say, “Wow, this is really clean,” and I’ll mark it and think, “If we manipulate here, hold SMT, and move back above, I’m going to buy.” I already know I would want to do this on Gold right away, especially with SMT setting up. We’re taking out session lows right at the beginning of London, we’ve created a nice fair value gap, and here you should be saying, “Okay, this is a really nice fair value gap. If this inverts, I’m going to go long.”

Again, you could be looking at the lower time frames as well. You need to be looking at both. Fast forward—we get a spike lower and then, all of a sudden, we get a move to the upside. This is exactly what we want. We’re going to go long, and we’ll put our stops right below the inverse fair value gap—right below this low. It’s a little tight. The first move gives a 1.25 risk-to-reward, where you should take some off—especially in Gold since it’s weaker. Take at least 50% off, maybe more. As you can see, price moves higher—bang—hits that target. That’s how you would play that.

You don’t necessarily need to go down to those really short-term charts. Make sure you’re looking at everything. As you can see, the first target is this level. Then you look to the left to see what the next target would be. If we have targets to the left, we keep going. That would be logical, because there’s not much in the way here. But when you get to this area, you’ve got all this fair value and a pivot high. This is a good place to take profits—right there on Gold. A 2.75 risk-to-reward. Probably the best trade I’ve seen on Gold in a while.

But when you have a trade like this and you hit the target, coming into the New York session, what are you going to look for? You’re obviously going to look for price to come back into a fair value gap, which would be here. Do we tag back into this fair value gap? Do we create another one? Do I go down to the 15-minute and start playing the 15-to-1 setup? I don’t think so. You could have right here. You do have the inverse fair value gap right here. You can go break even right here and target this level. That’s kind of the way it would look, going from higher time frame fair value gaps and playing internal to external.

Again, I’m going to put the daily chart back up. Remember, this is the price action of Gold. When you get a trade like this—a good, clean move, a good clean inversion with momentum—you hit the first target, then the second target, and you’re done. I don’t care how high Gold goes today—I wouldn’t care. That’s a really good trade on Gold in a consolidation. Just understand that we can reverse at any time.

Now, I do think the draw on liquidity is going to be this high level. Just like we had that spike in the EUR/USD, these are going to be high draws on liquidity. My only worry is that Silver is stronger. But with this move and manipulation back down and the strong momentum, I think Gold is headed up into these levels and we can trade it like that. But remember, it’s Friday and we’ve already had a good move. Will this just continue? If it does and we get a manipulation or a 1-hour fair value gap that we can play in New York—great. Look for it. Otherwise, let Friday be Friday, and we’ll get back to it on Monday.

Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of prop firm funded traders every day, then click the link below the video and hop aboard. We look forward to trading with you.